I see three possible downsides to Google’s launch of the Nexus One phone.
First, they risk pissing off their cell phone partners who have been pushing “Droid.” They seem to have come to some sort of agreement with these partners – for now – but surely there is some behind-the-scenes anger from HTC, T-Mobile, etc.
Second, Nexus One is not search related, nor is it about “organizing the world’s information”, unless you consider your phone’s address book to be part of that mission. The farther Google moves away from their core competency, the more diluted they become as a business.
But thirdly, and perhaps most importantly – and I think this has been lost on most pundits covering this story – is the fact that this is the first time that Google is directly selling something to consumers. The ‘droid was “powered by Google” which meant that if it broke, you complained to T-Mobile. The Nexus One, however, is sold directly by Google. That’s a big difference.
It’s one thing to get questionable search results on Google.com, or to have an over-zealous Spam filter on Gmail, or to get bad directions from Google maps – these are all free and consumers understand that ‘you get what you pay for.’ But now that Google is actually making money directly from consumers, the game changes. If something goes wrong with Nexus One – say a major bug – consumers will direct their ire at Google. The invincible Google brand could be at stake here.
Of course, if Google succeeds with Nexus One, this could also be a stepping stone for many more direct-to-consumer paid products, like laptops or SaaS solutions (I’m thinking TurboTax and of course any Office product). Google does need to diversify away from search revenue after all.
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