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Just What is Google Selling?

After months of hype, Google’s Nexus One smartphone is out the door, and they are beginning to take orders. As many of you realize, Google doesn’t build consumer electronics gear. Instead, they went to HTC, a successful smartphone maker who has experience with Android products, to do the heavy lifting.

At the end of the day, early reviews indicate that the Nexus One isn’t a game changer, nor does it rate as a potential iPhone killer. But it has lots of good hardware capabilities, including a five megapixel camera and flash, to tempt customers who are seeking alternative products. On the other hand, the Nexus One doesn’t sport a touchscreen interface that comes close to rivaling the iPhone’s Multi-Touch capability, and storage for apps is limited to the device’s internal ROM. You can’t store them on the external memory cards, which means that you’ll be partaking of precious few of those 20,000 Google apps even if they are compatible.

Despite its limitations, the Nexus One is still a showcase of Google’s latest technologies, but in the end it’s also a competitor to other Android phones from other companies, which puts the search giant in a position similar to Microsoft when the Zune came out. If a company is going to partner with third parties, releasing a similar product might be regarded as a smack in the face. If HTC makes the official Google phone, what about Motorola and other companies who also make Android devices?

More to the point, just what is Google’s end game here? Do they plan on becoming a consumer electronics powerhouse to go up against Apple? Maybe it’s just smartphones today, but what about portable PCs to run the Chrome OS? When does it stop?

Yes, Google no doubt gets a piece of the action from the Nexus One, but they are licensing Android free of charge. The same will hold true for the Chrome OS. Google’s real income source is, of course, ads.

So free Google apps and search links present you with ads, from which income is earned when you click the link to check out a product or service. More eyeballs increase the click-through rates and Google’s profits. Indeed, Google isn’t stingy about letting other companies distribute their ads, and a number of those Google features are available on the iPhone and will continue to be updated for that platform. So whether you buy an Android phone, an iPhone or any mobile device or PC that features something from Google, income is generated from ad placements.

The mainstream media wants you to believe that Apple and Google are destined to engage in a battle to the death, but how is that going to play out? When it comes to smartphones, I expect millions and millions of Android devices and iPhones will be sold in the years to come. At the same time, it appears Microsoft’s mobile initiative is toast. Companies are abandoning Windows Mobile to embrace the free Android OS. Developers who don’t wish to work within Apple’s App Store constraints will possibly choose Android, despite the limitations of the platform.

Limitations? Well, when a software company makes an App Store product, they can depend on their app running reliability on a guaranteed roster of compatible products. Yes, there are some features that won’t support the first generation iPhone or an early iPod touch, and there will be new capabilities in upcoming iPhone revisions that won’t be backwards compatible. But all of these devices can be easily upgraded to the latest and greatest iPhone software.

When it comes to an Android smartphone, there is no enforcement of strict hardware standards, and different devices will have different OS versions. Upgrading, where possible, may require a time-wasting visit to a wireless carrier’s retail store. Worse, not all stores have the equipment in place to perform software upgrades of this sort. Usually the factory stories have the capability, but there is no guarantee that a specific OS version will be available for any individual product.

So a developer may have to build different versions of a product to address these incompatibilities or limit the app to more limited feature sets that might support a greater number of handsets. The chances of having three billion downloads in a year and a half are slim to none. Besides, none of that really matters to Google anyway, since they only care about the number of people who use their apps and search features and click on the paid ads.

As to RIM and the BlackBerry, they continue to do quite well in the enterprise. But if they confront more and more of those server outages, there’s the danger that a fair number of customers will seek other options when the wireless provider contracts are up. However, I’m not about to predict the impending failure of this company. They are pioneers in the industry and surely smart enough to fix the problems and embrace newer technologies.

In the meantime, it does appear that Nokia, stung by all the new competition, is hoping to somehow get a big payday from Apple over the current patent disputes. In the end, someone will be paid off, and Apple does have deep pockets.

As to Google, they’ll just be laughing all the way to the bank.