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Why the Google Phone will not be released to the public

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The hype machine is in overdrive. Google has confirmed that it has issued special Android-running “dogfood” phones to some of its employees, and every tech blog is speculating about when this will be released to the public and how it’s going to change the world.

I’m willing to bet that Google will not release a Google-branded phone in the next year, unless “Google branded” means what it did with the T-Mobile G1 – a subtle logo on a phone sold by other companies.

Why? Three reasons. Before we get to these reasons, though, let’s look at what people are actually talking about.

First, Google is not getting into the hardware manufacturing business, except in the way it already does with the Google Search Appliance. The Google Phone is, according to all the reports, made by HTC. It’s not built to Google’s spec, but instead is reported to be a rebadged HTC Passion, a phone that’s long been in the development pipeline.

Second, at present (as Google has stated in its public blog post) this is a testbed phone distributed to employees only. Phones like this are designed to be used for development purposes, and are commonly called “dogfood” – as in the old programmers phrase “to eat your own dogfood”, meaning to use software that is still in development to iron out issues. If you’re interested in how dogfooding works, that’s a great description of it in Zachary Pascal’s book about the development of Windows NT.

And, in terms of things we know, that’s about it. So is this a herald of a phone released to the public under Google’s name? I think not.

1. Google’s lack of experience

The first reason is simply that Google doesn’t have the infrastructure or experience to support a sizeable consumer hardware project. It has no support system, no outlets, no distribution – in short, none of the things that what would be a major hardware launch actually requires. Neither does it have any experience in consumer hardware products.

At this point, someone will probably point to Microsoft and Xbox as an example of how a software company can more into hardware quickly. But this ignores the fact that Microsoft had been in the hardware business for years, on a much smaller scale, with mice, keyboards, and other peripherals. This gave it a valuable set of experience of hardware and how to market and sell it. Had Microsoft launched Xbox without this experience, I doubt it would have been a success.

2. Where’s the network in this?

Second, there’s the Network Effect. No, not that network effect – I mean the fact that in order of a phone to be useful, you need a contract from a phone network.

When selling phones, manufacturers face two choices: they can either sell the phone “off contract”, at full price to consumers; or partner with a network, which buy phones (at full price) and sell them with the up-front cost hugely reduced, getting the cost back over the course of the contract.

This is why you can buy an HTC Hero unlocked in the UK for £369, or get it for free with a 24 month contract on the 3 network. Unsurprisingly, very few consumers choose to buy the phone for the upfront cost.

In fact, Nokia has suffered massively from this in the US, where its smartphones have tended to be sold unsubsidised and thus have had minimal impact. People don’t want to pay $500-600 for a phone – period.

That’s why the talk of Google selling its phone off-contract is, frankly, silly. Why would anyone other than the kind of hardcore geek who MUST have the latest phone pay full price to buy one with a Google logo on it, when they can get the same phone with an HTC logo on it for much less money upfront? Even if the HTC Passion becomes the Google Phone exclusively (something I doubt given HTC’s record), there are many other manufacturers of Android phones and many good devices coming down the pipeline – and consumers will buy them if they’re free/cheap upfront.

Some might argue that Google could reduce the up-front price of a Google Phone on the grounds that it will increase their overall ad revenue over the course of the phone’s lifetime. But this would be a massive punt for the company, as there is no way of definitively showing ROI on a project like this. While they could show that X number of ads had been served on their phone, how many of those ads would be served anyway on another Android phone, an iPhone, or even a Nokia or BlackBerry? Working out the incremental revenue delivered, which would be required to work out how much the company could afford to subsidise the phone, would be impossible.

3. What’s unique about the Google phone?

Third, there is the issue of uniqueness. In order to be a success, there would need to be something other than the Google brand that differentiated it. Given that Google doesn’t make hardware, that means one thing: different software. And that’s the one thing that Google cannot do with Android.

Why? Because the moment that it started keeping “good” Android features to itself, it would alienate current and future Android phone makers, and fragment the platform. And that’s exactly what it wants NOT to do at this stage of the game. Android is already beginning to suffer from fragmentation. Anything which increased this will be avoided.

Could it offer additional, branded-phone-only services? Yes – but what would be the benefit to it doing so, over offering the same services on subscription (or even free) to the wider Android audience? Google has historically trod a very careful line with its services, making them as widely-available as possible for a very simple reason: The wider they are available, the greater the potential for ad revenue from them.

Show me the money

Put simply, unless Google has some unique business plan or completely radical technology that no one knows anything about – in other words, unless they have some magic pixie dust to sprinkle – it makes no sense for the company to release a unique, category-dominated Google Phone. We might get an HTC Passion, Google-branded in the way that the T-Mobile G1 was, sold through networks – and hey, that might be a very good phone. But it won’t be anything like the predictions we’re seeing now.

Remember when the iPhone was early in its hype-cycle, and how it was referred to as the “Jesusphone”? What we’re seeing now is a classic case of “Jesusphone” hype, the need of the tech blogging world to find a next big thing and portray it as massively different to what we have. The truth is more prosaic, and more dull. Category-defining products happen rarely, tectonic shifts in markets come along only occasionally. But hey, it keeps the geeks amused.

Update: John Gruber digs a little and finds the Google Phone identifies itself as “Nexus One” (smart reference). He’s also hearing that it’s GSM, but only works on T-Mobile’s 3G band.

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