Why Nexus One Will Make Money for Google

11 thoughts on “Why Nexus One Will Make Money for Google”

  1. Think we need to see the phone somewhere else than T-M to really gage interest. Let’s see where it goes once it hits Verizon. But have to say “1M-3M” sure is a CYA estimate.

  2. Google Voice number portability will ensure the Nexus One will make tons of money.

    Or, even better, Google throws its weight behind ENUM here in the U.S., then adds ENUM support to the Nexus One ($$$!!!)

    “…The main issue is that the ENUM standard demands that ENUM is a public service and that the control of the telephone number lies in the hands of the end-user…It explicitly states that users can bypass their communications provider when they register in the ENUM registry. A significant amount of money is made by today’s telephony providers (be they traditional providers or ISPs providing VoIP bundled with Internet access). Telephony providers see User ENUM as a threat to their bottom line and are therefore not keen on introducing the technology nationally.”

    http://arstechnica.com/business/news/2010/01/enum-dragging-telephone-numbers-into-the-internet-age.ars

    😉

    1. I don’t know where you got the idea about Google Voice Number Portability. It does not exist. There’s been talk for close to a year that they are ‘about to’ make it available. I would not hold my breath if I were you.

  3. I suspect that we will see Google capture a meaningful portion of the smartphone market over the next two years. Google is uniquely positioned to leverage its local search, location-based services, and cloud-based productivity apps to carve out a strategic position where Apple’s iPhone is currently weaker. And though the initial launch of the Nexus One has been somewhat disappointing from an execution standpoint, the opportunity to improve the device rather rapidly still exists.

    I recently wrote an article on the Hierarchy of Mobile Needs for my blog, TheAcquiror, that describes this theory in greater detail if interested.

  4. “I find these estimates to be way too optimistic.”

    I don’t see these as overly optimistic at all. Take into context that Google-branded “anything” has rolled-out slowly and built steam over time (gmail, voice, enterprise, etc.), generally in Beta form.. this is part of their business model. Then look at the competition – who build hype through pre-marketing, or complete secrecy.

    Now, look at the numbers. Sure, you can take the argument of opening weekend at the movies – the most traffic, destined to die-off – or you can flip that and assume the Google “steam building” methodology. Without budging, the numbers look like this: 20k x 52 = 1m+/-

    Now… lets add-in some factors that seem to have been excluded from the original post: International Adoption, CDMA Release, Full-Spectrum 3g/GSM Release, Distribution Model. All of which are proposed to happen in 2010.

    The last earmark – which unfortunately won’t effect the bottomline in 2010 – is Voice-as-Data. Google already has a big foot in the door here… which could be explosive in the coming years.

    Not all of the aforementioned points will be bread bearers… but enough of them will, that hitting those 1m-3m estimates could even be considered “modest”.

  5. Andy Rubin said Google was not interested in making money on hardware but that Google was going to make the money on serving relevant mobile ads and other web based services.

    Though, the Nexus One bill of material is $175, it just doesn’t make sense to say that Google is not trying to make profit on the hardware sales.

    There is a $354 profit margin (66%) on every Nexus One sold at $529. That is really huge. And sure, HTC and Google spent some R&D money that they need to make up in margins.

    Still, I believe 66% profit margins per phone sold is not at all ground braking and will not in itself enable the real revolution in mobile computing.

    Unlocked Android phones need to be sold below $200 unlocked for it to really take over the whole market. Consumers will buy Android 95% of the time if they can get it for less than $200 unlocked with absolutely no subscription costs.

    Imagine also if Google is able to purchase bandwidth from some carriers in bulk packages of several Terrabytes of data to be used on those 3G networks. That could enable Google to offer very cheap or even free Google Voice services to users who have any Android device even the unlocked $200 ones.

    Thus basically, I think you can look forward to the $199 Android phones that come with free unlimited Google Voice included. Maybe even basic web browsing and bandwidth for basic apps also free or very very cheap.

    Even if bandwidth was expensive at $10 per GB, Google could still re-sell Android users that bandwidth at $10 per GB and you only need a very few GB per year if you just want basic Web Apps, Web browsing and basic Google Voice VOIP conversations.

    I hope we will soon see Nexus Two, Three, Four and Five at the Mobile World Congress in just 3 weeks from now. From the Motorolas, Samsung, LG, Acer, Asus and any of the other manufacturers. They are for sure all working on the $199 unlocked superphone with unlimited free calls and never again any expensive carrier subscription plans.

  6. I question the stats used by the author, as Android Apps currently are above 24000.

    The overall premise seems reasonable, but its up to google to make this work for them. They need to thoroughly review their units and provide good customer service.

    Phones are sold through the eyes, not over the network. When they grasp that concept, they may make money.

  7. I don’t believe that Google is trying to sell 10 million handsets. I’m not sure what they’re trying to do, but they have the marketing power to advertise the hell out of this phone and they simply haven’t done it. I own the phone – (IMHO) it’s the best phone currently available. So let’s think about this: they have this great phone, and they are BARELY advertising it. Not only that, there are NO demo models available at the T-Mobile store; Google didn’t even supply T-Mobile with marketing materials for the Google phone. Walk into a T-Mobile store and it’s as if the N1s don’t even exist. The sales team will pitch blackberries at you like they’re going out of style!

  8. I’ve seen many ads for the Nexus One in the Adsense networks of sites and blogs. Basically Google can advertise it as much as they want.

    The thing is, I suspect, that most of the $354 in profit per Nexus One actually goes to HTC and not to Google, so Google should not have an interest in marketing too much out of it.

    Google prefers having Nexus Two, Three, Four on the google.com/phone site within a couple of months and have 3-4 major manufacturers compete on the price of selling the phones unlocked.

    You really need to understand that $529 should not be normal pricing for such a phone. isupply.com calculates the bill of material at $175, so if Google says the truth in “Google doesn’t need to profit on hardware”, then the unlocked phones should be sold for $199 or less sooner rather than later. And

    I expect Google could even subsidize part of the cost of the unlocked phones for long-time Google users. in which case the unlocked phones could be sold at $99 and even come with free Google Voice calls since VOIP consumes only very few kbit/s and Google should be able to purchase bulk amounts of bandwidth to use for anything they want. And Net Neutrality should allow Google use VOIP on that bandwidth and not have it disconnect or be any more unreliable than any existing voice calls.

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