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Google (GOOG)
New Google Phone: Who Cares?
If you have not heard by now, Google launched its own smart phone yesterday called the Nexus One. Google has released its Android mobile software in other wireless providers' phones before, but it has never designed a portable device from the ground up. In previous instances (like with the Verizon Droid), Google's primary task was to design the phone's operating system software. However this time around, Google has decided to develop a smart phone in its entirety without a wireless providers help. Although, Google did team up with HTC to actually manufacture the Nexus One, the internet search engine giant had the final say on both the software and hardware design. It is obvious that Google is excited about its new phone, but should anybody else be? Why is Google risking current wireless carrier relationships to launch a product independently?
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The Nexus One is a direct competitor to the Apple iPhone and Blackberry, but from an overall design standpoint, the Nexus One is more comparable to the iPhone. Both the Nexus and iPhone are touchscreen smart phones with no physical keyboard functionality. From a technical standpoint, the Nexus One boasts similar capabilities as the iPhone. In some areas, the Nexus is better than the iPhone and vice-versa. For example, the Nexus One has a better screen size/resolution and camera, but the iPhone trumps Google with its on-board memory and available third-party applications. In the end, it boils down to a personal preference. If Google's new phone is not vastly superior to the competition, than what is all the hubbub about?
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Well, Google appears to think that it is not just the appeal of the phone itself but how consumers are able to purchase it. Google is making the Nexus One available to users directly via its online store. In addition, the Nexus One is not limited to a specific wireless provider, or at least not in theory. The Nexus One can be purchased privately and activated through any carrier of choice. However, like most things in life, there is some fine print. The only current available carriers for the Nexus One are AT&T and T-Mobile, but Google has promised that Verizon will be added to that list in the near future. Another caveat is that the Nexus One is not currently supported by AT&T's faster 3G network. Nexus One buyers must also pay a premium price of $529 if they decide to buy the phone directly from Google. If consumers buy it with a T-Mobile contract, the Nexus One is $179. The Nexus One is another channel for Google to secure more of the mobile market, but the search engine giant has a bigger goal in mind.
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Google is beginning to see its online advertising network growth slowdown, and has identified online mobile advertising as the next big thing. As a result, Google is making a blitz to lock up as much of the mobile market as possible. The search juggernaut made its first move in the mobile market a few years back when it launched the Android software with various T-Mobile phones. However, Google did not stop there. It just recently partnered with Verizon to help it release the new Droid phone. Both the Verizon and T-Mobile alliances were Google's effort to secure a stronger foothold in the mobile phone market, but the search engine tycoon seemed to have grown impatient with the partnership strategy. So, Google has decided to developed its own phone and make it available everyone regardless of their cellular provider. Google wants to get its Android software in the hands as many users as possible. The ultimate objective is to position itself for the launch of its mobile ad network.
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Google prefers to do things fast and on a large scale, and that is exactly the direction it is heading in the mobile phone market. In a very short time, Google has flooded the mobile industry with its Android software both through wireless carriers and independently. The search engine giant is hoping to gain as much of the smart phone user market as possible so that its mobile ad network launch will be successful. Analysts expect the mobile advertising industry to be extremely lucrative as more and more people transition to smart phones. Google is trying to take advantage of this consumer trend early before the barriers to entry become too high. In order to achieve this, Google needs to make its product available to everyone not just specific carrier customers, and that is exactly what Google is trying to do with the Nexus One. It is not about the actual phone for Google but how consumers can purchase it. The Google assault on the mobile advertising market is in full swing. The question is: will Google burn too many bridges getting its Androids in position?
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