Google plans to close its online retail store for the Nexus One handset in the U.S. and instead pursue the mobile operator retail model it uses in Europe with Vodafone. And as available inventory spreads worldwide, Google will morph its web storefront into a showcase for information on a wide range of available Android handsets. What was once a cannon shot across the bows of the U.S. carriers meant to change the way consumers purchase phones is now a small rubber bullet falling short of its target.
There’s a few lessons to be learned in the overall Nexus One experiment. With perhaps 200,000 Nexus One handsets sold since early January, the web store closure indicates that consumers aren’t ready to purchase a new handset sight unseen. While there are several online venues where one can purchase a phone — Amazon and Wirefly come to mind — all of the phones available online can also be found in brick-and-mortar stores, where consumers can get some hands-on time with them to help decide which model they is best for them.
Then there’s the marketing issue — there really wasn’t any. Sure, there were Google ads on the web, but no mainstream U.S. media outlets carried ads showing off the phone. How else would a potential customer even know the Nexus One was available for purchase? Contrast that with the $100 million ad campaign that Verizon sunk into the Motorola Droid launch and it’s easy to see why the Droid outsold the Nexus One by a factor of nine in the first 74 days it was available.
Finally, it seems clear that the majority of U.S. consumers still aren’t ready to adopt the unsubsidized handset model that Europe and other areas use. People here gripe about their 2-year contracts, but aren’t willing to go contract free by paying full price for a new handset. I’m done griping, as evidenced by my own purchase of a Nexus One for $529 in January. I have the freedom to switch phones or carriers without an ETF, or Early Termination Fee, and I pay $20 a month less for my plan than a subsidized customer does for the same plan. Either I’m still in the minority or I was raised in Europe in a past life.
All those lessons aside, the one factor that Google isn’t talking about in today’s announcement is how its Android partners reacted to competing with Google. Essentially, that’s what happened the moment Google announced its own phone — it set the stage to upset the very partners it needs for Android. And without happy partners, Google can’t continue its assault on Apple, Nokia, Research In Motion and others in the mobile space. For that reason alone, pulling the plug on its Nexus One store just might be the best thing to happen yet for Google in the ongoing Nexus One story. Given that there are now 65,000 Android phones shipped daily, the partner relationships were really all Google had to lose in the first place.
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