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4 Lessons Learned From Google’s Nexus One Store Closure

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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 (s vod). And as available inventory spreads worldwide, Google (s goog) 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 (s amzn) 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 (s aapl), Nokia (s nok), Research In Motion (s rimm) 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.

Related research on GigaOM Pro (sub req’d):

Google’s Mobile Strategy: Understanding the Nexus One

79 Responses to “4 Lessons Learned From Google’s Nexus One Store Closure”

  1. Aztecwarrior25

    No one wants a non-subsidized phone as you have to pay for data plan either way to make full use of the phone’s features.

    as per this article “pay 20$ less per month for data” claim, that only saves you $360 since the data plan is enforced for only 18 months of the 2 years contract you can stay on cheaper or no data for last 6 months plus you get free/cheaper upgrade after 18 mo.

    fully owned –
    retail price 529 + 8.1% state sales tax = ~ $572
    Activation fees = 30
    Net amount spent from pocket after savings 602 – 360 = $242
    This excludes overages on the data plan as the 10$ plan is not unlimited

    subsidized
    TMobile price 179 + 8.1% tax = ~ 195
    Net amount spent = ~195

    A. you actually lose $20-50 by not signing contract
    B. The phone is useless without data plan unless you plan to stay indoors and use Wifi
    C. you have to pay 500 + amount upfront which is detrimental to your pocket if you change your mind or need to change your phone or if the phone gets stolen, damaged or breaks. The carrier can pardon data plan if you lose/damage your phone
    D. Cheaper data plan is often not unlimited

    In all I dont see any big merit in buying wihtout contract.

  2. Friend

    Glad I got one. Really just happy that the continued updates and the (currently) unmatched 1Ghz processor will keep this phone as a top notch device. Sad that it didn’t catch on, however even myself being a true fan of Google, had a hard time putting the cash up for a new phone. (Canada resident, wasn’t even sure that it would work on my network)Either way glad its here in my hands and working amazing! Sad to see that more people will not be able to adopt such a forward thinking approach to cell phones. Update for 2.2 coming soon, and yes N1 gets it first!!

  3. I don’t think anyone has this right yet. The reason the nexus one didn’t sell better was that it was using crappy carriers. No one wants to go with at&t, sprint, or t-mobile. The only carrier that has decent coverage is verizon. As soon as the smartphones were released on verizon they sold like crazy. The nexus one would have outsold the droid if it had ever been released for verizon. Look at the htc incredible which is almost identical to the nexus one. It has been sold out for weeks.

    • Choice of network certainly plays a factor in the purchase decision and potential sales numbers. So from that perspective, I’d agree with you, but it’s not the only factor. The Incredible has mainstream marketing power behind it, can be seen / used in a store and will have sales representatives nudging consumers to buy. Those are definite differences and will impact sales as well.

  4. trip1ex

    Apple already tried to sell the iPhone for $600. Didn’t work that well.

    No one wants to shell out $600 up front for the phone.

    No contract on Tmobile is nice (I just switched,) but since no one else in no contract and your phone doesn’t work on any other carrier it’s not like you can switch carriers.

    Might as well have a contract.

    You’re not going to be switching phones (like you can easily do on a no-contract plan) if you paid $600 for your first phone.

    Also poorly advertised. And never made sense that Google sold Android to cellphone manufacturers and then tried to make their own phone. It seems to me that would piss off the Motorolas etc of the world.