Has Google Learned Its Nexus Lesson?

The first Nexus One was a failure.

Google (NAS: GOOG) simply didn't know what it was doing when it opened its digital storefront for the device, selling the device directly to consumers on its own site instead of through carrier retail stores. Turns out potential buyers prefer to physically test drive a device before making the plunge.

A trip down memory lane
Google originally billed this new direct sales model as "revolutionary," but it quickly fell flat. Despite all the hype and rumors leading up to the launch, Google sold an estimated 20,000 units in the first week -- a paltry amount compared to the 1.6 million Apple (NAS: AAPL) iPhones and 250,000 Motorola Mobility (NYS: MMI) Droids that moved over the same time frame.


Source: Google. Nexus One.

Source: Google. Nexus One.

The HTC-built device had some initial hiccups with poor 3G performance, and buyers looking for technical support naturally turned to the entity that sold them the device: Google. The problem there is you can't simply call up Google, as it has no customer-support numbers and there is no 1-800-GOOGLE. Instead, frustrated users were left to email support requests to the search giant, which promised a turnaround time of one to two days.

Calling up the manufacturer (HTC) or the wireless carrier (T-Mobile) led only to finger-pointing, with customers being transferred back and forth to no avail, leading to hours of frustration. T-Mobile said it didn't have support documents for the phone, referring people to either Big G or HTC. HTC said to call T-Mobile. Google would get back to you by email in a couple of days. A big mess, all around.

Within a matter of months, Google conceded the mistake with an official blog post from Android chief Andy Rubin.

But, as with every innovation, some parts worked better than others. While the global adoption of the Android platform has exceeded our expectations, the web store has not. It's remained a niche channel for early adopters, but it's clear that many customers like a hands-on experience before buying a phone, and they also want a wide range of service plans to choose from.

Source: Official Google Blog. Post by Andy Rubin dated May 14, 2010.

This was Google's admission that it wasn't cut out for direct sales, and it adopted the good old retail-sales model.

Lessons learned
The next two Nexus devices, the Nexus S and Galaxy Nexus, have used traditional sales models and have succeeded where the Nexus One failed. Samsung built both handsets, after collaborating directly with Google on design.

These devices have set the bar for Android devices for purists looking to escape from carrier or manufacturer software modifications, and the Galaxy Nexus remains one of the best Android devices money can buy today.

Let's try this again
According to a recent Wall Street Journal report, Google is now looking to change its Nexus strategy once again. Instead of working with just one manufacturer at a time, Big G is supposedly interested in working with up to five OEMs to introduce an entire family of Nexus-branded smartphones and tablets.

The company again intends to get back into a direct-sales model and sell gadgets straight to consumers through its website, presumably after learning lessons from the first botched attempt. There are a slew of benefits to taking this approach, assuming that Google is properly prepared to support a direct-sales model.

By working with a handful of OEMs, it should address their fears of favoritism of Motorola as it's about to get swallowed whole by Google, net losses and all, as soon as China signs off on the deal. That should mitigate some of the pressure to explore alternative mobile operating systems, particularly Microsoft (NAS: MSFT) Windows Phone.

Google can also control more of the process, much as Apple does. It can skirt wireless carriers that impose their own requirements, like when Verizoninitially blocked Google Wallet on the Galaxy Nexus, potentially because of its own payment-processing initiatives.

When it comes to pushing out the latest Android updates, there are two primary bottlenecks that cause delays: hardware OEMs and carriers. Increased OEM collaboration could alleviate the first, while direct sales cuts out the second.

Ring! Ring!
You may have noticed a keyword in the last section: tablets. There's already been much speculation of a Nexus-branded tablet intended to compete with Amazon.com's (NAS: AMZN) rogue Kindle Fire. At this point, it's less wishful thinking and more of an inevitability, since the Android tablet market needs some leadership from Google, especially in the face of Windows 8 tablets due out later this year.

This strategy doesn't address the lack of a "hands-on experience," but it would still be a major unified assault on the mobile-device market that could pay off in spades -- as long as Google picks up the phone for support calls.

There's another industrial revolution happening as we speak, that will also have implications on how mobile devices are manufactured. Check out this free video report on 3-D printing and how you can profit from it.

At the time this article was published Fool contributorEvan Niuowns shares of Apple, Amazon.com, and Verizon Communications, but he holds no other position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Amazon.com, Microsoft, Apple, and Google.Motley Fool newsletter serviceshave recommended buying shares of Amazon.com, Google, Microsoft, and Apple and creating bull call spread positions in Microsoft and Apple. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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