Google admitting defeat in 'direct to consumer' model phone sales
googleblog.blogspot.com
googleblog.blogspot.com
There are bigger, more mature markets elsewhere. Go after them. You might even get more people to use your services (maps, etc.) on a mobile than they would on a PC.
Also, $350-$400 (may be even $500 for topend) is a sweet spot for smart phones in India. And people do buy these phones in open market without a contract.
All the best. Go forth and prosper.
/an iPhone and Droid owner.
If you don't mind me asking, how/why do you use two phones?
As far as I know, only T-Mobile USA has really come on board so far to make non-subsidized phones a better deal. T-Mobile has cheaper rates if you are not on contract. If you buy the AT&T compatible Nexus One, for example, you still pay the phone "subsidy" the entire time are using AT&T, even though you own the phone outright.
When the N1 came out, however, people were for some reason surprised about this. There's lots of news about it: http://www.google.com/search?q=t-mobile+%22nexus+one%22+%22n...
Google seems to think the former case deserves to pay $100 more for the phone.
Otherwise, you have people entering (comical) 20 year contracts, which would be (practically) unenforceable.
Can we expect LTE phones to work across carriers? If so, I anticipate a demand for change in the US when someone brings their out-of-contract ATT phone over to Verizon and realize they are paying as much as someone that got a subsidy.
Given that the average Indian worker makes less than $6k a year, I'm not sure I'd really describe those figures as a "sweet spot".
The market for smart phones is pretty big in India.
(Don't have the sales numbers at hand. But Admob metrics report shows that in the first 3 months of 2010, they served 2.8 billion requests to cellphones in India. 63.1% of them were from smart phones. This doesn't mean that 2 out of 3 cell phones in India are smart phones as folks without smart phones don't usually go online much. But it does mean that the Indian market for smart phones is bigger than the Australian market - where Admob served 656 million requests in the first quarter of 2010.)
India has unequal distribution of wealth compared to western countries. Thinking of India as a poor country is common mistake.
And, if you got a lemon, you couldn't take it back and exchange it for a new model (you had to wait weeks while it was repaired by HTC (assuming N1 here)).
I really don't understand why people keep missing these two crucial points, which TRUMP ALL OTHERS.
So a month before my 2-year contract is up, my ETF would be the same as if I cancelled within the first month. This is bogus if the reasoning is so that the carriers can 'recoup the cost of the phone that they were subsidizing.'
Even with the pro-rated ETFs now, IIRC they won't be insignificant at the 'month before the end of a 2-year contract' point even though the carrier has obviously made back most (if not all) of their sunk costs by then...
ETFs are there because the mobile carriers like to bank your monthly fees as a constant revenue stream, and when people cancel early it screws up their numbers and projections, much in the same way that banks penalize you for closing out a CD early. Talk about how it's to 'protect the carriers from people that cancel early without covering the full cost of the phone' is just people buying in to the BS story that the US mobile industry's PR depts have been telling us for years.
They didn't decide. Non-prorated fees were found to be unenforceable. I'd call that forced.
Number portability means carriers can't offer phones at steep discounts without the contract. People figure "I'm going to have a cell phone for the next 2 years anyway, I might as well just pick one carrier and get it for free."
For cellular phones, the $200-300 hardware cost is easily recouped over two years on a $70.00 monthly plan.
The difference can likely be explained by how some combination of the economics, regulation, politics, culture, geography is different in the US.
I would love to get a droid phone that does just that.
That's because you have a basic understanding of math and finance, unlike an alarmingly large percentage of the population.
People who are so bad at savings that they want the government to hold their money are taking the contract.
As is, I have to do the unlock dance, and have a phone that crashes semi-randomly. I'm very unlikely to buy another iPhone again, at least not unless they sell them as unlocked handsets, and I'm also unlikely to use it with AT&T.
Shitting on your customers is such a stupid strategy.
Maybe if the discounts were much steeper and widespread, but as of now, I still don't see a reason.
$20 * 24 = $480, roughly what your phone is worth except you're stuck with the carrier for 2 years.
If we could buy a phone from Europe, off Craigslist, a phone from ATT but switch to Verizon, etc., and not worry about carrier, we would start to question the contracts and pricing structure. There would be a huge demand for discounts (with the real threat of being able to take our phone elsewhere if they didn't comply) on non-subsidized phones.
That being said, Google needed to kill this. Along with the no retail try it before you buy it issues, Google isn't setup for being a retail company -- it just isn't in their DNA. I mean, people had to drop $500 for a phone, and then only support they get is a web forum, where they may or may not actually get an answer from a Google employee? Weird confusion over whether Google or HTC or T-Mobile was responsible for different support issues?
I'm sure Google COULD fix these things, but it would take fairly significant internal effort.
Very true. Google is a company with a very high revenue per employee. When I bought a N1 I had minor ordering issues and it was clearly that their support mechanisms were simply a joke -- they do that part absolutely terrible. I got much better responsiveness (and not just lame automatic email replies) when buying a $9 fan.
I'd be very surprised if they actually prevented you from buying the phone unlocked. After all, you can buy pretty much all HTC smartphones unlocked through sites like http://www.htcphonestore.com
If Google released a phone that supported both AT&T and T-Mobile and Sprint and Verizon, then it would be a great deal. Hate AT&T? Just port your number to Sprint and keep the same phone.
The phone companies would hate this, and the extra radios would cost like five cents more, so I don't see this as ever happening. But that's what would be truly innovative -- a $700 unlocked phone just isn't very compelling when you have to pay the subsidy anyway.
On the other hand, I've advised every (non-technical) person I know who is looking into a new smartphone to go try them out in person to see how they feel about the interfaces (along with pointing out the differences in application availability, carriers, etc.)
I would probably have bought my N1 a month or two earlier than I did, but for anxiety about dropping >$500 on something I had only seen pictures of...on the upside I like having it customized with my name and email address. That eliminates the resale value but I'm gambling that Antiques Roadshow will find it interesting in a few decades :)
With having to deal with technical support, and all the small margins associated with retail, I'm not surprised at Google's decision.
I bet there are a bunch of users who were waiting till October to buy a phone at the discounted rate. That's 24 months after the original G1 was released, which is when those owners are eligible for discounted upgrade.
Like myself.
(Remember, you only pay a prorated early termination fee in the US now, so if you only have a few months left on your contract, switching to a competitor is cheap. I have a year left and am definitely switching from T-Mobile to Sprint on June 4th.)
Also 'upgrading' to the Nexus One (or a number of other nice phones) on T-Mobile requires you to switch to an Even More plan.
HTC Incredible is CDMA (Verizon) phone.
Once the rest of the US carriers follow T-Mobile's lead and let people pay less in exchange for bringing their own phone, then a lot more people will start going that route.
I'm actually surprised that it didn't work. This was top premium ad space. How can it fail? Unless their expectations for sales were so stratospheric that even their massive campaign couldn't pull it off?
I had expected Google to sell the phone over the web for $99 with no contract. That would have been the sort of bold, gutsy move that Google needs to do to change the mobile phone market.
It seems that Google is actually looking to get a piece of the existing pie and doesn't care about changing the way phones are sold.
The Nexus One is cheaper than a contract free (but still locked!) iPhone 3GS. Their "mistake" was being honest about the price, and not explaining how it would more than pay for itself in lower monthly charges if you used T-Mobile's non-contract rates. Even that may not have worked, because consumers are generally really bad at math.
I think Google's pricing was targeted at investors (as in look, we can get top dollar for a phone just like Apple) rather than at consumers who would happily give Google lots of behavioral data for ads in exchange for a discounted phone.
Unsubsidized HTC Desire from local brick and mortar store = 400 EUR.
So I guess that the opinion 'Google drastically overpriced the phone.' is still valid.
Although, I did see a lot of Google Ads for the Nexus One.