My Cellphone My Terms

We all know Google as the lead of the search market and online advertising. This is its bread and butter.

But recently Google unveiled a new Smartphone called Nexus One – a rather impressive device that threatens to rival the iPhones and Blackberries of the world.  With a 1GHz processor it packs enough punch to rival most desktop computers in the market. But the big question I have is why would Google enter the cell phone hardware market?

I can understand the need to be in the mobile arena. With ~ 1 billion PCs worldwide vs 1.2 mobile phones, it isn’t hard to see that most of us are likely to be spending more time on our cell phones than our PCs. So there is a market shift from desktop computers to mobile cell phones/smartphones. This threatens Googles search business because if it is not in the mobile space then its place as the market leader for search and online advertising (Ad sense) is threatened.  But Google has made a number of smart moves in this area – the development of Android is a brilliant strategy to ensure that Google’s applications remain relevant and at the forefront of handset makers who use this mobile operating system.  Good strategy! And because of this Google ensures that its remains the leader ahead of Microsoft, which has its own mobile operating system that promotes Microsoft products.

Recently Android has been taking off – more handset makers are adopting the Android operating system as its preferred choice – Motorola, HTC, LG, Acer, Asus, Huawei, Sony Ericsson to name a few. This adoption ensures that regardless of handset manufacturer, Google remains relevant and available to mobile users. According to Forester Android is likely to capture 10% of the market in 2010 driven by heavy industry support from Qualcomm, Verizon, and Motorola. So why then would Google manufacture its own handset to compete with the very same companies that is ensuring its survival in the mobile business?

I don’t quite get it. The only reason I can see is that this is a signal to handset manufactures – a signal that Google is ready to enter this market space if OEMs are reluctant to allow Google’s applications like Google Voice which was not allowed on the iPhone.  Google wants openness and access to mobile devices. Currently the mobile operating space seems to be dominated by proprietary operating systems from Apple and RIM – not having access is a big concern as this means Google can increasing become irrelevant. It remains to be seen how handset manufacturers react and whether there will be a Nexus Two in the works.