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Citigroup analyst Mark Mahaney is forecasting that Google will sell between 1 and 3 million Nexus One handsets in its first year.
Depending on your perception, however, that number can be construed as a potential success or a disappointment. Apple’s iPhone shipped nearly 5.5 million units in the first year and Citigroup estimates that the first year sales of the Motorola Droid will be more than 7 million.
So if it’s such a powerful handset, why the lowered expectations for the Nexus One? It all boils down to Google’s approach. For now, the device is only supported by T-Mobile, which is the smallest major carrier. That will change once Verizon Wireless sells a CDMA version later this spring, but we don’t know by how much.
Have you seen any television commercials for the Nexus One? Of course you haven’t. On the other hand, I bet you’ve seen a Droid commercial recently. And good luck trying to skate through a week without seeing an Apple “there’s an app for that” ad.
In contrast, Google is advertising online and there’s a good chance you’ve encountered such a promo already. But just how effective of an advertising campaign is that? If anyone knows the power of targeted, contextual ads, it’s Google, but can they compare with television?
You also have to consider the sales model. Google will tell you that its new way of selling the Nexus One is an experiment and that it could disrupt the typical carrier-driven sales model that allows customers to really test a phone before buying.
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But there is debate over whether customers will be comfortable buying a phone online without the opportunity to hold it in their hand. Though some buyers may enjoy seeing a phone first, do they really need to pick up a handset to know this screen is bigger or that its processor is considerably faster?
As smartphones increase in popularity, there is plenty of time to adapt to the business model. Personally, I can’t help but think that Google’s new way of doing business will be anything but a success, regardless of the number of Nexus One phones sold.
Google’s core business comes from search and advertising and you can argue that Android puts even more targeted ads in front of people. The open-source platform is already showing promise in location-based marketing and other areas not previously possible with PCs and laptops.
We just learned yesterday that AdWords campaigns now can be targeted based on specific handsets. So what better way to deliver more of these phones than to open their own online storefront with dozens of partners?
