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The day that Google announced its Nexus One retail strategy, I wrote a post pulling no punches that I thought it was a horrible idea. If first week sales figures are any indication, I am being proven right. What's more, Google appears to be cannibalizing their own ad space to prop up the sluggish phone sales.

Ads Are Their Bread and Butter

Yesterday as I made my way around the web looking at articles where Adsense buys appear, I noticed a trend. Nexus One phone ads dominated, meaning they are using one of the most profitable parts of their business to prop up one that is clearly under performing.

When I pointed out the ad sales conundrum on Twitter, a friend responded out they are free for Google, which is true of course. But the real issue is that this is ad space they could be selling and making money. As I've pointed out more than once in this space, Google's prime business is search and AdSense income. Anything that has a negative impact on these primary business objectives is in my view bad for Google's bottom line.

A Closer Look at the Numbers

MobileBeat has a nice chart showing first week sales figures for several major cell phone releases. Google sold 20,000 Nexus Ones. Compare that with 250,000 Droids sold the first week by Verizon. When you consider the huge release party they held for the press and the amount of hype in the days preceding the release, these numbers are truly pathetic. There's really no sugar coating it, and the only thing that can account for such horrible initial sales is the strategy of selling directly to consumers on the Web.

Reports of Bad Customer Service

If you are going to set up a web-only sales strategy, you need to make sure that you have a first-class customer service unit set up and ready to go when the product launches. It's absolutely essential to success, yet reports like this one from Ars Technica say Google's support forums can't keep up with the complaint volume. This is a rookie retail mistake and one Google could easily have avoided if they simply sold the phone through normal channels (or at least as my friend Jeff Rutherford suggested, partner with an experienced retailer like Amazon).

I understand that one week in the life of a product isn't necessarily a benchmark of success or failure, but I also understand that most products get an initial push out of the gate from the hype cycle, then settle in to a more consistent sales pattern. These early numbers certainly don't bode well for this phone, which is a shame because it looks like it could be a great phone. I just wonder how long Google will wait for the market to develop before it moves to a more conventional sales approach. If I were them, I wouldn't take too long.

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Last Post by allsround
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My view on this is that there may be some more marketing required, but as always and throughout the life of android, Google is trying to make a change in the way mobile handsets perform, are sold and operate.

This is just another early and expectadely slow way of evolving a new approach to distribution. It will take time for this to catch on.

Michael Manning

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I think we are reaching a point of saturation in these smart phones.
Between the Iphone, Pre , Blackberries, and various flavors of Android phones, everyone who wants one already has one.

The next new releases are going after smaller amounts of the pie.
The latest greatest phones will get some people to switch, but we are now only seeing incremental improvements in these devices.

This is why we are seeing changes in pricing of phone plans. They are trying to get more of the 'feature phone" buyers to step up to a smart phone.

Only when there is a real game changer will you see people jump on the next big thing.

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Michael:
Could be, but I'm thinking Google has to be very disappointed with these initial figures and I still maintain that a web-only sales model is a bad idea. People want to see and feel a phone before they buy and this method doesn't allow that.

Thanks for your comment.

Ron

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Across04:
I don't agree. All it takes is a the new guy to catch the cell phone buying public's fancy and the phones will sell. Cell phones are very much a fad device and people will switch quickly. Don't forget we are also talking about an expanding worldwide market. There's always going to be room for one more phone, so long as it's innovative and fun and captures the buying public's imagination.

Thanks for you comment.

Ron

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<blockquote>...they are free for Google...</blockquote>
Are they? If a user clicks on a Nexus ad that appears on xyz.com, xyz gets nothing?

I wouldn't go so far as to say Google is “cannibalizing” AdSense, but it's clear that marketing isn't free.

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Did you ever think you were on pages that were related to your Nexus One reading and AdSense was doing its job?

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