Google hits market with a rival to iPhone

The company seems determined to become a force to reckon with in mobile advertising
Last Updated 06 January 2010, 16:46 IST

Google also said that it would sell the Nexus One, which it called a superphone, exclusively through a new online store. Google, which earns the vast majority of its revenue from advertising, said it was dipping its toes in the direct retailing business not to reap profits from the sale of phones but to broaden the availability of handsets running its Android software.

“There is an opportunity to make some margin on the unit sales, but that’s not the objective here,” Andy Rubin, a vice president of engineering in charge of the Android technology, said. “Our primary business is advertising.”
Consumers will be able to buy the Nexus One for $529 unlocked or for $179 with a two-year calling plan from T-Mobile. Google said that the Nexus One would be available on Verizon Wireless in the United States and on Vodafone in Europe later this year. It said it hoped to add other devices and carriers to the direct-to-consumer programme in the future.

Some analysts said they were impressed by the speed of the Nexus One and by some of its capabilities. Google has voice-enabled all text boxes in the device, so a user can, for example, compose an e-mail message by speaking into the phone rather than typing. But they expressed disappointment that Google had not done more to shake up the industry by, for example, subsidising the phone through profits from advertising.
“It would have been nice to see them roll out something really unique,” said Danny Sullivan, the editor of ‘SearchEngineLand’ and a longtime Google analyst. “It is more evolutionary than revolutionary.”
The Nexus One, which was built by HTC, a Taiwanese electronics manufacturer, has a 3.7-inch screen and runs the latest version of Google’s Android operating system. At less than a half-inch thick and 4.6 ounces, it is slightly thinner and a tad lighter than the iPhone. It has a removable battery, a 5-megapixel camera with an LED flash and can shoot both still images and video.

Google executives called the Nexus One ‘exemplar’ of what is possible with Android today. They said Google was pleased with the success of Android, which in little more than a year has grown from one device on one carrier to 20 devices with 59 carriers around the world. But they decided to work closely with HTC to design the best possible device based on its software.

The only person in the room who did not appear ready to concede that the Nexus One was the best Android device in the market was Sanjay Jha, the co-chief executive of Motorola, which recently introduced the Android-based Droid.
“I think the Nexus One is a good phone; I think the Droid is a good phone,” Jha said. But Jha appeared to embrace Google’s plan to market phones directly to consumers. “I see this potentially as an expansion of the marketplace,” he said.

Similarly, cellphone carriers appeared unperturbed by Google’s plan to sell unlocked phones directly to consumers. “We certainly welcome bringing more choices to the marketplace,” said John Taylor, a spokesman for Sprint. Jeffrey Nelson, a spokesman for Verizon Wireless, said his company was aware of Google’s plans for a store when it signed a broad cooperation agreement with Google.

For now, the Nexus One phone works only on cellular networks using the GSM standard, which in the US is used by AT&T and T-Mobile. It can run on AT&T’s network if the unlocked-phone owner has an AT&T SIM card, but it will work only on the older and slower EDGE network, not the faster 3G network, Google said.
The Nexus One has a high-speed 1-gigahertz Snapdragon chip from Qualcomm, which keeps multiple applications running quickly. It has some 3-D display capabilities, and Google collaborated with Cooliris, a Silicon Valley start-up, to incorporate that company’s technology, which showcases photos along a scrolling wall of images. Google also introduced a version of Google Earth that runs on the Nexus One.
In recent decades, the power of industry giants like IBM and Microsoft, which once seemed unassailable, waned as computing shifted from big mainframes to PCs, and from PCs to the internet. Many analysts say it is now Google that is faced with a less certain future in the face of another shift.
Still, they say Google saw this coming years ago and has been preparing for it. Google executives now say they are confident that the company will thrive as the mobile internet grows.

Top Google executives, including Eric E Schmidt, the chief executive, have long said that the mobile internet was Google’s biggest opportunity for new growth. They orchestrated a string of acquisitions of companies with mobile-related technology, including Android, maker of a cellphone operating system; GrandCentral, a service for making calls that can bypass telephone lines; and AdMob, an advertising network for mobile applications. The AdMob deal is awaiting approval from regulators.
Google also invested far more aggressively than its competitors in mapping technologies and services tied to a user’s location, which are likely to become the vital underpinnings of new advertising systems on GPS-equipped mobile phones.
“It looks like a really cool phone,” said Charles Golvin, an analyst with Forrester Research. “But it is not a game changer.”

Peter Chou, the chief executive of HTC, refused to disclose sales forecasts for the Nexus One, but he said that the device “pushes the limits of what’s possible on a mobile phone today”.
While the Nexus One may be a rival to the iPhone, Google and Apple are approaching the cellphone market with very different strategies: Apple makes money by selling phones and Google makes money by selling ads. But there is little doubt that the two companies are on a collision course.
In December, Google came close to paying more than $500 million to acquire Yelp, a website for business listings and reviews. While the deal collapsed at the last minute, Google’s interest underscored its determination to become a force in mobile advertising.
If the Nexus One or other devices sold through Google’s store succeed, they could eat into the appeal of the iPhone. Meanwhile Apple said on Tuesday that it had acquired Quattro Wireless, a mobile advertising start-up, indicating that it has plans to attack Google’s core advertising business.

(Published 06 January 2010, 16:45 IST)

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