With the pending closure of Google’s Nexus One online store, a smartphone revolution is in tatters. Google still has a killer product in Android, but the Nexus One’s online-only business model, meant to disrupt the way phones are typically sold, is a failure.
Google wants the Nexus One in more retail stores around the world, which means it’ll have to make nice with wireless carriers. So what if Google was selling unsubsidized phones as an alternative to two-year carrier contracts? The idea didn’t take off, so no harm, no foul. Once Google is satisfied with the Nexus One’s retail presence, it’ll shutter the online store and instead use the Google Phone Web site as a showcase for all kinds of Android phones.
How did it end this way? It’s easy to blame the Web store itself — people prefer to try before they buy, Google says — but the full explanation is more complicated than that.
Before the Nexus One launched, analysts wondered if Google would shock the wireless world by subsidizing smartphones on its own. Instead of owing two years to a specific carrier, your debt would be to Google and its advertising. But when Google announced a $529 unsubsidized price for the Nexus One, or $179 with a two-year T-Mobile contract, it was business as usual.
Still, champions of the Nexus One said the Web store made all the difference. By giving customers the option of a subsidized phone on contract with T-Mobile or an unsubsidized phone that could be used for any duration, or swapped for AT&T’s 2G network, Google was slowly taking control from the carriers. That was the idea, at least.
Unfortunately, the Nexus One got off to a rocky start. Google wasn’t ready to deal with customer service complaints, and it was actually possible to pay a higher early termination fee than the phone’s unsubsidized price.
But what really killed the Nexus One’s Web store was Android itself. Those who called the Nexus One an evolutionary product were spot-on, as the phone has already been upstaged by the Droid Incredible, and soon the HTC Evo 4G. Verizon Wireless and Sprint stopped itching to carry the Nexus One once they had their own cutting-edge Android phones.
And as Google learned, support from wireless companies is really important if you want to sell phones. Verizon’s advertising prowess thrust Droid into the spotlight, and the carrier’s two-for-one deals propelled Android to its first quarterly sales victory over the iPhone.
Let me be clear that I don’t think the Nexus One itself is a failure. As my colleague Jeff Bertolucci pointed out, the Nexus One succeeds as a sort of demo unit, a phone that showed app developers what Android is capable of. It also allows Google to show off its own mobile products in screenshots and live demonstrations on Google-branded hardware, so the company needn’t publicly show favor to HTC, Motorola or Samsung.
As a phone, the Nexus One wasn’t a total loss, but as a way to change our buying habits for smartphones, it’s a lost cause.