Why Google's Nexus One hasn't flopped (yet)

The tech industry wants Google to deliver an iPhone "killer," and continues to be disappointed that Google doesn't share that interest.

The reaction to a report issued Tuesday by Flurry Analytics managed to completely overlook some interesting news--the Android-based Motorola Droid outsold the original iPhone over the same period of time following their respective launches--to focus instead on the sales numbers for the Nexus One.

Google has sold an estimated 135,000 Nexus One phones in the 74 days since it arrived, according to Flurry, a time frame chosen for comparison purposes because Apple sold 1 million iPhones in the first 74 days of its existence in 2007.

Given that 135,000 units add up to way fewer than 1 million units, it's easy to label the Nexus One launch a "flop." But that conclusion assumes that Google intended to sell a mass-market phone all along.

We've said it before, but we'll say it again: the Nexus One is not the One True Phone descended from on high to restore order to an iPhone-dominated world. Google is indeed very interested in having its Android operating system become the alternative to the iPhone, but it is not fighting the same fight with the Nexus One that Apple, Palm, Research In Motion, Nokia, and countless others are fighting.

When it launched in January, Google Android chief Andy Rubin told GigaOm that he expected the company would sell 150,000 Nexus Ones. He didn't specify a time frame, but he didn't say "74 days" either. So it's just as easy to make the argument that the Nexus One is actually a huge success based on the Flurry numbers and Google's own expectations.

That would also be a stretch, to be sure. The reality is that selling the Nexus One is a very complicated dance.

With the Nexus One, Google wants to promote the idea of a Web store that matches phones and carriers, rather than individual phones sold exclusively through individual carriers. The problem is that it has to work with those individual phone makers and individual carriers to develop Android phones, and has to be careful not to irk those companies with aggressive Nexus One promotion and lose ground on the larger goal: the adoption of Android.

So it has walked a fine line with the Nexus One. Google hasn't bombarded consumers with mass-media messaging about the phone and the purchasing model the way Apple did after the iPhone made its debut; it has instead used word-of-mouth marketing and Web ads to promote the phone.

And that phone is only available at competitive prices through T-Mobile. Unlocked phones have a strong appeal to a certain kind of techie customer (and more appeal now that they can work on AT&T and Rogers Wireless' networks), but mass consumers buy on price, as Apple well knows from watching sales skyrocket each time they cut the upfront price of the iPhone.

Comparing the launch of the Nexus One with the launch of the iPhone is a bit disingenuous. The original iPhone launch was arguably the consumer electronics event of the past decade, with hype surrounding the iPhone launch and aftermath unlike anything tech-industry veterans and everyday consumers had seen.

The hype surrounding the Nexus One launch, on the other hand, was stoked by those who thought Google was getting ready to sell its own phone in a mano-a-mano battle against the iPhone. That's not exactly what Google had in mind, but the prelaunch impressions did not entirely disappear after Google revealed the actual plan: Goldman Sachs initially predicted Google would sell 3.5 million units in 2010.

Google could certainly sell the Nexus One more aggressively: does anyone really think that Google, of all companies, does not understand the power of advertising?

Consider the Motorola Droid, which according to Flurry sold 1.05 million units in its first 74 days through heavy promotion from Verizon and Google. Google certainly has the resources to duplicate that kind of promotional effort for the Nexus One.

But the day Google rolls out that kind of advertising for the Nexus One, it will be cutting off its nose to spite its face. Partners already wary of the Nexus One concept will suddenly find reasons to embrace Windows Phone 7 or Palm's WebOS rather than engage in open warfare against Google, and its hopes of remaking the mobile industry in its image will fade. A muted promotion strategy for the Nexus One keeps those partners on their toes in forcing them to raise the bar on their designs without Google siphoning away the revenue they'll need to raise that bar.

What Google really wants to do is change the way the mobile phone industry operates. Playing the same game as all the rest won't accomplish that: the ultimate measure of Google's success with the Nexus One won't be market share, but a market shift.