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Four reasons Pixel turns flagship Android mobe makers into roadkill

Go boutique, or get out of the way

Comment This year’s “Google phones” – now rebranded as Pixel – are just the latest step in Google seizing control of Android – and the biggest so far. If this process is like cooking the proverbial frog, then Google just turned up the heat so quickly, the OEMs cannot help but notice.

“There's more and more resemblance to Microsoft in the way it controls the PC experience every day,” one OEM told us in 2014. “Best of luck [in the premium space], Google have won.”

Hang on, you’re wondering... isn’t the Pixel business just the Nexus business with a new name? Hasn’t Google sold its own brand of phones since 2011?

Indeed it has, but as I said yesterday, two things about the Nexus line have always mollified rival Android OEMs. One was the absence of major feature exclusivity, while the other was the Nexus devices’ limited distribution.

Google has cast both aside. Pixel will contain new Android features first – and sometimes exclusively – and will no longer be a stealth product, but a direct and very prominent rival to flagships from Sony and Samsung.

There was also a third reason why Nexus-builders didn’t grumble too much. In Google’s rotating Nexus beauty contest, a different OEM was chosen each year – last year, there were two: LG and Huawei. Partnering to make a Nexus always gave one of the OEMs an insight into Google’s thinking – in return, the OEM got to showcase their design chops. If lost out on this year’s beauty contest, your number was likely to come up eventually. But look really closely at what Google is saying about Pixel. It’s making more and more of the phone itself.

HTC won this year’s Pixel prize, and has “made” both Pixel devices. But Google lost no time in kicking its partner where it hurts:

“Google has done the design work and a lot of the engineering,” Rick Osterloh gloated. Reflecting on the comment, Bloomberg’s Tim Culpan spelled it out:

“Ouch! That’s gotta hurt. After spending years building its design and engineering chops, HTC has been demoted to water boy. Supplying Google with smartphones isn’t a victory – it’s an embarrassing end to HTC’s decade-long campaign to break out of that contract-manufacturing business and stand on its own two feet,” he writes.

Don’t be surprised if Foxconn, which is keen to move up the value chain and is pushing its own design prowess, will be a winner in the next round. That would allow Google to cut out the middleman – which Google likes to do.

But there’s also a fourth reason why Pixel is such a big deal. Google wants a direct relationship with the customer.

Two years ago Google aborted its “Silver” program for branding premium Androids. Silver was intended to replace Nexus. Google Silver phones would have a 24x7 “concierge button” that called Google for support. There was a “Never Lost” feature that would supply a temporary replacement if your phone was lost. Only five OEM phones a year would be given Silver status. Silver was Google attempting to move faster than the market was moving, as alternatives to the big brand premium flagships from (largely unknown at the time) Chinese OEMs were starting to pop up: OnePlus, Xiaomi, Huawei.

Google was prepared to put up a lot of money selling Silver-branded Google phones, including an accreditation scheme for store staff, co-marketing, sales incentives and a dedicated retail presence in stores. But to qualify for Silver, an OEM had to give up a lot. It had to vow “to run the latest version of Android with no or very limited customizations.”

OEMs were aghast. It was an instance where Google turned up the heat too quickly, and the lobsters noticed. Silver had failed to win operator support either, with only T-Mobile and Sprint signed up in the US, while Verizon and AT&T refused. Google scrapped the plan.

Now Google has simply done Silver anyway, its own way. Google has implemented the 24x7 “concierge” button, for example, and the OEMs are in a worse position than they would have been as Silver partners. They’re left in the slow lane, as Pixel devices get Android first: Pixel will debut with Android 7.1, while OEMs grapple with 7.0.

Collateral Damage

To be clear, Samsung isn’t the target here: Samsung will merely be collateral damage. The prize is the windfall profits like those made by Apple with its iPhone line. In terms of “brand equity,” the mysterious quality that can only be divined by highly paid marketing people, Google (4th) ranks above both Samsung (5th) and Apple. But the qualification that’s needed here is one that largely measures customer satisfaction with its main product (search), not new products, and we have to consider Pixel a new product. But the point is, by removing the middlemen, Google can compete directly for customer mindshare and wallets.

Pixel isn’t off to a racing start. The design is dull and workmanlike, and the price point is too high. Beyond Devices notes that: "Google is attempting to position the Pixel as a true peer to the iPhone... The pricing of the Pixel phones is identical to the pricing for the iPhone 7, right down to the first-time $20 increase to $769 for the iPhone 7 Plus." That's pretty dumb. Android is a value proposition and Google has only ever succeeded in the consumer market by offering value. "Google can't sell expensive products," one Google fan blog points out.

Google forgot to bag the Pixel TLDs and the Pixel twitter feed. But next year, Google will make even more of the Pixel than it made this year. Google will include more Android exclusives than this year, including possibly an exclusive new Android-compatible OS.

The intention looks pretty clear: if you make a flagship Android, you can go boutique, or get run over. ®

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