A Google-branded mobile phone is supposedly on its way. If true, this is a mistake: Google should be focusing its efforts trying to get Nokia or RIM to switch to Android, not on scaring its partners by producing its own phones.
TechCrunch’s Michael Arrington is the latest to report that Google is developing a new device — in tandem with a handset partner, perhaps LG or Samsung — that will mainly feature the Google brand. It will reportedly be available next year directly from Google and also from retail stores — not from a carrier.
This echoes a report from TheStreet.com in October that Google “is working with a smartphone manufacturer to have a Google-branded phone available this year through retailers and not through telcos,” citing a securities analyst.
If true, why on earth is Google doing this?
- Maybe it thinks the companies making Google phones so far — Motorola, HTC, Samsung, etc. — are doing a crappy job, and that the world would only know how awesome an Android phone could be if Google was driving the bus itself.
- Or maybe it wants to disrupt wireless carriers — which sell the vast majority of phones in the U.S. to consumers — by selling a phone and owning the carrier relationship with the consumer, offering Google Voice services and mobile Web access, potentially at very low prices.
How might Google do this? Recall that Google has the ability to buy Sprint 3G (and Clearwire 4G) services and re-sell them to consumers, via its $500 million investment in Clearwire. Google could play the role of “virtual” network operator, offering smartphone service for much cheaper than a carrier might sell it at retail.
The challenges here are that the virtual carrier business is a bad one — many have been driven out of business or to fire sales, such as ESPN, Disney, Helio, Amp’d, etc. — and that Google would still need to find someone to subsidise the phone so that it would not cost a shocking amount.
A decent smartphone costs about $500 wholesale, but consumers are used to spending $100 or $200 for a subsidized iPhone-like device. Google could, in theory, subsidise the phones themselves, but at $300 to $400 a pop, that would add up quickly.
We think it’s less likely that Americans would suddenly agree to spend $600 on an unsubsidized smartphone, even if the services were cheaper, or didn’t come with a long-term contract. But it’s possible this will be Google’s strategy.
The main problem: No matter what happens, if Google does this, it will alienate its partners, which include some of the biggest names in wireless.
Verizon, the largest U.S. wireless carrier, is in the process of making a big push behind Android. If it finds out that Google is going to be a direct competitor, it is going to be pissed. Same goes for its other handset and carrier partners.
Why should Google care about its partners? Let’s not forget Google’s long-term goal here: To make a ton of money selling mobile ads.
- To get there, it needs to get as many people in the world as possible using the mobile Web and mobile apps with Google ads inside them. (That’s one reason it just spent $750 million to acquire AdMob, a mobile ad network.)
- To accomplish that, it needs as many phone makers and carriers as possible making and selling Android phones.
- The easiest, most cost-effective way to make this happen is to continue along the path it’s already on: Offering Android as a free operating system to large handset makers, helping them however it can, and not getting in their way.
But this news makes it sound like Google is intent on getting in its partners’ way.
Because unless Google has figured out something magical about mobile phone design — highly unlikely, given its unimpressive history designing user interfaces — the Google phone will never be as successful as the sum of all other Android phones. Which means it’s a waste of time, and a mistake on Google’s part.
If anything, Google should be spending as much time and energy it can getting the world’s biggest smartphone companies, Nokia and RIM, to switch to Android. Then it would be a GIANT. Now, it just looks confused.
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