Thursday, March 18, 2010

Google to offer stripped-down Nexus One phone in India?

This post first appeared in VentureBeat

Google may be preparing to launch a stripped-down, low-cost version of its Nexus One smartphone in India, and possibly other developing markets, according to speculation on multiple Indian technology sites. The rumors appear to have originated in a tweet from a TV show producer. But irrespective of how it got started, it sure highlights the importance that Google is placing on the developing markets.

Apple has historically focused on building high-margin products and slapping the legendary Apple Tax on them, but this strategy hasn’t found many takers in markets such as India. Indeed, many would say Apple has priced itself out of the market. In India, the iPhone 3G 8GB model is priced at about $680, while the 16GB variant is priced at about $790 (the 3GS has not yet been released, possibly due to the limited uptake that the 3G version has met). However, Google’s entry into the mobile handset space has to do with more than just device margins. The company is trying to increase the avenues by which consumers can interact with its services. Be it in the mobile space through Android or through its attempts at experimental fiber networks. And it is in this context that emerging markets such as India represent a large market that Google can ill-afford to ignore.

India is adding close to 18 million mobile subscribers every month, and the Indian telecom regulator TRAI estimates [PDF] there were around 127 million wireless subscribers accessing data services (essentially GPRS/EDGE based mobile data services) at the end of September 2009. That is a sizeable number, and one that continues to grow. Mobile advertising, too, is beginning to make its presence felt. Admob metrics [PDF] from January 2010 show India accounting for over 5% of all ad requests, behind only the US and ahead of many other developed mobile markets including Japan and the UK.

Moreover, Google already has some strong traction in the market. A Comscore September 2009 reportestimates that Internet users in India spent up to a third of their online time on Google sites, a figure that is over three times the global average. Given such strong usage indicators of its services, Google will want to build on its brand strength, while simultaneously tapping into the fast growing mobile space. Google is already experimenting with multiple mobile products for its Indian audience, including Google Phone Search (search using voice calls to a toll-free number, with results being sent as a text message), Google SMS Search (search using text) and Google SMS Channels (SMS-based mobile communities). Putting a feature-rich, yet low-cost phone into the hands of its users appears the right next step.

It is in this context that a stripped-down version makes sense from Google’s perspective. Google has previously signaled that it considers India an unfriendly marketplace for smartphones. One can only speculate on what components might be tossed, but there are a few low-hanging fruit. India does not yet have 3G networks, given that the required spectrum has not been auctioned yet (although that will likely change soon, hopefully). Similarly, GPS and WLAN chipsets could be on the block, if Google is looking at cutting down on the radios. The display, too, could be swapped out for a less expensive and smaller LCD screen as opposed to the OLED display that the Nexus One currently boasts.

The resulting device would definitely not be what Google calls a “Superphone“, and therefore would not qualify for its online webstore. However, that might do a world of good to Google if it were indeed to launch such a phone in India where online commerce is still finding its feet. Apple found out the hard way that in a large country such as India, having a presence at the neighborhood handset retailer store is critical to driving uptake (Apple’s iPhone is primarily available only at select carrier-owned distribution stores, which are very limited). While Google might not have the experience of dealing with large third-party distributors, it has shown that it does not shy away from such challenges. Indeed, the very fact that it chose to launch its own distribution channel for the Nexus One in the US is testimony to that.

India would likely not be the only target country for such a stripped-down version. Brazil comes readily to mind as another good candidate. For Google to translate its successes on the desktop to the mobile web, a strong presence across devices will be inevitable, be it through carrier partnerships or through Android-based phones, or better-still, a Nexus-One style device where Google exerts significant control. And emerging markets such as India with its large mobile base are probably the right entry point.
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