What a long, strange trip it’s been for Google’s branded smartphone the Pixel. After three bites at the apple with premium-priced products, achieving decidedly mixed product results (and outright poor market results), the company is trying again with new, mid-priced phones. The new $400 Pixel 3A and $479 3A XL look compelling, but can they change Google’s fortunes in the market?
Google’s Hardware Journey
For many years, Google worked with vendor partners to bring to market Nexus phones that highlighted what it saw as the best Android experiences. While die-hard Android fans loved the various Nexus products over the years, the phones never shipped in large volumes. In 2011 Google bought Motorola for $12.5B but continued to work with other vendors to ship Nexus phones. Three years later, Google sold Moto to Lenovo in 2014 for $2.9B. In 2016, Google launched the first Pixel phone as a premium-priced offering, shipping the 5-inch Pixel ($649) and Pixel XL ($769).
According to IDC’s Mobile Phone Tracker, Google shipped about 1.8 million units that first year (about 0.1% of the 1.5 billion-unit smartphone market). For reference, first-place Samsung shipped 311.4 million smartphone units that year; Apple shipped 215.4 million. Of course, it’s not entirely fair to compare Google’s volumes to that of Samsung and Apple, two well-established players in the space. More to the point, Google launched Pixel in a limited number of countries. However, when Google executives talked about the Pixel, they clearly saw it as a competitor to the flagship phones of Samsung, Apple, and others. However, while the company talked a good game about the Pixel, it didn’t do any of the things necessary for real success. Limited distribution, limited marketing, and limited carrier outreach. Most industry watchers assumed this was because the company was taking a slow, measured approach to the market.
In late 2017, Google launched the Pixel 2 ($649) and Pixel 2XL ($749). The new phones met with a similar market reaction, and the company also ran into issues with screen quality on the XL. While many reviewers began to credit Google for the innovative work it was doing with the Pixel camera, the company continued to limit the countries where Pixel shipped. It also often stuck with its direct-sales model. For example, it worked with just one carrier in the U.S. (Verizon). Total worldwide sales for Pixel, Pixel 2, and Pixel 2 XL reached just 3.5M units in 2017, representing 0.2% of the worldwide market.
In late 2018 Google launched the Pixel 3 ($799) and Pixel 3XL ($899), doubling down on the camera features and bringing to market the amazing Night Sight feature for low-light photography. The new phones once again shipped at premium prices, and Google continued to limit distribution and marketing. Despite the largely positive reviews, the company’s volumes in 2018 grew to just 4.6M units or 0.3% of the worldwide market. In the first quarter of 2019, a tough market all around, Pixel volumes declined year over year.
Once More, With Feeling
This week, Google announced the Pixel 3A and 3A XL. To reach the new, lower prices, Google made some pretty dramatic hardware changes, including lower-end Qualcomm processors and plastic bodies. However, as most reviewers have noted, the new phones still offer Google’s top-of-the-line camera features, which are driven largely by software and not hardware. From a device perspective, the new Pixels looks compelling at their price point.
Perhaps more importantly, Google seems intent on actually moving some units this time out. It’s working with more carrier—all four majors in the U.S.—and I’m already seeing some marketing around the phones, which is good. It’s an interesting strategy, if not completely original. The Lenovo-owned Motorola has been pushing this angle for several years, with mixed to positive results. The challenge is that the price band where the new products land—between $400 and $500—represents just over 5.5% of the worldwide market, and it’s not growing. Moreover, the volumes are even lower in the U.S. Speaking broadly, the high end and the low end is where all of the smartphone action has been. We’ll soon know if Google’s move to the middle is a smart one, or simply another misfire.
I continued to be somewhat perplexed by Google’s hardware ambitions. Many have suggested that the company continues to play in the hardware market to drive best-of-breed devices, to experiment with the intersection of hardware and software, and to keep its OEM partners on their toes. However, in 2019, with the broader smartphone market slowing or declining in many regions, this seems like folly.
Through the launch of the Pixel 3, it seemed the company might be following a similar playbook to Microsoft’s Surface portfolio, shooting to grab a sizeable chunk of the premium market. However, its marketing and distribution have guaranteed this won’t happen. And now the company is entering the shrinking mid-range space, and it’s hard to see why it would do this unless it were shooting for increased unit volumes. While it is working with more carriers in countries such as the U.S., it doesn’t appear Google is expanding distribution into more countries (at least yet).
In the end, it will be interesting to see how the new Pixel 3A phones do in the market. Regardless of the unit volumes through the rest of 2019, however, I can’t help but continue to wonder what Google’s ultimate goal is with the Pixel. Sometimes I wonder whether it knows the answer itself.
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