Google Kills Its Online Retail Efforts Ahead of I/O

Event Summary

May 14, 2010 – On its company blog, Google’s Andy Rubin announced that Google would be transitioning out of the direct retail business model for the Nexus One. All sales will shift to carrier partners, and the google.com/phone Web site will be used to highlight various Android phones available globally.

Quick Take

Analytical Summary

• Current Perspective: Positive on Google moving away from a business model that infuriated its carrier partners and never had a chance at large scale success in the first place. Google’s goal was to reduce the influence that carriers have over handset selection, but bypassing carriers risked ruining its primary distribution channel for Android overall. As Google quickly discovered that retailing – and providing support – is hard, and that most consumers aren’t ready to shop for phones online anyway, it decided to throw in the towel.

• Vendor Importance: High to Google, which wants to ensure it has access to the mobile Web for its advertising and apps. Despite earlier assurances that it was committed to the online retailing model and the Nexus lineup, Google already shifted its retail strategy in Europe, and now has done a complete about face.

• Market Impact: Moderate on smartphone market, because an online-only retail model without advertising support was never going to be successful beyond early adopters, but it could have harmed Google’s relationship with carriers and handset vendors. Android’s momentum is due in large part to poor offerings from Microsoft and Symbian; with entirely new versions of competitors’ licensed operating systems coming next year, Google cannot afford to torpedo its ecosystem.

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Competitive Strengths and Weaknesses

Response & Recommendations

Analytical Perspective

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