The Verdict Is In On Nexus One Sales Approach

On Friday Google announced that they will be phasing out their direct sales of the Nexus One, ending speculation about what Google was going to do after Sprint announced there would not be a Sprint Nexus One. As I wrote before, I think only Google can definitively say whether or not the Nexus One was a flop. What Google did on Friday was remain consistent with their history of canceling efforts that turn out to not be successful, rather than stubbornly trying to continue as other companies may have done. In my opinion the Nexus One is a success by raising the bar on the features for Android phones. Every carrier now has an Android phone that meets or exceeds the specs of the Nexus One. I expect to personally benefit from owning a Nexus One by being amongst the first to receive the Android 2.2 upgrade when it is released in the near future, because I should be able to receive the upgrade directly from Google without it going through a carrier's upgrade process. The question raised since Google's announcement on Friday is, what lessons are to be learned from the experience? I think Google was trying to change how Verizon and Sprint sell mobile phones in the United States. Because of the technology that T-Mobile and AT&T use for their network, it has always been possible for people to buy SIM unlocked GSM phones from companies like Expansys. All you need to do to use GSM phones on T-Mobile and AT&T is put your SIM card into the new phone. The CDMA technology that Verizon and Sprint use makes it impossible for consumers to buy phones from companies not authorized to sell phones on their network because the phones are effectively hard coded to work only on their network. Yes, it is technically possible to move a phone from Sprint to Verizon, but it is something that Sprint or Verizon has to do, and it is not as easy as plugging in a SIM card. Google's plan was to directly sell the Nexus One for all four carriers in the United States. To do so, Verizon and Sprint would have to authorize Google to sell the phones, essentiallly making Google a reseller of Verizon and Sprint in a similar manner to Wireless Toyz. I think Verizon and Sprint were wise to what Google was trying to do and not too eager to partner up with Google in selling phones in this way, therefore the only way Google was going to succeed is if it sold a huge number of Nexus Ones, and that did not happen. Neither Verizon nor Sprint were motivated to sell the Nexus One and having obtained Android phones with the same or better specs than the Nexus One, they had a good excuse for officially ending their participation in the Nexus One sales model. I have heard many say that most people will not buy phones that they cannot physically see, and because the Nexus One was not in retail stores, people opted to buy other phones in the store. Personally, I think the main reason why the Nexus One has not sold in huge numbers was the price. Even if Google cut a deal with Walmart or Best Buy to sell the Nexus One, it still would not have sold well because the price was too high. If the Nexus One were sold for $200 or less, there would have definitely been more sales. In my opinion the real issue is the prices of mobile phones being set by the handset manufacturers. Keep in mind that when you buy the HTC Incredible for $149 in a Verizon store, HTC is still getting the full price on that phone. You get the phone for a low price because Verizon pays the difference to HTC based on the two year contract you sign to get the phone at that price. Mobile carriers are more than happy to pay the difference to HTC and Motorola because they make all their money on the monthly fees we pay them to use the phone on their network. In fact, they like the subsidy model because they control the pricing process that compels people to buy the phones on their network. People are not just buying the HTC Incredible from Verizon, they are buying it at an incredible price. As I see it, there are only two ways the current model of selling mobile phones will change. Either the fees we pay each month to the carriers will become so low that the carriers can no longer afford to pay the subsidies to the handset manufacturers, or the manufacturer prices on handsets has to come down so low that the subsidies are not needed. What Google I think should have learned is that a $500 mobile phone is not going to sell in high volumes because the market can find phones for $200 or less thanks to the subsidies that carriers pay to handset manufacturers. The Apple iPhone is the only mobile phone that I know of that achieved success at prices around $500, though even Apple had to get the prices down. The initial success of the iPhone may never happen again in the U.S., and it happened because it was a huge game changer that Apple heavily marketed it. As much as I like the Nexus One, it is not a game changer on the scale of when the iPhone was first released, and frankly Google spent as little money as possible on selling the Nexus One.

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The Verdict Is In On Nexus One Sales Approach

Frank McPherson

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