Wireless

As a company that has built a business model atop trust, Google is in a sticky position as it prepares to formally introduce the Nexus One phone.

Google's Nexus One phone could be a sea change in how Google works with Android partners who might turn into competitors.

(Credit: Cory O'Brien via Twitter)

Google employees were given free Nexus One phones at a company party Friday night, and the Internet went into a tizzy. Reports surfaced later in the weekend that this device was the long-awaited Google phone, the company's answer to Apple's strategy of controlling the hardware, software, and distribution model with the iPhone, rather than the partner-oriented strategy of developing the guts of the operating system and letting partners each put their own stamp on the finished product.

Just two months ago, Google's Andy Rubin rolled his eyes when asked about an analyst report picked up by TheStreet.com that said Google planned to pursue this exact strategy. He said Google had no plans to make its own hardware--which is one thing since smartphones are almost exclusively manufactured by contractors in China and Taiwan--but he took a further step in spending about 10 minutes arguing why it would be a bad idea for Google to design its own phone and sell it outside of carrier channels.

That line of thinking resonated with many who follow Google and the mobile industry. After all, Google's stated goal for Android ever since the project was revealed in November 2007 was to create an "ecosystem" of multiple phones that would help improve access to the mobile Internet. And Google seemed to finally reach that goal this year, with over a dozen phones in the wild and more promised from some of the world's leading phone makers and wireless carriers.

But if the reports are correct, Google is about to make a radical departure from that strategy. And Google's new course would take it down a path that could sow distrust among the company's Open Handset Alliance partners, who must now be wondering if they're about to get into a marketing war with one of the tech industry's richest companies.

Katie Watson, a Google representative, said on Sunday that the company has confirmed nothing about its plans for the Nexus One, described as a "dogfooding" experiment for internal testing by the company in a blog post Saturday.

In the rush to anoint the Nexus One as the Google Phone, it's quite possible that the tech industry glossed over the fact that Google already sells Android phones, albeit on a limited basis. For quite some time, registered Android developers have been able to buy completely unlocked versions of the G1 and the T-Mobile MyTouch3G (also known as the Google Ion) for $399.

Google does sell some phones, such as the Google Ion, but only to developers for Android testing purposes.

(Credit: Stephen Shankland/CNET)

So there is a solid chance that the Nexus One is merely the Android Dev Phone 3, following the Dev Phone 1 (G1) and Dev Phone 2 (MyTouch or Ion). Just this year, Google handed out Dev Phone 2 models branded as the Google Ion to attendees at Google I/O 2009, but if regular people want to buy that particular phone they have to get the MyTouch3G from T-Mobile with a two-year contract.

It does seem clear that Google has played the premier role in designing the software for the Nexus One. In the company's blog post over the weekend, it said "we recently came up with the concept of a mobile lab, which is a device that combines innovative hardware from a partner with software that runs on Android to experiment with new mobile features and capabilities, and we shared this device with Google employees across the globe."

But the key unconfirmed detail is how Google plans to sell this phone. According to The Wall Street Journal, Google plans to sell this phone unsubsidized on its own, with consumers able to choose a wireless service provider after the fact. However, according to corporate sibling Peter Kafka at All Things D's MediaMemo and Reuters, Google has plans to hook up with longtime mobile partner T-Mobile to help sell the Nexus One through Google's Web site for $199.

How will Google market this phone? Anyone with a television set has likely seen an ad over the last month for the Motorola Droid, an Android phone sold for Verizon's network that has been billed as one of the best Android phones to date. It was also the launch pad for a long-term pact between Google and Verizon that will supposedly produce a family of devices based on Android.

If Google plans to sell the Nexus One directly to consumers, will it insist upon using its brand as the lead brand, rather than the "With Google" branding found on the back of many Android phones? Will it blast the airwaves during the NFL playoffs in January to trumpet the arrival of the Nexus One, perhaps just in time for the Super Bowl? And how will that affect partners such as Motorola and Verizon that have sunk so much money into promoting the Droid, only to see rumors of a Google Phone leak out at the worst possible time: the height of the holiday shopping season?

This could be a very telling moment in Google's history. At the moment, Google's mobile division does not seem to be completely in control of the message it wants to send consumers, partners, and competitors.

If Google really does plan to sell the Nexus One directly to consumers and compete with its customers, it has chosen an interesting way to announce it to the world, keeping the Google Phone rumor mill alive for months while publicly denying such plans. Apple has employed such a marketing strategy for years, insisting on near-silence regarding future product plans but benefiting enormously from the frenzy of interest in every little morsel that mysteriously pops up regarding those plans.

However, Google is not Apple. Google public-relations representatives will sheepishly admit that they have little control over how Google rolls out its products: Google is a company run by engineers, and engineers push the button when the product is ready to ship.

But when you're working in an environment with multiple partners that have competing interests, any confusion over your future plans--especially plans that would appear to yank the floor away--can breed distrust among those partners. One of Google's largest problems right now is that it has built a business model geared around the notion that it can be trusted with almost unprecedented control over the flow of information across the globe, and any cracks in that wall of trust will be exploited by its enemies.

With the way details have trickled out about the Nexus One, Google has either alienated current and future Android partners by muscling in on their turf, or set up thousands of eager smartphone consumers looking for an open alternative to the iPhone for disappointment when they realize Google merely plans to sell an expensive unlocked phone to a limited audience, if at all.

After all, Google essentially declared in its blog post that employees are testing a product with "new mobile features and capabilities" that presumably can't be found on the current crop of phones. It's almost the same language Google used to introduce Chrome OS ("our attempt to re-think what operating systems should be") while insisting that it had no competitive reasons for introducing that Netbook operating system.

Few believed that line with Chrome OS, and fewer still will believe that Google is creating Android for the betterment of humanity if it really plans to sell its own phone.

Perhaps you have already become used to Verizon's Droid tossing names at the iPhone like an 8-year-old boy behind his teacher's back.

However, the latest ill feelings directed at Apple's little cutey seem beyond even anything heard in an elementary school.

In a new TV spot, Droid asks an important question: "Should a phone be pretty?" To which many sane people would say "yes," and many emotionally challenged beings made of metal would say, "Huh? What?"

Its answer--the latest in its presentation of the Droid as a robotphone--is to hurl metallic-tasting custard pies as if the Apple store was a state fair.

"Should it be a tiara-wearing digitally clueless beauty pageant queen?" belches the ad's rhetoric, clearly referencing the iPhone, while wrapping the pie in a question.

I know many Socratically-inclined Apple fanpersons will object to the notion that beauty is only skin deep. But they will surely rail against the mere suggestion that the iPhone is digitally clueless.

Of course, this ad implicitly suggests that the Droid is, well, one of Cinderella's sisters, which might well affect its abilities to entice certain sectors of the populace.

Actually, the suggestion is more than implicit, for the deeply hirsute voice declares: "Is it a precious porcelain figurine of a phone? In truth, no."

So do you wait for a design that is pretty and is, as this ad so elegantly puts it, "racehorse duct-taped to a Scud missile fast" or do you have to compromise?

I know they say you can't have everything in life, but surely there must be some very attractive engineer out there who can give us everything in a few square inches of cell phone.

Motorola's and Verizon Wireless' $100 million marketing campaign for the Motorola Droid seems to be paying off with strong sales that will likely result in more than 1 million devices being sold by the end of the year.

The Droid, the only smartphone currently on the market that uses Google Android's 2.0 operating system, is Motorola's second Android device and it's available only on Verizon Wireless's network. The device is turning out to be the hit phone of the season, thanks in large part to an expensive and extensive advertising campaign.

Motorola Droid

(Credit: Motorola)

Neither company is reporting sales figures. But analysts say sales look good. The companies have likely sold between 700,000 and 800,000 Droids since the device was launched in early November, according to equity analyst Mark Sue of RBC Capital Markets.

"Verizon's big marketing push for the Droid is strengthening as we close in on the holidays, and following our round of checks, we believe about 700,000 to 800,000 Droids have been sold, making our hurdle of 1 [million] Motorola Droids achievable for 4Q09 [ending December 31]," Sue said in his research note. "Motorola, for its part, has done a good job on the production side, and our survey of over 100 stores indicates strong demand, limited stock outs, and very few returns."

John Stratton, executive vice president and chief marketing officer for Verizon Wireless, said when the device was launched in late October that Verizon would be pouring in more money to market this device than any other phone it has ever sold. And now it looks like the money has been well spent. From advertisements that specifically highlight the Droid to ones that focus on Verizon's extensive and reliable 3G wireless network, it's clear that the company has AT&T and the Apple iPhone in its crosshairs.

AT&T has actually sued Verizon over the advertisements about its 3G wireless network coverage.

Some Verizon Wireless stores, especially in major cities, are selling between 100 and 200 Droids per week since the launch in early November, Sue added.

The success of the Droid is good news both for Motorola and for Verizon Wireless.

Motorola comeback
For Motorola, the Droid represents a chance to make a comeback in the cell phone market. The iconic American company that practically invented the cell phone market has struggled for the past several years now. After the runaway success of the ultra-thin Motorola Razr in 2004, the company has been unable to come up with a hit phone. And it has steadily lost market share to other competitors, such as Nokia, Samsung, and LG Electronics. It's also ceded market share in the fastest growing segment of the market, smartphones, to newcomers like Apple and Research In Motion.

Motorola's mobile devices CEO Sanjay Jha took a bold gamble more than a year ago when he decided to dedicate the company's resources to building phones using the Google Android operating system. The Droid and the Motorola Cliq, which is exclusively sold on T-Mobile USA's network, are the first two Motorola Android phones to hit the market.

But Jha said the Google Android operating system will not only be used in high-end devices like the Droid, but it will also be used to power less expensive phones, creating a new tier of smartphones that will eventually replace the basic feature phone category. Jha said the company will launch at least 20 more Android devices in 2010.

The success of the Droid is an important first step in getting Motorola back on track. But equity analyst Ittai Kidron of Oppenheimer said in a research note Monday that sales of the Motorola Cliq are falling short of expectations. Motorola is expected to sell 1.5 million smartphones in the fourth quarter. And two-thirds of them are expected to be Droids.

Kidron said the Cliq is not selling well mostly because of issues with battery life. Motorola is supposedly preparing a software patch to fix the problem. But he also noted that T-Mobile appears to be losing interest in the device and is not marketing it heavily.

But T-Mobile says that the Cliq is doing just fine. And the carrier said that it's committed to marketing the phone through the holiday season.

"The Motorola Cliq is very popular among our highly connected customers and is the only device with Motorola's innovative Motoblur solution," a company spokesman said. "T-Mobile is excited about the Motorola Cliq for the holidays and continues to showcase it prominently in T-Mobile retail stores and with recent holiday deals."

Verizon's iPhone alternative
The Droid's success is also important to Verizon Wireless, the nation's largest wireless operator in the country. It is the first device that offers a true challenge to Apple's iPhone, which runs exclusively in the U.S. on AT&T's network. While Verizon has a strong reputation for its network, consumers often complain about its lack of cool phones. Up to this point, Verizon has mainly competed against AT&T and the iPhone with RIM's BlackBerry devices. But RIM's touch-screen BlackBerry Storm, which was first introduced a year ago, was largely a disappointment.

The Droid offers Verizon customers an alternative to the iPhone on the Verizon network. This fact could help Verizon retain some consumers who were thinking of leaving for the iPhone. But it might also attract new customers who are either disappointed with AT&T's service or have heard bad things about the network.

Verizon Wireless representatives say the Droid is certainly an important part of the company's device line-up.

"We are pleased with sales over the holiday weekend," Brenda Raney, a spokeswoman for the carrier said in an e-mail. "This phone clearly fits the needs of a number of customers who are excited about its availability on the Verizon Wireless network."

But if analyst data is to be trusted, it is clear that the huge marketing budget for the Droid is at least part of the reason why the device has been so successful. The HTC Droid Eris, another Android device sold exclusively on Verizon's network, is not selling as well as the Droid, Sue said in his note. The HTC Droid Eris went on sale the same day the Droid was launched, but with much less fanfare.

Part of the problem is the fact that there are many Android devices coming to market. And the number will only increase next year. The lesson from the success of the Motorola Droid is clear. If device makers and carriers hope for break-out success, then they will have to spend big on marketing.

(Credit: Phandroid)

Oh, you knew someone was going to do this. So let's just get it over with. And though some might think of this as a battle between the Droid and the iPhone for the nation's morality, let's be open-source about it: someone's trying to make a lot of money from cell phone porn.

A company with the obtusely childlike name MiKandi has launched a mobile app store that will exclusively cater to adults whose brain food consists of content that reflects their age. Yes, the sort of stuff some prefer to refer to as porn.

MiKandi's publicity material naturally avoids this term, referring to the more PC phrase "adult only." However, there is a little kink in its offering. According to Android fanperson site, Phandroid, the MiKandi Market apps only work with Android phones and not with Apple's more morally minded handsets.

Cupertino steadfastly sticks to its policy of refusing to allow apps filled purely with adult content, though some might dispute whether its definition of "adult" isn't occasionally a little idiosyncratic.

Not for a moment would one suggest that Verizon or Motorola or the deities at Google are necessarily in favor of porn apps. However, MiKandi is attempting to take advantage of the fact that the Android system is more open than the iPhone's.

So while the Android Market itself doesn't offer porn, nothing on your Droid phone prevents you from using MiKandi's services. The wise people at Phandroid do, however, offer stern warnings about MiKandi's workings.

Despite attempting to use MiKandi's services, purely for scientific purposes, Phandroid failed to actually secure access to any mature content. Remember, children, this sort of thing will always be a somewhat risky business.

In its attempt to redress the imbalance created by the latest Verizon ads, AT&T has hurriedly cobbled together not just one Luke Wilson ad, but several.

Curiously, one ad features precisely the same strategy as that of the latest iPhone advertising: reminding those who might still be on the fence, on the phone, or even on the lam that you can't simultaneously enjoy voice and Web surfing on the Verizon 3G network--and hence on the Motorola Droid.

So here we have Luke Wilson, still looking a little peaky and dressed in a difficult brown. Behind Luke, we have a man trying to use two phones (by implication, Verizon phones) to perform a task the iPhone will manage alone.

Some might find it entertaining that as his friend attempts to download something on one of his Verizon phones, he complains that it's all going rather slowly. Others might find this both true and funny.

AT&T hasn't merely paid Wilson a little more than 3G to make this comparison. Someone, somewhere, has, perhaps even wisely, said, "We need a map to counter Verizon's map."

So the writers hit upon the idea of a two-part extravaganza (this already aired during Tuesday's "Dancing with the Stars" finale), in which Wilson produces postcards from all the different American towns that really do--no, really--have AT&T 3G coverage.

Wilson says his job is to set the record straight, with respect to Verizon's vicious besmirching of the AT&T network. He tries his best. He tells us that AT&T covers 97 percent of all Americans--yes, 300 million people.

The AT&T map also seems far more filled-in and far more colorful than it appears in Verizon spots, though one suspects that local word of mouth might be rather stronger, in this instance, than national advertising. If you live in Spokane, Wash., for example, and you know someone there who has spotty 3G service on a particular network, that is far more powerful an influencer than any number of Wilson's postcards or Verizon's barbs.

It's enlightening, however, to discover that Wilson once dated someone in Tulsa, Okla., and it didn't work out. Did she catch him simultaneously calling and Web surfing? Perhaps we will never know.

It seems that Apple doesn't respect Verizon's Droid phone quite as much as it does Microsoft's PCs. But two new ad spots, launching Monday evening, come as close as Apple has done thus far to directly attack the allegedly do-it-all robotphone.

The Droid, you see, went after Apple in its teaser campaign with some telling remarks and the hearty claim that Droid does what the iPhone doesn't. Then Verizon decided it would be fun to knock both the iPhone and AT&T's spotty 3G coverage with its "Misfit Toys" concept.

AT&T has already replied by hustling a hastily-dressed Luke Wilson into directing a few resentful pins at Verizon's effigy. However these new ads, while entirely in keeping with the iPhone tone and style, end with a line that expressly assaults the doings of Droid--or rather, its alleged non-doings.

Both ads focus on the iPhone's ability to allow you to use voice and data capabilities simultaneously over the AT&T network. By asking gently at the end of each spot "Can your phone and your network do that?" Apple is bursting what it sees as the inflated stealth bombing that accompanied the launch of the Droid.

Apple iPhone Ad - Did You See My Email? from Arik Hesseldahl on Vimeo.

Apple iPhone Ad - What Time's The Movie? from Arik Hesseldahl on Vimeo.

These ads don't mention the Droid or Verizon by name. But the fact that Apple has decided to address its rivals, however obliquely, suggests that one can look forward to more accusations, more bickering, and more attempted one-upmanship.

'Tis the season of goodwill, after all.

When you've lost the first round in your case against Verizon's persistent and persuasive mockery, who do you turn to?

Luke Wilson, that's who. After all, he starred in "Legally Blonde" and, well, "Jackass Number Two."

Actually, Wilson is lovable. Truly lovable. Perhaps if he'd dressed down a little and Justin Long had suffered an interminable hiatus hernia, Wilson might have got the part of Mac, the Microsoft Mocker.

Instead, he has the slightly more difficult task of persuading the folks who adored him in "Old School" that AT&T's 3G will serve them well on the 3.10 to Yuma.

The creators didn't give him much of a script, as I suspect they wrote it a couple of lattes and a shot of bourbon before this opus was filmed in what looks like the empty space above Victoria's Secret in Santa Monica, Calif.

Luke is forced to stand before a board and prove that AT&T has the fastest 3G network, lets you talk and surf at the same time, and offers you more apps that feature people making strange noises, half-clothed women, and animals that smile when you touch the screen. (Disclosure: slight exaggeration)

Sadly, it all looks a little analog. Luke looks as if he'd prefer to be surfing, as he really doesn't have the tools to make you believe what he's being paid to say.

His hair looks as if it's been hurriedly greased with Czech lard and his face offers a certain hemorrhoidal mien as it offers a little jape at the end of the spot. Yes, a jape about Verizon beginning with "V" and AT&T not beginning with "V." That rumbling you can hear is the collective guffaw from Verizon Central.

Verizon is hurting AT&T with its clinical, delighted unpleasantness. And I fear that before "Legally Blonde 2: AT&T's Revenge" can possibly be effective, the iPhone carrier needs to dramatize its argument rather better than the gospel according to Luke.

As consumers increasingly purchase sophisticated smartphones such as the iPhone, BlackBerry, and Droid, they are developing expectations for how these phones allow contacts, calendars, e-mail, and social networks to remain in sync across all their devices.

One of the big challenges is that users don't always maintain the same source of inputting data--they switch from browser to desktop application to smartphone as their data access and entry point, introducing many variables into the data chain. And data integrity will only get more complicated as more applications become browser-based and keep no local data storage.

Most enterprise users have a local store in addition to the cloud storage, something that I still find puzzling from the T-mobile Sidekick outage, where consumer data that should have been in multiple locations (or at least present on the device) was thought to be lost.

The most common sync services are not provided directly by the mobile operator. Generally this is a good thing, as the more you can dis-intermediate the carrier, the more control you have over your data. But because the sync services are provided by others--notably Microsoft, Google, and Apple--you end up locked-in to their data structures as well as whatever privacy and data management issues that might arise in relation to advertising or other usage of your information.

Today, you can fairly easily sync your mobile device with most common online e-mail and PIM services although the BlackBerry, Droid, and the iPhone differ in their approaches--or at least in the visibility of how they work. For example, you can sync with Gmail and other services on the iPhone, but it rather perversely requires the Microsoft ActiveSync protocol.

By controlling the address book, Google and Apple effectively lock-in users to their sync service, leaving the carriers and devices to be easily replaced (minus the cancellation charges.) The user would barely notice the difference, aside from the sticker on his phone that says AT&T or Verizon.

Mobile operators do not want to cede control of the address book to Google or Apple, but they are late to the game and do not yet have sync solutions of their own. As a result, they are scrambling to add this functionality, but building a sync solution that works with all different devices and email services is no easy task, thanks to the widespread problem of device fragmentation in the industry.

One option is to deploy a white label solution, like the open mobile cloud sync offered by Funambol. Funambol CEO Fabrizio Capobianco told me the company has been approached by many of the top mobile operators, with several of them looking to setup sync services for their customers. They all recognize the issue, and according to Capobianco can turn to Funambol as a way to quickly bring a high-quality solution to market.

With all the different players in mobile sync, users will begin to question who owns their data. Enterprise users, in particular, should have privacy concerns about trusting their data to someone else. In the case of Android users, there is a growing anti-Google sentiment, and if Google already owns your email, calendar, and search queries, do you really want them to own your phone contacts as well?

(Credit: Marguerite Reardon/CNET)

Early indications suggest that the Motorola Droid could be the breakout hit phone of the holiday season.

You might not have guessed it from the lack of long lines this past weekend, but analysts believe that Verizon is seeing strong sales of the Motorola Droid. The device went on sale on Friday across the country. And unlike other big launches for phones such as Apple's iPhone or even the Palm Pre, retailers had plenty of devices in stock, and customers didn't have to stand in long lines to get their phones.

Neither Verizon nor Motorola is providing exact sales figures, but David Samberg, a spokesman for Verizon, said sales were very strong over the weekend, with a steady stream of customers Friday, Saturday, and Sunday. Store representatives in Manhattan confirmed this, with one sales associate telling me on Monday afternoon that there had been a steady stream of customers in the store all weekend and even through Monday.

Analysts also believe that the phone is selling well. Mark McKechnie, an analyst at Broadpoint AmTech, who covers Motorola, checked with a small sample of Verizon retailers around the country and said in a research note on Monday that he is encouraged by the anecdotal reports.

"While it is early, and the sample size is small, we are encouraged by our findings," he said.

McKechnie estimates that Verizon had about 200,000 phones in retail channels for the launch, with many stores in larger metropolitan markets, such as New York and Los Angeles, getting about 300 devices. Stores in cities such as San Francisco got more than a 100 devices, and retailers in smaller cities got between 25 and 40 devices each.

Locations were stocked well enough that there were no reports of any stores that were completely sold out. An employee at the Verizon Wireless store on West 34th Street in New York said his store had gotten about 500 Motorola Droids and HTC Android Eris phones for Friday. The store didn't sell out of either phone, but much of its stock is now gone.

That said, the store employee, who didn't want his name used, said his store did sell out of the $29.99 Droid docking station, which charges the device. As of Monday, the company still hadn't restocked its supply of that accessory.

McKechnie reported in his research note that the Droid outsold the HTC Eris, which also went on sale Friday. And checks with Verizon stores in Manhattan back up this claim. While there were plenty of customers looking at the HTC Android Eris in the Verizon stores I visited Monday afternoon, most people said they planned to buy the Droid. The main reasons were the device's higher-resolution screen, better camera, faster processor, and latest Android software.

Still, plenty of customers noted that they preferred the look of the HTC Eris over that of the Droid.

Verizon's marketing may also be paying off. Verizon is spending more money on the Droid advertising campaign than it has on any other device launch. At least one customer at the West 34th Street said Verizon's advertisements had convinced him to get the Droid instead of Apple's iPhone, which runs on AT&T's network.

"I was considering the iPhone," said Henry Goodison of the Bronx borough. "But I saw a commercial about AT&T's 3G coverage. It said, 'Here is AT&T's 3G coverage, and here is ours.' And I thought it would be better to have Verizon, if I travel to another state, where AT&T doesn't have 3G coverage."

AT&T is actually suing Verizon Wireless over this commercial, asserting that Verizon's advertisement is misleading consumers. Verizon dismisses this claim as untrue.