Thursday, January 07, 2010
No, Google will not subsidize the Nexus One (for now)
I have read lots of different comments on the Nexus One. As you might expect, I have my opinions on it...I saw the phone for the first time around mid November, by mistake. I was at Google, meeting an executive, when he dropped the phone on the table. His eyes panicked while he tried to hide it. It was pretty clear to me of what I saw. However, I am not a journalist, I am bound to confidentiality and I definitely do not write about certain things on blogs (sorry).
Also, I had written a post a few days before about why "Google would not make a smartphone"... My reasoning was that it made no business sense, having Google made Android the mobile OS of choice for device manufacturers. It made (makes) no sense for Google to undercut them, right when Android is about to win the game.
Seeing the phone, at first I was a shocked, thinking they were actually making the gPhone. Then I thought about it and I concluded: "nope, it is not going to be a Google-manufactured phone, it will be a device manufacturer phone, sold by Google". Exactly like they were selling the G1 an G2 for developers before (we bought a couple, online, same thing as today only limited to developers).
Now that it is out, I have the exact same feeling. They are selling online a developer phone to stimulate the market. The phone is built by HTC and they clearly spell it out in the Terms of Sale. It is sold subsidized, yes, but by T-Mobile (yep, an old-style mobile operator, there are still around). If you want to buy it at full price, it costs as any other phone. The difference is that you can buy it online (although I think you can buy unlocked Symbian, iPhones and Windows Mobile online too…). Honestly, the only difference is the URL, which is Google, instead of Amazon (a significant change, mind you, I am not downplaying the move of Google to act as a retailer).
They did not go against the device manufacturers. They built it with one device manufacturer they know very well (HTC built the first Google phone, ooops, Android phone). They pushed the market forward once again. Device manufacturers that were sitting on Android 1.5 cannot relax. The market is moving. If a device manufacturer thinks it can sit on a release, Google makes sure it has a new Android version out with a reference phone. It is a stimulus to device manufacturers. It is not against them. Google needs device manufacturers (for now) and vice versa.
What about the mobile operators? The Nexus One is not against them either. You need a data plan at least, from T-Mobile or any other carrier that will sell it and subsidize it. They provide it to you. Google is not a carrier. It helps carriers make money. Google needs them (for now) and vice versa.
Now, the big looming questions is: will Google subsidize the phone? Not this one, apparently. And not any phone soon, in my opinion (some disagree ;-) However, Google could: the mobile phone today is a glorified web browser (their tagline is "Web meets phone"…), bringing advertising dollars to Google. It is easy to assume they should do it, changing the game forever. Give a phone away for free, destroy the device manufacturers and force the carriers to offer pure data plans to survive.
I might be dense, but I stand by my first comment months ago: it does not make business sense. It won't happen soon.
Android can only succeed if device manufacturers are pushing it hard. And they are. Google won't screw that. Did you wonder why they did not launch the phone before Christmas? Not to screw the Motorola Droid launch. One day, when Android will be the clear winner in the mobile OS space, they might (and they probably should). Now, nope.
And do not forget the carriers. They are here, alive, doing well. They are fighting not to become a pipe. If you think the world market can go around them, you are foolish. They still control the network, and they are not going to give it up that fast (and if someone wants it, they have to pony up a lot of billions to buy it, not even Google probably can…). Google needs to work with mobile operators. One day, that might change. Now, nope.
Bottom line: Google is doing this for developers, not consumers. They get this. This market is going to be won by the OS that can attract developers. Giving everyone in the world easy access to a reference phone is a very smart move. We started building stuff for Android 2.0 in Europe, on the emulator. It just does not work. You need the real phone. Now we can easily buy it. The rest is free marketing. They did not piss device manufacturers or carriers off. They are working with them. They got an enormous amount of ink, which will convince developers even more that Android is going to win. As a by-product, they will sell some phones online. I am ready to bet their margin on the phone is ridiculous (if not zero): all money to HTC and the carriers.
Developers developers developers. Steve Ballmer knew it and maybe has forgotten it. Someone else is doing it way better. Trust me, I know developers. Mobile developers in particular. We have tens of thousand working on Funambol. What works with them is open, and open source in particular. Nothing else works and will ever work (sorry, Microsoft, it is time you get it). You nail the competition, if you can convince developers. Google is pulling a Funambol (ok, this sounds a bit too strong, but it feels good to write it :-) We just started a few years before them. They are doing what we do, but at a grand scale. And they are going to be immensely successful (while we would settle for that $1B elusive open source company :-)
Sorry consumers, you'll have to wait a bit for your free phone with $20/month data plan with no commitment. It will happen, eventually. But it is going to take a while.
Posted by Fabrizio at 07:18
3 Comments:
Fabrizio i actually have a different opinion on this on.. I foresee google buying HTC and boingo wireless and becoming 1) hardware manufacurer, 2) wi-fi and mobile virtual operator in the US this year and in europe in 2011 via android and chrome os devices They will be open to developer for sure but sink the microsoft model of licensing to old style handset manufacturere (motorola samsung etc producing really low quality product) to go consumer you really need a compelling experience. Google can and will do it but in a different way. Btw for microsoft they need to buy RIM soon and merge the corporate market once htc dumps them... I am playing with a bb 9700 now i love uma the rest is good companion for lenovo notebooks
Comment Posted at 08:52
dror said...
And let's not forget the huge amounts of PR they get in the process. December was Droid month and January is Nexus month. Everyone's talking about Android phones rather than iPhone. Google's beating Apple, at this point, at its own game.
The one issue that they need to be careful about though, is confusing the consumer. It's pretty easy to decide which iPhone to buy today, but much harder to decide which Android phone to buy. At the end of the day though, choice is good, and I expect Android to surpass the iPhone in terms of units shipped by the end of next year.
Comment Posted at 09:57
Davide said...
Good point! I think you are the only one in the industry that understood that.
Everybody else is just speculating and wondering when Google will solve the particular problem of the wireless phone industry that bother he or she more. And there are a lot of such problems, so everybody is wondering why Google didn't solve any.
