May 14, 2010 10:04 pm

Google shuts online phone store

Google has suffered an embarrassing defeat in its attempt to change the way mobile phones are sold, revealing on Friday that it would stop direct sales of handsets through its web-based store, less than five months after its launch.

In January, Google said the new store, selling phones that use its Android operating system, would simplify the buying process for consumers and reduce costs for mobile companies.

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But in a blog note on Friday, Andy Rubin, head of mobile engineering, said: “While the global adoption of the Android platform has exceeded our expectations, the web store has not.”

“It’s remained a niche channel for early adopters, but it’s clear that many customers like a hands-on experience before buying a phone and they also want a wide range of service plans to choose from.”

At launch, Google offered a flagship Android phone, HTC’s Nexus One, with T-Mobile providing service in the US. A promised quick expansion to include more handsets, operators and countries has failed to materialise.

In April, Google adopted a different model in Europe, selling the Nexus One through existing retail channels.

In the US, the Nexus One has not been the success many had expected – just 135,000 units were sold in the first two months, according to the Flurry web analytics firm.

Verizon Wireless and Sprint passed on the opportunity to sell the Nexus One and Verizon has chosen to promote another HTC model, the Incredible.

Network operators will see Google’s abandonment of its store as a vindication of the existing model of retail stores and subsidised phones – the Nexus One has been available without a SIM card or a subsidy for $529 from the online store.

It also demonstrates the power of network-operator marketing, highlighted by AT&T and the iPhone, with Apple’s help, and Verizon with the Motorola Droid.

Mr Rubin said the store would be just a store window in future, showcasing a variety of Android phones available globally.

“Innovation requires constant iteration. We believe that the changes we’re announcing today will help get more phones to more people quicker,” he said.

Google seems likely to renew its focus on mobile phone software, having failed with its retail concept and insisting it is not interested in hardware and producing a “Google phone”.

At its annual developer conference next week, it is expected to introduce the latest iteration of Android – version 2.2, codenamed Froyo, according to an alphabetical progression of bakery goods from Cupcake through Donut and Eclair.

Android overtook Apple in US smartphone sales in the first quarter, according to the NPD research firm, with 28 per cent of unit sales, compared with 36 per cent for BlackBerry maker RIM and 21 per cent for the iPhone.

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