The umpteenth Google Phone: What we can learn from what we don't know

A few years back, a tip for marketers that had been passed around with regard to search engine optimization was this: Drum up a phrase and build buzz around the phrase, so as to improve your standing in Google's search index. Later, you can then use the phrase in its branding and your path to contextual glory will be paved in advance. Apparently Google was reading that tip too, because it managed to create buzz over the weekend for a Google Phone even though -- at least from T-Mobile's perspective -- there's already more than one.

Google officially declined comment on a multitude of questions Betanews posed this morning, although one of the declined questions was significant for its having been declined. It did not specifically regard the Android phone whose existence Google confirmed in a blog post Saturday morning. It was more of an analyst question: What did Google expect the balance of its operating expenses to be, between manufacturing and R&D, going forth into 2012?

That's a very significant question not to have answered, because it goes to the heart of a question Google already answered for the US Securities and Exchange Commission last October.

For its last quarterly report, Google told the SEC that it projects R&D expenses as a percentage of revenue to increase for the remainder of 2009, and implied that those expenses could continue to rise. But it categorized the reason this way: "We expect to continue to invest in building the necessary employee and systems infrastructures required to support the development of new, and improve existing, products and services."

Though it's conceivable that such language could be used to cover the likelihood of Google becoming more of a manufacturing partner, it's still somewhat of a stretch. Usually the costs of producing a product or service offset the costs of developing it. For Google in the advertising business, it doesn't incur much operating expense -- its biggest expense there comes from traffic acquisition costs, the percentage of revenue it shares with advertising partners that carry Google AdSense and related services on their Web sites. Although Google's name does appear on a piece of hardware, the Search Appliance, it hasn't characterized itself as a manufacturer.

Nor does it appear likely to begin doing so, since the transition to a manufacturing operation that is viable by 2012 -- the timeframe in our unanswered question -- would have to begin now. If you're investing in factories like Apple did, rather than simply licensing your name for someone else to use, then that metamorphosis takes time...time which, for a public company, should be announced publicly.

The fact that Google would not provide further information on a matter that is already public knowledge, suggests that the next "Google Phone" will end up being something less than its extraordinary buzz makes it out to be.

If indeed there is an Android 2.1-based phone whose chassis is manufactured by HTC, and which is the Nexus One model whose FCC ID label format application was released by the FCC this morning (PDF available here), then the more likely relationship here is that Google is developing its own branded software front end atop the Android platform, and that Nexus One will be its launch vehicle. The public information revealed by the FCC frequency test documents intentionally omit details about the phone's chassis, deferring to the request of the manufacturer, so we do not know what would make this model particularly unique. However, its wide screen size with respect to its body (at least in the purported photograph) suggests -- especially to Betanews' Tim Conneally -- that multitouch could be a possible game changing feature.

It will need one, otherwise it's just another Google Phone. In that case, Google would have to make the case for a branded environment for smartphones. One foreseeable option is a kind of "Chrome for Android:" a front end that is essentially the same as Chrome OS, demonstrated publicly last month. That demo didn't really present an operating system so much as a vehicle for Google's cloud-based applications service; and this device could be just another vehicle for that service, in handheld form.

The advantage Apple has with iPhone is that it has designed the hardware as well as the software; the iPhone's innovation was not an add-on to an existing hardware platform. If the Nexus One story proves correct, then such will not be the case with Google -- instead, it will have picked an upcoming device as a launch pad for its software, and Google is sticking to software. If Google were to have answered our question on manufacturing costs outright -- for instance, by saying it's not a manufacturer and that it's sticking to software -- it might have squelched some of that perfect buzz it's been enjoying this weekend.

Frequency ranges of the HTC Nexus One phone as tested by the US Federal Trade Commission in October, 2009.

Although we've read many reports today that say that the available information narrows the Nexus One to T-Mobile as a carrier, we don't get that from our read of the same information. Nexus One was tested for four GSM operating frequencies, in the conventional 850, 900, 1800, and 1900 MHz ranges. That would appear to make the phone a candidate for either T-Mobile or AT&T; nothing here appears to exclude AT&T.

However, The Wall Street Journal reported this morning, citing "people familiar with the matter," that Google plans to sell the phone only unlocked, and only online through its own Web site. Of course, Google declined to confirm or deny. This time, the information we're reading tends to lean more on the side of the WSJ's take of events this morning, and away from the notion that this is intended for T-Mobile (which is the WSJ's take on the same story this afternoon).

If Google is going it alone, it needs at least one extremely good value proposition. "It's from Google" won't cut it. Multitouch would make a strong point, but is not necessarily likely. A "Chrome for Android" vehicle, where phone follows function follows phone -- to mangle architect Louis Henry Sullivan's famous phrase -- is perhaps Google's best chance at the second half of a one-two punch.