Google dove into the mobile device market this week with a splash similar to a Baby Grand piano falling into a swimming pool from 10 stories up.
With the unveiling of HTC's Nexus One smartphone, which has Android under the hood, Google is now going to be selling mobile devices directly to customers. It's a bold move, but one that will put Google in competition with partners and raise the ante in the already competitive mobile market. Not to mention the potential for unintended consequences.
Here we look at three questions -- and there are clearly many more -- that the Google Nexus One is generating right now amongst the wireless industry cognoscenti, and which Google is going to have to answer at some point in the not-too-distant future.
1. Why Is Google Competing With Its Partners?
When Google first unveiled Android, its stated plan was to develop the operating system while phone makers concentrated on producing Android phones. That plan worked well at first, and many handset makers stepped up with innovative Android powered smartphones. However, when Verizon started selling Motorola's Droid smartphone in November, cracks began appearing in the veneer of harmony that had been part of the initial blueprint.
Some industry watchers believe that Google may be getting caught up in the political side of the wireless operating systems business. "How did Verizon suddenly get the rights to sell an Android 2.0 phone when all of T-Mobile's phones were Android 1.6 and below?" says Allen Nogee, an analyst with In-Stat, Scottsdale, Ariz. "It looked like Verizon was getting some favoritism."
With the arrival of Nexus, Google is now competing with Verizon and every other phone manufacturer that has invested in supporting Android. Take Motorola, for example: Are they a Google partner or a Google competitor? According to Nogee, this ambiguity could cause some manufacturers to reconsider their level of commitment to Android.
"It gets very fuzzy. Because Google has entered the phone market, and they have the power to give themselves the most advanced version of Android, other phone makers may feel they are at a disadvantage, and therefore may support Android a bit less," says Nogee.
Steve Beauregard, president of Santa Monica, Calif.-based mobility solution provider Regard Solutions, is impressed with the brashness of Google's entry to the mobile business but agrees that it's likely to ruffle the feathers of industry incumbents.
"This move sends mixed messages to Motorola, HTC and other third party manufacturers that have to wonder how Google will keep a level playing field in a hotly competitive market," Beauregard says.
2. Is Nexus One Really A Game Changer?
Google is selling an unlocked version of Nexus One for $529 and a version with a T-Mobile contract for $179. Naturally, it's the unlocked option that's getting the most attention, as some industry watchers see it as Google's attempt to chip away at exclusive agreements that have been U.S. carriers' bread and butter.
But will the addressable market be large enough to justify the expense of developing Nexus One? Dan Croft, president and CEO of Mission Critical Wireless, a solution provider in Lincolnshire, Ill., doesn't see anything ground-breaking about the economics Google has described for Nexus One.
"How does offering an unlocked version of the Nexus One for $529 and a Nexus One with a two-year T-Mobile activation for $179 qualify as 'game changing'? It might the greatest device ever, but it sure sounds like the traditional carrier subsidy model to me," says Croft.
Next: Google's Demand Generation Challenge