51 Comments

Summary:

Yes, Virginia, there really is a Google Phone! And no, I don’t mean all those Android-powered devices, but instead a Google-branded phone that’s made by an original equipment maker. The company has started giving away these devices to its employees, who started tweeting about it last […]

Yes, Virginia, there really is a Google Phone! And no, I don’t mean all those Android-powered devices, but instead a Google-branded phone that’s made by an original equipment maker. The company has started giving away these devices to its employees, who started tweeting about it last night, and it had to make an announcement this morning. In a blog post on the Android Blog, Mario Queiroz, vice president, Product Management writes:

We recently came up with the concept of a mobile lab, which is a device that combines innovative hardware from a partner with software that runs on Android to experiment with new mobile features and capabilities, and we shared this device with Google employees across the globe. This means they get to test out a new technology and help improve it. Unfortunately, because dogfooding is a process exclusively for Google employees, we cannot share specific product details. We hope to share more after our dogfood diet.

Amazing, crazy, why? Those were the first things that ran through my mind when I read that Google is actually making a device. This is very much a page out of Microsoft’s playbook. Microsoft makes specification designs, and Google seems to be doing just that. Of course, just as Microsoft and its Zune came along to compete with all those Play4Sure MP3 players, Google can make its own hardware and thus compete with the same folks who are betting the farm on Android.

The company says it’s doing this for its employees, but why shouldn’t we believe it will start selling it to consumers? After all, Google has the brand and the means to do that. If I were Motorola, then I wouldn’t be happy, because now I’m going to be competing with a Google-branded device. I need to talk to Google about the rationale of this decision before passing judgment. I’ve fired off emails to Motorola and other Android supporters.

Reading between the lines, Google’s decision to release a device shows it’s worried about the fear of fragmentation of the Android ecosystem that we’ve often talked about. By putting its stake in the ground, the company is hoping it doesn’t make the mistake that Microsoft made by dragging its feet in releasing Zune and ceding the market to Apple’s iPod. The iPhone, despite the issues with AT&T’s pokey 3G network, as eloquently pointed out by Verizon in its ads, continues to sell like a monster. Google doesn’t have much time and needs to respond fast.

On the plus side of the news — maybe you can return those Droids now that Time magazine has put its hex on the device.

  1. Expect the Google Phone to launch with RETAILER partners, not carriers. It will also be a GSM based phone – thus more attractive world wide – and less competitive to Android OS hardware makers in the CDMA space… I am hearing from people in the space who have used it, that it truly is an Iphone killer …regardless anything that brings a second ‘real’ competitor into the space is a good thing …even for Iphon users.

    http://twitter.com/A_F

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    1. Agreed. That is what it looks like – GSM and via retail. It is going to be an amazing turn of events. iPhone killer…. how many have come along… let’s count :-)

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      1. Well with no carrier subsidizing, one has to wonder what this will retail for?

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    2. Seems like Google will be selling this lil bad boy. Tmobile will be supporting the launch of this? http://bit.ly/63n3uX

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  2. I’d hate to be in charge of Motorola’s Droid inventory this morning! It seems that Google has given up on its partners and is trying to be the iPhone’s Grinch this Christmas.

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    1. Tim… Grinch is here. I loved your tweet by the way :-)

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    2. Google’s phone will be GSM and Verizon is CDMA with 90M customers. I think the Droid will be OK because we know that their customers will stick with CDMA instead of the alternative.

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      1. Really? You think US consumers have a preference for CDMA over GSM?

        I think they don’t have a clue what those acronyms stand for…if they can even identify them as cellular technologies.

        Or do you just mean they will stick with Verizon?

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  3. Om,like everyone else here, I look forward to a real iKiller. However, I don’t think this is the right way to do it. Not that I’m anywhere near as smart as the collective and money-hungry Google Brain, but they should stick to improving Android and giving it away for free, not competing with those who are in bed with them now on the hardware side. What they should be focused on is unifying Android and Chrome OS and competing against the iPod Touch by giving it true VOIP capability.

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    1. on Android Gizmo5.com have Laucned a Guava and Latest release is fring from fring world in Market

      Both have Really nice VoIP Interface

      fring can connect Google Talk Skype, Gizmo and any SIP based Service.

      Means Google Surely have true VoIP Interface.

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  4. For the mass consumer market, think about what having a “nearly” free phone with near-zero monthly operational costs will result in?

    Who cares about “designer apps,” give me free or cheap any day.

    Free GPS voice nav, free’ish VOIP and SMS(Gizmo5), Google Talk/Voice and WAVE; combined with QR Tag and barcode reader (ultimate ad platform; and, remember, Goog just shipped 100,000 Tags out last week)…

    It will be as essential to the mainstream’s daily lives as Google/Search has become. It will be the most targeted advertising platform in the world, in your pocket. And, you will NEVER leave, since you’ll never understand why it costs $50/month/phone for other services; plus paid apps…

    Scary? Sure. But, hey, If a family of four can have 4 smart phones with a monthly cost of under $50. Probably closer to $25? Less? And, the “information” (ads) you receive are relevant to you?

    Nearly-free smart-phone mobile changes everything. It’s probably Google’s biggest play since they first launched (it will make them money, compared to YouTube). And, who’s going to compete against them?

    This does create a range of opportunities for advertising/content/technology folks to step in with some fascinating, entirely new, mobile ad/brand experiences, provided they are Android/XMPP/Voice-XML friendly.

    Google wins when they put the consumer-first and damn the Industry as a whole. I think they win, big time, here. Thankfully, I’m not an iPhone/App Developer (a job that will cease to exist within 2-3 years?).

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    1. With the saturation of iPhones in the market, I would highly doubt that the handset will disappear within your time frame. There are too many people jumping on board and loving their experience and those people hate to learn new stuff…sad but fact.

      I am not completely sold that Google will subsidize the phone with ads but I have been wrong in the past. Overall a solid idea but again, I feel that people are so scared of what Google does to scrape information and therefore would not be on board with a Phone that is reading their text messages. People are too overly secretive and they have some benign sense that justifies the action, it is tre bizarre.

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      1. iPhone saturation in the US is at what? 4-6% with it estimated to cap at 10% (strangely in line with Apple computers v. PCs). That still leaves 90% of the market (where the current players, like Nokia and Motorola are self destructing without any outside help).

        All phones and carriers “read” your text messages now; then they delete after 4-10 days. The difference with Google? It may link GPS data or other data it acquires to your SMS patterns and (possibly) eek some NLP processing into the mix to push more targeted ads/info at you. If anyone thinks that any non-encrypted communication is “safe,” they are fooling themselves.

        But, my main point is that cheap/near-free is going to win. People will overlook their own best interests if offered a “deal.” That’s just the kind of Country/culture we are. And, Google/Phone (with it’s plethora of shared services) at a price point (monthly service mainly) that is a fraction of everyone else?

        It is an ad-engine in every pocket and they can afford to put it there very very inexpensively.

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    2. Sam, very little of what you mention says “mass consumer” to me, except for “near free” which I don’t think is achievable. You sound like an overexcited geek trying to pack as many buzzwords as possible into a single sentence:

      “This does create a range of opportunities for advertising/content/technology folks to step in with some fascinating, entirely new, mobile ad/brand experiences, provided they are Android/XMPP/Voice-XML friendly.”

      Blah, blah, blah — what about your pontificating sounds consumer-first and ready for mass adoption by the average consumer.

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    3. Sam – you are so right on! The carriers who want to flood us with advertising in addition to paying for usage will have to duck for cover as I doubt anyone will want to pay for poor service, ads and lack of privacy.

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    4. Sam

      With all due respect…WTF?

      Google cannot offer a phone for free or near free. Google cannot offer phone service for free or near free. There is no Santa Claus, either, so stop dreaming of getting something just because you wish for it.

      Google makes money off ads. Correct. They can subsidize devices or service with ads. Also true. They could even get revenue shares in the future by steering people towards Brick and Mortar businesses. But to be a profitable company, the ad revenue needs to exceed the subsidy. In offering a top-flight smartphone for free, Google would have a ~$500 subsidy to recoup. That’s a @#$@ of a lot of ads.

      Google is a big success on the web because they use relatively cheap processors and storage, and serve billions of page views and ads. Each page view, on average, has a tremendously low cost to provide, and also a small revenue component. By keeping the costs so low, and the ad revenue slightly higher, in volume the ads drive a fantastically profitable operation.

      You’ll note that Google does not pay for your PC in the above-mentioned successful model. You’ll not that Google does not pay for your ISP connection in that model either. Together, this makes the model highly scalable, in that they can serve millions of users with the same infrastructure and negligible marginal costs. If Google needed to supply each user with a $500 marginal cost device…um…do you think that might affect a high-volume business?

      Now, while in the current web world, Google does not provide your ISP service, you propose they will do so for cellular service, but at a much cheaper rate. How do you suggest Google provide a near-free cellular service without any spectrum, nor any cellular infrastructure assets in any country? To have any impact on cellular rates, for now at least, in each nation Google would need to become an MVNO, or partner with an existing carrier as a channel. In either model, Google would have little ability to reduce market subscription rates. No carrier will slash market prices at Google’s behest, and as an MVNO Google could subsidize calling plans, but the underlying network operator will still charge standard wholesale rates? Can Google recoup $50 a month of subscription subsidies with their ads? Every month? From every user? And can they do that at the same time as they need to recoup the $500 subsidy for the device?!!

      So, yeah, Google can alter the playing field if they so choose, and in significant ways. But not the way you’re expecting, and certainly not to that extent.

      Derek Kerton
      http://www.kertongroup.com

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  5. Here is VoIP for Google Android for Gizmo5.

    http://gizmo5.com/guava.html?loc=guava

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  6. Contrary to Diablo above, I really would care less how much it costs without the subsidy. Phones, especially the iPhone, Android, WebOS kin have come so close to mobile computers that I would be willing to drop 200-800$ on a device if I knew I had a choice of networks. I have never been psyched about being married to a single carrier and think that overall it is very monopolistic (a word Google severely dislikes).

    Say we had to pay 550 for this gPhone and with Google’s release cycle you could opt to have experimental builds of the OS on the phone with exciting, upcoming features. I would definitely be down for this and would pony the money up immediately. Kudos go to Google for this move.

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  7. While the GSM + retail option cannot be completely ruled out, despite the number of troubled handset makers that it antagonizes, I would be quite intrigued if this is a precursor for a mass-market launch shortly…The timing seems to be too early for such a move…Android can by no means be classified as a strong success, and Google is still trying to drum up support for devices on that platform…And again, product sales are a wholly different beast compared to selling text ads on search engines ;-)

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  8. Mario didn’t say a word about a Google phone. This is an HTC Passion fun running an internal alpha version of Android 2.1 (instead of the about-to-be-release 2.01). Why make a story out of that?
    Google did this twice before: they handed out an unlocked dev version of the G1 HTC Dream exactly a year ago to employees and then the Google Ion/HTC Magic at Google i/o to developers.
    There’s no story here.

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  9. For all the people who think Google shouldn’t compete with its current partners: Come on, guys! Look at the bigger tech picture here. Competition is good. Innovation should not be sacrificed to protect partnerships. Remember in the brave new tech world, there are no friends or enemies. Just frenemies.

    PLUS, if this phone is really good, then the manufacturer will make a lot of money. Other phone manufacturers will be forced to innovate as well. Good for the consumers.

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  10. To say this is “the” Google Phone and that it precurses a product launch is absurb. I am sure Apple hands out pre-production iPhone units to employees all the time for testing and feature investigations, etc. The difference is, Apple employees aren’t stupid enough to go tweeting about it, and Apple as a company forbids such activity.

    Google’s corporate culture, on the other hand, apparently encourages internal company matters to be blasted throughout the interwebs. How idiotic is that?

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  11. This is a great move by Google. By not entering the manufacturing part, Google is still leaving enough room for its Android partners. By designing the phone, it can ensure that it creates the right template for its partners to adapt and learn. Mind you, there is still knowledge transfer as the manufacturing will still be done by HTS (in this case). Read more http://truvoipbuzz.com/2009/12/thank-you-google-for-the-google-phone-opinion/

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  12. The WinTel model of monolithic software + fragmented hardware isn’t the only way to win. After watching the the kind of progress HTC has made since Android, Google must wondering: Why do I need all these different hardware partners when I just need one really good one? After all, Apple is killing it with essentially one model of hardware.

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  13. Would make sense for Google to offer this to the prepaid mobile guys.

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  14. Will be dumping my iPhone next month in favor of something new – such as this new smartphone. I’m sick and tired of AT&T, their network is horrific.

    I would think that Google may use BrightStar to sell these phones GLOBALLY. BrighStar already has a strategic relationship with Google.

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  15. God, I hope someone at Google realizes that the damned thing needs a video player that will do DiVXed/XVided AVI files. Who wants to convert everything to MP4? I won’t do that for the iPhone — and Apple stubbornly refuses to allow software like vlc for its iPhone/iPod. Archos was smart in making such video playback the center of its Internet Tablet — which explains why it’s very hard to find in brick & mortar stores this season.

    I’m sure another reason Google did this is to see how Google itself plays with an “ideal” device. You can get we’ll see changes to many Google services — one of which will be Google Books.

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  16. Three comments. One, this would be a fairly material acknowledgement that Google’s loosely coupled approach is not “good enough” for the mass market in mobile (relatively to Apple’s tightly, integrated end-to-end story).

    Two, by doing this, Google looses the “enemy of my enemy is my friend” positioning with handset makers, developers and carriers (the “anyone but apple” crowd), and those who to date have bifurcated the market as Evil Apple vs. Do No Evil Google. Now, the two companies look similarly positioned.

    Three, the iPhone Killer meme, and the “inevitability” of Android story – great handset or no – still hungers for better tools, more apps, a more compelling Android Market (workflow, experience, marketplace) and an iTunes-worthy Media client.music library, something that I blogged about in:

    Android’s ‘Inevitability’ and the Missing Leg
    http://bit.ly/87URNI

    Check it out if interested.

    Mark

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    1. Google should have just bought Palm. They have what looks likes a decent hardware/software platform, but they could use some re-branding and deeper pockets.

      I agree this news won’t make Motorola and Verizon all warm and fuzzy inside even though the Droid is CDMA-only.

      And I agree it sounds like confirmation of Apple’s, RIM’s and Palm’s hardware&software business model to me.

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  17. “Reading between the lines, Google’s decision to release a device…”

    Om, has Google actually decided to release this to market? Or are you taking a punt with this one?

    Reasons not to do it are simple: It would be ferociously expensive. An unlocked HTC Hero runs to between $500-600. While Google could (justifiably) reduce that cost a little by making an assumption on increased ad revenue, I don’t think it could do it by much without – it’s already spending a heap of money on creating Android’s software stack without any accountable ROI, so subsidising hardware as well would be an interesting way to look after shareholder value.

    Nokia has had precisely zero success selling off-contract phones at similar prices in the US, so why should Google be successful?

    More importantly, why would anyone buy an off-contract Google branded phone at a high price when they can buy an on-contract Android phone for less upfront – possibly even the same model, given that HTC routinely sells rebadged versions of its phones to anyone who wants them?

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    1. I think your premise that unlocked phones remain hugely expensive is wrong. Here’s why: Does anyone think that Apple is losing money on iPod touches? A 32GB iPod touch is $299. An unlocked 32Gb iPhone is $699. What does a camera and a 3G radio chip cost? Not $400. Phone manufacturers make huge margins on phones, and the consumer doesn’t care because it gets amortized over a 24 month contract. If they were selling these at or near cost — they would be very competitive with anything in their class.

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      1. Well, iSupply pegged the cost of parts for an iPhone 3GS at around $180, but that doesn’t include costs of design, software, research and development and patent licensing (and this last bit isn’t cheap, which is why Nokia and Apple are beating each other up at the moment).

        Google is neither designing nor manufacturing, so you can add on decent margins for HTC and whoever their downstream manufacturers are – say $100 per phone in total. Now add in a margin for retailers, who will want to make some money. Call this $50 (which I suspect is low). Now you’re up to $320, before Google has made a cent. Even if the big G were to take a minimal $80 per phone, you’re still talking about a cost to end users of $400.

        Of course, Google COULD sell the things at a loss to itself. But if anything were likely to bring down the anti-trust lawyers on to it, it would be cross-subsidizing hardware in order to boost the market share of its online services. It would open up a whole world of pain.

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      2. @Ian – Lots of assumptions in your comment there.

        If this is indeed the Google phone, then lots of design inputs came from Google. I wouldn’t be surprised if Google financed the whole design on its own. Does it cost more to design a new phone, than to design a new killer app like the Google Maps Navigation app?

        So, Google could pay for all design costs, use HTC as just a manufacturing supplier and sell all devices online without using any other retailers, at a selling price very close to the cost of manufacture. Then, comparing to iPhone’s $180 cost level, Google could sell this new phone for under $200.

        I have no idea why you think there would be any anti-trust case against Google. Especially when this would be an unlocked piece of hardware on which you could install more apps than on any other phones out there. All Google has to tell those anti-trust lawyers is, “Look guys, we have no restrictions. You can install more apps on our phone than on the iPhone. In fact, you can install apps which will even replace the functionality of our own services. We won’t say no. Now, would you please check on the restrictive iPhone first before you come knocking on our door? After all, they won’t allow any apps which are remotely like any of their own services”.

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      3. @AS – It’s ironic that you ding me for making assumptions, while making far more wild ones yourself! :)

        Does it cost more to define a phone than a piece of software? Hell yes, particularly if there’s innovation in the hardware! Designing hardware isn’t cheap. Second, even if Google had paid for all the design costs, that cost would either have to get passed on to the consumer or paid for by Google – and if Google was paying for it, it would need a business case to do so. Why should it pay for hardware design? Where’s the profit for it?

        The anti-trust issue wouldn’t be anything to do with apps. The strongest part of anti-trust law is about preventing companies using a monopoly in one market – in this case, ads – to muscle its way into another market. While you can subsidize new product lines, you have to be very, very careful doing it. Doing it when there’s no actual revenue for you in the new business line is very dangerous territory.

        To put it another way, if Google was going into selling phones to make a profit from selling phones, it might be OK. If it’s subsidizing phones to increase its market dominance in advertising, it could be in real trouble.

        Think back to Microsoft/DoJ: The turning point was its release of IE, a free product that was designed to shore up its dominance in operating systems. If Google were to release a phone designed to shore up its dominance in online services, it would be in trouble.

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      4. Cost difference between a Touch and an iPhone? Support. I would imagine the support costs for a cell phone are much higher than an mp3 player.

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  18. “innovative hardware from a partner with software that runs on Android to experiment with new mobile features and capabilities, and we shared this device with Google employees across the globe.”

    The first 2/3 of that line sounds like there may be some really innovative features in this device. Doesn’t sound like just a marginally incremental improvement to existing devices. Employees across the globe is a large, diverse population. So, the last 1/3 of that line implies that we will get more details of the device sooner than later.

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  19. Honestly, this sounds more like Google being public about mobile prodcut testing so that rumors about them doing a new device wouldn’t be rampant. Here and other sites have constructed a Google Phone out of an announcement of open testing from an unnamed partner. Dang, I though the analysts here were a good bit more in tune than to fall for a dangled carrot like that.

    You can’t test mobile services, especially Google’s, behind a wall. It needs to be in the open. Unforuntately, very website hit, analytic, etc. that would be gained would eventually turn into a rumor of a Google Phone at some point. So they blog that they’ve given out devices, so that folks looking for smoke signals in wireless devices wouldn’t have a cow about something new.

    Don’t the folks that write about these things know about this kind of software and hardware development (process and methodology)?

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    1. Seems unlikely that HTC would design, fabricate and build from the ground up a handset for Google employees (and their friends) only, doesn’t it?

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      1. If it’s the HTC Passion (as rumoured) then it’s not been built solely for Google – it’s just pre-released hardware which HTC will sell itself soon.

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  20. the hw is htc, so you know.

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  21. Google is moving down in the stack to challenge B2C opponents with an open architecture and new sets of standards. In creating a post-revenue business model, Google can only manage success if consumers accept a co-branding and outsourced manufactured device … NQ Logic recommends reading about the rest of the new Google’s mobile strategy at http://www.nqlogic.com

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  22. Om,
    Why are you( and folks) excited ?
    Its another Android phone. Plain simple.
    Besides the rumored specs look “OKAY”.
    Google might give input to the hardware design but its still made by HTC. I would seriously consider Google made phone if they have their own in-house hardware division.

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  23. This is nothing short of a war cry to carriers ! It is not Apple they are after, but to make the mobile phone a commodity similar to the PC, where anyone can buy a mobile phone from retail store, get a 4G (WiMax or LTE) subscription and there you go ! Activate Google Voice (must have been pre-installed on the phone) and why do you need a carrier ? Only issue with this strategy is how soon 4G coverage would be ubiquitous with good nationwide coverage? Makes me wonder why Google did not participate in the recent round of Clearwire funding. Hmmmm….

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  24. It’s going to be cool to have a Google branded phone. And even better if Google goes retail direct and cuts those hefty data charges and handset prices from traditional operators. A good thing to look forward to.

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    1. How would selling a phone retail cut data charges? Or, given that you wouldn’t be tied into a contract, why would it cut handset costs?

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  25. hmm… i’m just interest how fast google chrome… but, this phone look great i think..

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  26. Poor strategy / loose strategic thinking comes to mind.

    1. Google now not only has MS against it – but also the handset mfrs.
    2. There is a tipping effect. Google has been walking a fine line, and this one should make the CEO of Ericsson / Nokia think: There is a push on Google voice, and now Google phone. What next? Google networks? In fact I would be on the phone speaking with my counterparts at Motorola / Samsung / Verizon / others to stall Google / Android
    3. Google doesn’t really have the skill sets for a retail play. They are an online play – not a distribution company.

    My $0.02.

    M

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  27. So the dog is out of the cage…
    Just think people could calm down with the iKiller thing..
    }For a while its just a phone, and to kill a phone that is so saturated in the market is not that easy i would say.
    Lets wait’n see

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  28. Intriguing… Now all they need is a service that allows you to make calls… oh wait… Google Talk… I guess Google is moving up the ranks to Disney status in the world domination market!

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  29. “Doing it for the employees…” That would be like Tiger Woods saying he needs to put family first.
    I think this is a smart move by Google because search and ad is (obviously) so vital to the company and this is quickly porting from desktop to smartphone.

    My take here:
    http://brianshall.com/content/smartphone-computer-googles-smart-move-making-their-own-mobile-phone-goog

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  30. Number 1 google :)

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