Since early January, Google has been trying to disrupt the mobile phone carrier industry by selling phones direct to consumers.But now, it has hit a big snag: Verizon Wireless, a key partner, won’t be participating.
That, combined with weak sales of Google’s first direct-to-consumer phone, the Nexus One, could send Google back to the drawing board.
It wasn’t supposed to go like this. Google unveiled its web-based mobile phone store in early January, and coupled with the sexy HTC Nexus One, got a lot of buzz. (Some of it was because people thought this might be a “Google phone,” which it really isn’t.)
Initially, the idea was that Google would have the exclusive on selling what was then the world’s best Android phone, and that that might have been enough to support Google’s new e-commerce storefront.
But if you sketch Google’s plans out a few years, it’s easy to see what Google’s real goal was: To disrupt carriers, which dominate mobile phone distribution in the U.S., by selling directly to consumers. Eventually, you could see Google distributing phones that work across multiple carriers, encouraging phone companies to bid on customers’ business, via special discounts and offers. Google could have become the Web-based centre of smartphone distribution, versus the fragmented retail system that exists today.
But so far, that doesn’t look like it’s going to happen, mostly because Google is counting on the same mobile carriers to service its phones that it was trying to disrupt. T-Mobile, the no. 4 U.S. wireless carrier, is the only one that has agreed to subsidise Nexus One devices for new subscribers. AT&T, the no. 2 carrier, has agreed to support the device, but not offer any subsidy or incentive for people to buy it.
And now Verizon, the no. 1 carrier — which had been advertised as a “coming soon” Nexus One partner since launch day — is no longer “coming soon.” Instead, it’s going to sell the HTC Incredible, a phone that has the same guts as the Nexus One, ships with better software, and will be sold through Verizon’s traditional retail and e-commerce channels. You can’t buy it from Google. (Though Google’s Web store, perhaps reluctantly, lists it as being available from Verizon. “A powerful Android phone and similarly feature-packed cousin of the Nexus One.”)
To be sure, since Google’s whole point here was to disrupt carriers, and not necessarily to generate any significant revenue growth, it’s not really losing much — mostly face.
Big picture, it doesn’t matter whether Google or Verizon is selling the phones — all that matters is that people are buying Android phones, and not iPhones, Microsoft phones, BlackBerry phones, etc. This is why it was silly of Google to compete with its carrier partners in the first place: Because carriers can still sell dramatically more Android phones than Google can, and that’s the only way it’s going to beat Apple.
(And who knows, maybe this plan will still eventually work. Perhaps Google will figure out a gimmick or give consumers another reason to buy direct.)
But for now, Google’s plan to disrupt carriers is not looking good.
More about our vision of Google’s disruptive plans: The REAL reason Google is getting into the mobile business →
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