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Nexus One online store's failure shows wireless carriers still rule

Shuttering of Google's 'Web meets phone' store reveals market realities

May 18, 2010 06:00 AM ET

Computerworld - Google Inc.'s decision to stop selling its Nexus One Android smartphone online might disappoint some customers hoping to limit the role of wireless carriers in the smartphone buying process.

In marketing circles, Google's decision, which comes less than six months after launching the online store, is fairly striking. The ramifications of the reversal will resonate in a U.S. smartphone market that is still obviously dominated by the carriers.

On reflection, it seems amazing that online sales ever would have worked, since customers want to hold and use smartphones before shelling out the cash for them. Google's online sales concept failed mainly for that reason.

As Google's vice president of engineering, Andy Rubin, admitted in a blog post on Friday: "It's clear that many customers like a hands-on experience before buying a phone, and they also want a wide range of service plans to [choose] from."

Some analysts predicted late last year that Google's online concept wouldn't work, mostly because of the cost of an unlocked phone, double the price of a subsidized one purchased from a carrier.

They also noted that the unlocked concept hasn't caught on in the U.S. as it has in Europe. And they saw that buying any piece of electronics sight-unseen can be risky.

Google started selling its Nexus One in January, unlocked at $529 or for $179 with a two-year contract with T-Mobile. Users could also get an unlocked version for AT&T's network.

Customers can still buy Nexus One from Google's online store, but it isn't clear for how much longer, as Google plans to stop selling them entirely on the Web once stock has increased in retail stores. Google's Web presence will eventually become a showcase for Android phones, Rubin said.

At the time of the announcement of the Nexus One in January, analysts and Google seemed to value the marketing concept of online smarpthone sales as a bigger idea than the Nexus One device itself. As it turns out, however, it's really all about the device.

Rubin said at the time that the Google online store and smartphones that access the Web are a great way to support Google's core business of advertising, even adding the Google wasn't trying to make a profit on sales of the Nexus One hardware.

Google also explained the online philosophy in a blog post in January by Mario Queiroz, vice president of product management. "The goal of this new consumer channel is to provide an efficient way to connects Google's online users with selected Android devices," he wrote.

The Nexus One was to be the first "in what we expect to be a series of products which we will bring to market with our operator and hardware partners and sell through our online store... We expect to add more operators, more devices and more countries in the future..."

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