Why Does Google Still Make Nexus Phones?

on September 24, 2015
Reading Time: 4 minutes

Next week, Google is holding an event in San Francisco to announce (we’re told) new Nexus phones along with a finalized Marshmallow version of Android along with some other hardware. The Nexus phone line remains one of the oddities of the global smartphone market and there have been rumors for some time that the whole program would be discontinued. And yet, here we are, about to see not one but two new Nexus phones announced. Why?

Nexus doesn’t seem to be working

We’re already a long way from Google’s original vision of Nexus devices. Back in 2010, Google began the program with the launch of the Nexus One, which was intended to bypass traditional carrier channels by selling exclusively online. However, the phone was more or less a flop, and Google itself said, when it discontinued online sales a few months later, “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.” That remains a very good summary of the fate of the Nexus program since then, too. Google has continued to struggle to get wireless carriers to support and stock its Nexus phones at retail, especially in the US and, as a result, buyers have been limited to two fairly narrow groups.

Those two groups have been developers and a niche segment of non-developer users who care enough about using stock Android devices they’re willing to pay full price for them, since Google has never been able to take advantage of carrier subsidies or the more recent equipment installment plans. It gives away a fairly large number of Nexus phones to developers at I/O and through other programs, while selling them at close to cost through the Play Store to both developers and others who are interested. These two groups, even combined, are small. Small enough that sales don’t really register on most analysts’ smartphone trackers.

For a while, Google experimented with selling stock versions of non-Nexus handsets as a way to help developers test new versions of Android (and their apps) on top-of-the-line Android hardware – the HTC One and Samsung Galaxy S 4 and several others. In many ways, this seemed like a better solution to the problem the Nexus devices were trying to solve, but Google abandoned the project, likely because OEMs were unwilling to participate in this way. The big advantages of this approach, though, were that Google got to use high-end devices (whereas Nexus phones have often been mid-tier devices) and leverage the scale vendors brought, without showing favoritism. By contrast, the Nexus program has historically favored a single vendor each year, in the process alienating others.

Interestingly, the core value proposition of a stock Android experience has been taken beyond the Nexus experiment during Google’s ownership of Motorola, which has largely focused on fairly stripped-down flavors of Android in its smartphones over the last several years. However, given that company’s flagging fortunes, it’s clear this model doesn’t have enormous appeal even when it’s sold through traditional channels. In a world where almost any Android phone can be made to run stock Android if you want it to, especially if you’re one of the users most likely to want that experience, Nexus devices are increasingly serving just the one constituency: developers.

A new role for Nexus – and new model?

Two interesting things have changed in the past year that may affect how Google views the Nexus series: the launch of Google Fi and the rapid adoption of installment plans and device leasing programs by US consumers. Google Fi, because of its unique technical requirements, currently only runs on a single device — the Nexus 6. However, that phone is unusually large even by today’s standards, and a single device, especially one you have to pay for out of pocket, is a poor solution for a wireless service in today’s market. If Google Fi is to succeed, it needs to offer a wider range of phones and it needs to find ways for consumers to pay for them easily. Edit: Google does now offer financing for the Nexus 6 when purchased as part of Google Fi.

Enter the two new Nexus devices on the one hand and the potential for an installment plan model on the other. With two new Nexus phones (both of which will presumably be compatible with Google Fi), Google will have three devices it can offer that work on the service (assuming the Nexus 6 remains available, perhaps at a discount). Google now offers financing for Nexus phones through Google Fi, so assuming this model is extended to the new phones, that helps to solve that problem. The remaining major challenge, however, would be the retail problem it identified in that 2010 statement. Given Google’s lack of success getting carriers to stock its Nexus phones, how will it allow them to test these devices?

A showcase for new Android versions

The other role the Nexus devices continue to serve, of course, is the only way Google can truly get its new versions of Android into (at least some) consumers’ hands when it launches. Like Apple, Google now announces new versions of its mobile operating system in the summer, followed by availability in the fall. However, unlike Apple, which has seen over 50% uptake of its new version of iOS within the first few days just this past week, new versions of Android tend to find their way into consumers’ hands extremely slowly. The big bang announcement of a new flavor of Android in the summer is often followed up by a whimper in the fall, when the new version is announced but available to almost no-one. The Nexus phones continue to be the way developers get access to these new versions, but they’re also pretty much the only way ordinary users can get access in the first few months. This past year, Lollipop didn’t start showing up in Google’s own stats for adoption until several months after it became available.

A program that needs a new purpose

Many developer programs provide hardware for testing purposes but, in the vast majority of cases, this hardware is either the standard version ordinary customers will also end up buying, or custom, stripped-down hardware for the sole purpose of developer testing. The Nexus program is odd in that it combines this same core purpose of providing devices to developers with the fanfare and branding of a consumer product, albeit a niche one. At some point, Google needs to apply the lessons it apparently learned but didn’t heed after the Nexus One launch and find a new purpose for the Nexus program. Perhaps Google Fi will provide that purpose and perhaps a device financing plan can stimulate sales. But, so far, there’s little evidence this year’s Nexus phones will fare any better than previous year’s versions.