Report of Google making its own smartphone is rubbish

Google is rumored to be working on a smartphone of its own that would help it "tighten its grip on mobile software and see it compete directly with the iPhone", according to a report from The Telegraph. The information comes from the usual "sources familiar with the discussions", who are all too often making the news because some fellow writers have no filters whatsoever.

To folks completely unfamiliar with the mobile space this report would make sense. It has all the right ingredients for that, but fortunately using just a small dose of common sense one can immediately call this report for what it is -- rubbish. Here's why.

Google, believe it or not, already has a fairly tight grip on mobile software through Android. It may not be able to control everything that vendors do with its open-source operating system, but it can dictate the terms that they have to agree to in order to sell devices with the Play store pre-installed.

The only reason why your Android device has access to the Play store is because Google has allowed it. Vendors can't install whatever apps they want on a smartphone or tablet and sell it to consumers, as they have to meet certain requirements that Google imposes for it to receive access to the treasure trove that is the search giant's mobile services suite.

If you are not familiar with that, it is basically a collection of apps and services that turn an Android device from a nearly-useless piece of junk into a very powerful smartphone or tablet. Without them, you can't really do anything -- unless you build your own equivalent, like Amazon does.

Also, a smartphone in itself can do little to help Google "tighten its grip on mobile software" because, first of all, it is just a smartphone. Its sales have to be in the hundreds of millions of units for it to have any effect on the Android space, and that is extremely unlikely to be the case. Google would have better luck trying to make Windows Phones than selling as many smartphones.

Critical mass is not something that you associate with a Google-branded smartphone, because Google is not really a hardware company. It does not actually want to sell you smartphones, tablets, laptops or thermostats, but rather the services that are available through those devices. Google wants you as a software and services customer, because that is where all the money is for it.

And in that sense Google gets much better results by writing the code that makes vendors choose Android and adhere to its rules. When you have an army of companies willing to make smartphones and tablets powered by your own software it makes no sense to go at it on your own in the heated battles of the mobile market. To Google which player leads the charts is irrelevant as long as they do it using its own code.

Let's get to the elephant in the room, which would be Nexus. To the unfamiliar, that is a brand of smartphones and tablets which run Google's vision of Android but are produced by different companies, Huawei and LG in the case of the latest members in the family. Google may not be dictating every detail that pertains to these devices, but it only needs a few major points anyway.

To Google, the hardware as a whole is not the most important thing about Nexus devices, because such devices are meant to give developers a powerful testing platform and steer them into a certain direction (like optimizing apps for phablets and tablets, for instance). They are also a nod to purists and enthusiasts who love Google and how it sees Android.

Google can -- and by some accounts will -- become more involved into the hardware side of the Nexus development process, but that will likely see it making minor changes. Its partners are already doing a great job with these kind of devices, and it is unlikely that Google feels the need to go back to the writing board to change everything.

What would make sense for Google to do is talk to more mobile operators to get them to sell Nexus devices to their customers. That is an area where the company has not really focused on, even though it should given how costly its recent Nexus are -- mobile operators can drive the initial cost down using financing options and subsidies, which would help sales in the end.

Google probably wants vendors to stop messing around with Android so much -- which makes it hard for users to get the latest updates right away -- and having a bit more reach would certainly give it more power during negotiations. But to make its own smartphone -- that would not be a Nexus -- to compete at the high-end of the market seems like an uphill battle that is very hard to win.

The smartphone market is, at this stage, seeing single-digit growth, meaning it is very hard for a new vendor -- which Google would basically be -- to win considerable ground. Things have settled a bit, and the only boosts in market share that you see are from up and coming players that primarily target huge markets like China and India. Google isn't one of them.

Google typically focuses on a handful of markets when it comes to distributing Nexus devices, and that is because it does not plan on selling a ton of units. If that happens, great, but if it doesn't then it is not really an issue because the margins are likely not all that high in the first place. Only a few vendors are making big money from selling smartphones, and those are primarily Apple and Samsung.

The money equation is extremely important too, because when a company such as Google ventures into a new market it has to have a very good reason for doing so. With smartphones that would be some sort of disruption, that would lead to a spike in sales, but that seems unlikely. To burn money for the sake of building market share in this space is, to put it bluntly, stupid. The margins are shrinking if we go by the decreasing average selling price, and in the high-end space it really is impossibly hard to go up against Apple and Samsung.

Now that I brought Apple into the discussion it, again, makes little sense for Google to want to compete against it directly in the hardware market. The iPhone is a huge seller, and the only product line that stands a chance of rivaling it is Galaxy S, which Samsung has spent years marketing to consumers. To release a product that can truly rival the iPhone -- from a sales perspective -- takes years and years, as aspiring vendors like Huawei and Xiaomi are learning now, and Google simply does not need the hassle that comes along with that.

All these thing add up, and when you draw the line it is hard to see how it makes sense for Google to do what that report is claiming. The iPhone element, which is an important part of the report, is a dead giveaway that something is off. But, in the off chance that Google is actually building a smartphone, a good reason for doing so would be to introduce a smartphone member to the Pixel family.

Pixel devices aren't targeted at the average consumer, as they are premium priced. In a sense, Pixel is basically a Nexus line of devices designed by Google in its entirety. Branding-wise, it would make sense for Google to consolidate the two brands into one -- Pixel -- to clean up its consumer product line. However, even so, it would be a stretch to assume that such a smartphone would be as important in the mobile space as the report suggests. More likely, it would be a case of misreading the information and making a big deal out of it as a result.

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