Would Google do a Phone?

The rumours of a phone branded explicitly as a Google phone have been re-surfacing in the past few weeks. These originally started in the months leading up to what became Android, but the result was an operating system that ran on other phones. None of the devices are explicitly branded or labelled as a “Google Phone”. So, would Google want to do a phone?

Despite the assertions of some, Google has some modest hardware experience, in the form of the Google search appliance for enterprises. Granted, this isn’t exactly a mass market consumer device. However, Google wouldn’t be entering the hardware domain without some experience, no matter how limited or how different it would be from a phone.

If Google were to enter the consumer hardware market, my guess would be a ChromeOS-enabled netbook first. I think that from both a hardware and a business perspective, it would be an easier first step for Google into the consumer market. From a hardware standpoint, the pieces needed to build a reasonable quality netbook for fairly cheap exist and they are almost off-the-shelf. Worst case, Google could turn to someone like Acer or Asus to take an existing machine, come up with Google-unique packaging, and build the device for Google. This would allow Google to jumpstart the hardware process and gauge sales success (or failure) before jumping in and designing their own netbook in their own labs.

The netbook also offers them the ability to avoid dealing with carriers, at least initially. Eventually a netbook will need to come with some kind of 3G or similar connectivity support as an option. But it wouldn’t be critical for that support to be available out of the box. Further, the hardware to support 3G data services is also a commodity, and could easily be added (along with the plan) without worrying about special network or hardware requirements.

A phone is a bit trickier, although I would expect Google to start by having someone rebrand an existing device rather than building their own from scratch. The difficulty with the phone, though, is dealing with the carriers, and any special or weird requirements they might want to impose on their network. The success of the iPhone has given Apple the clout they need to avoid the rampant customization that occurs on handsets from Nokia, Motorola and Samsung. While Google carries some weight, I’m not sure they could command the same terms as Apple, at least not initially.

The biggest issue I see with Google releasing their own handset is that they will be competing directly with their other Android partners. Big companies have a hard time trusting each other completely, and I could see the other handset makers getting nervous if the supplier of one of their OS’s is also building a handset. No one is supporting Android exclusively right now (and Nokia apparently has no plans to support it at all). The major handset makers are, for the most part, continuing to hedge their bets by offering multiple operating system choices. It is possible that some could lean toward Android, perhaps exclusively, but expect that desire to change if Google were to release a version of Android that only the Google phones could take advantage of out of the gate. That would hit Google’s partners in two ways. In the short term, it would pummel their stock prices, since the market would question how likely the other vendors are to get the new feature(s), or get them in a useful timeframe. In the longer term, it would leave their partners scrambling to take advantage of the new features. Either way, the result would likely be a soured partnership and a diminishing of whatever trust was there. Ultimately, it could act as a deterrent to broader adoption of Android as a result.

The other area of competition is on price, and Google has enough cash around that it could basically subsidize the first few models completely, basically making the phones free (or at least really, really cheap) for the consumers. Motorola, HTC and Nokia aren’t exactly awash in cash, and need their products to turn some kind of profit, or at least break even, to have a chance at long-term survival. Having to compete against Google on price, where Google could be almost giving away high-feature phones, would be very, very hard. The other manufacturers don’t have the resources to outlast Google in a price war. If the Google phone were a runaway success, it would seriously hurt their partners, driving them even further to other platforms like Symbian or Windows Mobile, and reducing the uptake of Android.

Of course, Google having their own phone does give them one advantage: a complete user experience. Apple has this now, since they control the hardware and the software. Android is at the mercy of the handset makers, and Samsung has already said they intend on customizing their variant of Android to “better suit their phones”. That means that the look and feel of Android, and thus the user experience, will start to change and diversity for Android. If others get in on the act, then the Android brand may not have much value. I can’t just buy an Android phone to work the same way as any other Android phone. That will give rise to questions as to whether all the apps will work the same way, or if some will work at all. By having a Google phone, Google at least can set the standard and the benchmark. To take advantage of Android and keep customers happy, the other handset makers would likely have to make their units act in a similar way to avoid being marginalized.

In the end, I wouldn’t be surprised to see Google release a phone. However, I’m not betting on that happening anytime soon. As long as the other Android handsets continue to gain market acceptance, and as long as they user experience doesn’t stray too much, Google will probably wait. However, if handset sales stall, or the customization becomes rampant, then I would expect Google to step into the market.

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