April 26, 2012, 10:46 AM

Take two: Google tries again to sell smartphones online

Google is selling the Galaxy Nexus via its Google Play marketplace.

Lead Photo

If at first you don’t succeed, try, try again. And if you’re Google Inc., you have the resources to try again.

After its first failed attempt two years ago to sell via the web the Nexus One smartphone from handset manufacturer HTC, Google is trying again, selling the Samsung Galaxy smartphone via Google Play, the search engine giant’s new digital marketplace.

Google is selling the handset for $399 unlocked and with no contract requirements. That means it will work on more than 200 carrier networks worldwide, including AT&T and T-Mobile in the U.S. A consumer just has to slip a SIM card into the back of the phone to get service.

 

A large display banner under the ‘Shop’ tab on Google Play confirms that Google is once again trying its hand at selling phones directly to consumers. “Galaxy Nexus New! Buy Direct from Google Play” the ad at the top of the page reads.

Google did not comment except to confirm the news.

Some analysts see the step as another sign that Google aims to sell Android tablets directly to consumers to compete with the likes of Apple Inc. and Facebook, which is rumored to be planning to sell a smartphone from manufacturer HTC. Facebook declined to comment on rumors about it selling a smartphone.

“I suspect this at least positions Google to sell into the tablet space, where they're weak,” says Brian Klais, founder and president of Pure Oxygen, a mobile marketing consulting firm.

Given Apple's iPad sales numbers, and Facebook's rumored smartphone, Google is under survival pressure, he says. “Google sees the threat that Apple and Facebook present to their core business as consumers shift into smartphones and tablets,” he says. “If Google doesn't remain aggressive in both mobile and social technology, they'll soon find themselves locked out, as amazing as that sounds.”

David Eads, CEO and founder of Mobile Strategy Partners, an m-commerce consulting firm, also thinks Google is trying to compete with Apple, which maintains control over nearly every aspect of its mobile products—from hardware and software design to retail sales. “Vertical integration is one key to Apple's success and gives them a competitive advantage over Google,” he says.

Since the original Nexus One release, Google has been working to become more vertically integrated, Eads says. That includes Google’s purchase of mobile handset maker Motorola. Now, with the addition of a devices shopping section on Google Play, Google has a direct retail channel to sell its own hardware and software as well as to get a cut of sales of Android handsets from HTC, Samsung and other licensees, he says. And, he adds, it’s not far-fetched that Microsoft might make a similar move with its Windows Phone.

“Microsoft has Windows Phone software and a tight partnership with handset maker Nokia,” Eads says. “Microsoft could acquire Nokia and control much of the process.” However, he says, Microsoft would lack a retail outlet.

Avi Greengart, research director for consumer services, at Current Analysis Inc., a mobile hardware and telecommunications research and consulting firm, says that Google’s approach could hurt its relationships with the hardware and retail partners it needs to be successful in the mobile space.

Google, he says, often seems to treat hardware and retail like software development—by beta testing and then iterating and improving. While he says this often works well with web software, it does not translate smoothly when hardware and retail partners need to be involved and make their own investments.  

“I don't know why Google is once again selling phones direct to consumers,” Greengart says. “The last time it did so, it seriously offended its carrier retail partners. Could this be a trial run for selling other hardware direct? Who knows?” he says. “But one thing is clear: If you work with Google, you can never be certain that the company won't start competing with you.”

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