Google phone revolution or misdirection?

Google smartphones are either a daring foray into the telecom world or a misunderstood test of the next-generation of the Internet giant's Android mobile operating system.

Analysts interviewed Friday were divided over what to make of the "Nexus One" smartphones that Google is having workers test internally.

"We are having a big discussion whether this is going to kill Android or make it," said analyst Rob Enderle of Enderle Group in Silicon Valley.

"It looks like Google is moving to see if they can do the Apple thing."

Apple iPhones dominate the smartphone market, in part because the California company "controls the customer experience" from design of handsets to programs available at the hugely successful online App Store.

Canada-based Blackberry maker Research In Motion rules the business market with a similar approach, instead of licensing software to device makers who call the shots regarding hardware.

"When you have too many cooks in the kitchen, who actually owns the menu?" Enderle asked rhetorically. "Apple and RIM have one person owning the phone. Clearly it is worth experimenting with. This could work."

Google had Taiwan-based HTC make the hardware for Nexus One, the devices it gave employees last week to experiment with in a process referred to as "dogfooding."

If Google markets an "unlocked" phone, meaning it isn't tied to a specific carrier, customers would face price premiums because telecom firms routinely subsidize hardware to get lucrative multi-year service contracts.

"Google clearly is not going to sell this merely as an unlocked, unsubsidized phone at a commensurate high price point (over 500 dollars)," Ovum research fellow Jonathan Yarmis said in a note.

"More disruptive than the phone itself is likely to be how they approach the business model."

Liberating itself from carriers would free Google to put its online ad targeting skills to work generating revenue to subsidize its smartphones, according to analysts.

Last month Google paid 750 million dollars for AdMob, a mobile advertising specialty firm with technology proven in iPhones and other smartphones.

"Selling a high-priced device is not very interesting," Yarmis said. "Selling a device that's subsidized by being an advertising platform as compared to being subsidized by a carrier is the news here."

Google must "walk a thin line" between marketing its own smartphone and being a supportive partner for electronics firms making their own handsets based on Android mobile software, according to Yarmis.

HTC already makes Droid smartphones and is expected to incorporate any Google device advances into its own offerings.

Although Android's share of the US smartphone market is relatively small, it has doubled in the past year to 3.5 percent in October, according to comScore.

Awareness of Android is growing rapidly, due in large part to the Verizon Droid ad campaign, the industry tracking firm added.

"The Android platform is rapidly shaking up the smartphone market," said comScore vice president of mobile Mark Donovan.

"While iPhone continues to set the bar with its App Store and passionate user base, and RIM remains the leader among the business set, Android is clearly gaining momentum among developers and consumers."

Analysts at industry-tracking firm Gartner Research believe Google isn't poised to market its own smartphone, rather it is having employees test the next iteration of Android.

"Our consensus is they are not going to do this," Gartner analyst Van Baker said. "For Google to go into the business of selling phones just doesn't make a whole lot of sense."

Even if it controlled the hardware and software, Google would still have to work with telecom carriers regarding the service the same way Apple does.

"Just coming out with a high-end phone really doesn't buy you much," Baker said. "You'd be hard pressed to come up with enough revenue from pushing ads to pay for the phone service."

Instead, Gartner contended, Google will refine Android using employee feedback and then let outside developers dabble with it to get a rich array of applications ready for when the new-generation operating system is released.

(c) 2009 AFP