Google cannot be this bad at selling phones

Google hasn’t sold enough original Pixels to move the needle

Google is arguably the biggest and most influential company in the world. It employs tens of thousands of brilliant people who work on solving insanely complicated problems. Selling smartphones is not insanely complicated, so why is Google so bad at it?

Even by the most optimistic guesses, Google hasn’t sold enough original Pixels to move the needle. According to comScore data from August, just 0.7 percent of US smartphone subscribers use a Pixel. The graphic below speaks volumes.

Recode

You could say that 0.7 percent (or a few million units) is still respectable for a device’s first year on the market, but this is Google, not OnePlus. And it looks like the second year on the market won’t be much different, either.

Sales of the Pixel 2 and Pixel 2 XL are held back by the same issues that hampered the first generation of “Made by Google” smartphones:

  • They are expensive, especially considering that Google doesn’t need a big profit margin to sustain itself like most Android OEMs. Also, the Pixels’ pricing runs against Google’s mission statement to bring Android to billions of new users in developing countries, at least philosophically.
  • Domestic availability is limited. Looking at the Google Store, many versions are out of stock or shipping with delays of 3-5 weeks. Availability may be better than last year, but that’s a very low bar. Additionally, the Pixel are still only available at Verizon. Surely, Google had the clout to make deals with more carriers if it wanted to?
  • International availability is very limited. This is a perennial problem with Google products and services. The company seems to think most markets are simply not worth the hassle.
  • Their hardware barely stands out. There’s no headphone jack (don’t even bring up microSD). There’s no striking hardware feature and the design of the Pixel 2 is dated. Is this the best product Google could come up with?

All of these issues are the result of calculated decisions by Google. You could come up with reasonable explanations for each of them, but it’s hard to believe that Google couldn’t do a better job selling phones.

This is no hobby

If we accept that Google is not grossly incompetent at selling smartphones, the only reasonable explanation remaining is that Google doesn’t want to sell smartphones in high volumes. But why?

Is hardware just a “hobby” for Google? That’s hard to believe. Both Google CEO Sundar Pichai and head of hardware Rick Osterloh have stated the company is serious about hardware, which they hope to turn into a meaningful revenue source within five years. Google made close to $90 billion in revenue in 2016, so when we say meaningful we’re talking about tens of millions of units sold.

Is hardware just a “hobby” for Google? That’s hard to believe.

Some embarrassing failures aside, Google has already taken some steps that suggest it actually is serious about hardware. It set up a unified hardware operation (under Osterloh, former head of Motorola); it acquired a large part of HTC’s engineering team; and it poured money into TV ads and other marketing activities. Its hardware-related message in the past two years has been remarkably consistent, which is a bit unusual for a company known for flip-flopping in other areas.

With friends like these…

Why is Google pouring money into smartphones, but deliberately holding back when it comes to selling them? For a clue, we can take a look at a recent survey of global market share by IDC.

Out of the top five smartphone sellers right now, Google has no one on which to rely for achieving its vision of “AI + software + hardware.” Leaving out Apple for obvious reasons, we’re left with:

  • Samsung – A hugely resourceful and rich company. It has ample control over the way people experience Android and seems to desire ridding itself of Google’s control.
  • Huawei – Samsung 2.0 in the making.
  • Oppo and Vivo – They’re owned by the same corporation (BBK Electronics) and focused on China and developing markets; these two players care about high volumes only. That means a focus on iPhone-like designs and increasingly extreme beautification modes, rather than AI and tight integration with Google.

Together, Samsung, Huawei, and BBK account for almost half of all Android smartphones sold right now. Google can’t count on any of them in the long term.

LG, Xiaomi, and a few others have a shot at entering top five, but when you lose money quarter after quarter, you’re in no position to shape the ecosystem. Everyone else is too small to count.

Together, Samsung, Huawei, and BBK account for almost half of all Android smartphones sold right now. Google can’t count on any of them in the long term.