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.