March 1, 2010, 12:00 AM

Google: The Retailer

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For the first week there were more Internet searches for Nexus One than for Apple’s iPhone, reflecting the media glow, says Heather Hopkins, an analyst with online traffic measurement firm Experian Hitwise. But in the two following weeks searches dropped sharply, falling to about half the level of iPhone searches.

“Google has a way to go to get the cool factor of the iPhone,” says Gene Alvarez, an analyst for Gartner Inc.

Nexus One marketing so far indicates Google does not expect to move significant volumes of the handset beyond a base of early adopters, says Avi Greengart, a consumer device analyst at Current Analysis Inc.

“It’s going to have to make a concerted effort to raise awareness of the device,” he says. “The comparison is to Amazon’s Kindle. Amazon merchandised the hell out of that thing.” By contrast, he adds, Google’s lackluster promotion of Nexus One seems more like a recruitment drive for a secret club.

Touch and feel

Google is selling the Nexus One phone exclusively through its web store, and initially placed a link to the store from the home page. That link disappeared by February, and when one types in “smart phone” on the search page, Nexus One ads appear below ads for other phones, suggesting Google is not giving its own ads better placement than those of competitors.

There is no evidence of any large-scale marketing push from Google for the phone. Such an effort might fail to reach mainstream consumers anyway. “There’s a reason all these mobile phone stores exist,” Mulpuru says. “People want to touch and feel things.”

But Google took some small steps on its new e-commerce site to get past that desire to touch and feel. The Nexus One web store tries to digitally replicate touch by offering a 3-D view of the device and a feature that enables a consumer to put her hand to the screen and adjust a line drawing of a hand with a slider mechanism to see how the phone would fit in her palm.

Consumers can buy the phone without first signing up to a mobile network, a practice common outside the United States but which results in higher cost for the handset itself-in this case, $529 for a model without a network subscription. U.S. mobile operators typically subsidize phones when consumers sign up for long-term contracts. Google’s Queiroz, employing a concept that has guided Google since its creation, described the experience of buying and setting up the phone as “simple.”

Simple or not, Google annoyed some consumers in the early days of the launch with its approach to customer service, conducted mainly via e-mail. Two days after the launch, marketing consultant Patricia Seybold blogged about the lack of information on the Nexus One and T-Mobile sites (T-Mobile USA offers a two-year plan for Nexus One customers) and the difficulty she had activating her phones.

Google has since launched a phone line for customers who have ordered the Nexus One and have questions about when the phone will arrive or its technical features. “Our approach with our new consumer channel is to learn fast and continue to improve,” a Google spokeswoman says.

Hopkins, however, says Google has avoided major public relations problems, with only one negative term-“nexus one problems”-among the top 30 search terms so far associated with the phone.

Google also must be sure it doesn’t offend other partners that help promote its services and applications. For instance, Motorola Inc. makes smartphones that use the Android operating system from Google. As for Motorola, its co-CEO, Sanjay Jha, attended the Nexus One launch press conference and said he did not see the phone as a threat. “This is an expansion of the marketplace,” he said. He did not say if Motorola would build a Nexus One handset.

Real and potential missteps aside, it’s hard to forget that Google already has transformed, indeed practically created, the online advertising industry. And it has the financial heft and the constantly growing storehouse of data to potentially alter online retailing, even if the elephant has yet to hit its full stride.

Google’s web retailing

Nexus One: Launched in January, sells mobile phones with a Google operating system and apps directly to consumers, who don’t have to commit to lengthy contracts with mobile network operators.

YouTube: The Google-owned video channel for 10 days in January sold $3.99 rentals of five independent movies affiliated with the Sundance film festival. Consumers paid for 2,684 rentals in what a YouTube spokesman calls a first step in an ongoing experiment in paid rental.

Google Editions: Google will sell digital downloads of books to consumers who can read the content on a variety of web-enabled devices, including computers and mobile phones. The store, set to launch in the first half, will enable publishers to set prices for most e-books and split the revenue with Google.

Software: Details are scarce, but Google wants to sell business-related software through another online store, putting the search engine in closer competition with Microsoft Corp.

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