Google Nexus One: Buy the Rumor, Sell the News

"Buy the rumor, sell the news," traders sometimes say. That seems to apply to Google's announcement of the HTC-built "Nexus One" smartphone.

There was so much leaking of news about the device, its distribution model and retail pricing that some of us likely were underwhelmed by the actual launch.

That is no slam on the device, just a comment about expectations.

As sometimes happens with financial assets, sometimes the big run-up occurs only at the "rumor" stage, with the actual confirmed event then provoking a bit of a sell-off. Some of us might note that it has taken a year for Android devices as a whole to reach what appears to be an inflection point in terms of mass buyer interest.

One probably has to credit Verizon Wireless for almost single-handedly creating "buzz" around its Droid, with spillover effects on the rest of the Android market, in all likelihood. But as many have noted, though the Nexus One appears to be a fine device, the business "wrap around" is largely conventional.

In fact, in some ways, Google is being "carrier friendly" in a way Apple has not been. That likely comes as quite a shock to many who thought Google was angling for a bit more disruption. The phone can be bought at full retail and unlocked. That's fine, but few Americans buy their devices that way.

An unlocked device can in principle be used on any GSM network in the United States, but the frequency range specified for the Nexus One means that, if used on the AT&T network, 3G won't work. In practice, that means the Nexus One is a "T-Mobile USA only" device.

If bought with a two-year contract from T-Mobile, the device costs $179. Some people will note that the Nexus One is "first" device that actually can go "head to head" with the iPhone. Others might almost say, "so what?" If all any other competing device can do is replicate the iPhone, many users might simply buy the iPhone.

Progress in the Android handset space continues to be quite rapid, so we'll have to wait and see what happens next. But it would not be surprising if it takes a little time for the Nexus One to have an impact. If the massive Verizon advertising campaign for the Droid means anything, it means promotion and marketing can make all the difference, even for a highly-capable device such as the Nexus One.

As the launch hype fades, we likely will settle in for a year or more of what appears only to be incremental growth for the Nexus One. So far, some of us cannot yet see why the Nexus One is such an advance over the Droid, as some expected. Then again, that's what this next year or so is about: allowing consumers to become familiar with the device and figure out where it fits in the smartphone market.

One might simply argue that the Nexus One is not the iPhone, and neither is the Verizon Droid, meant in a market positioning sense. The Apple iPhone seems to have created a large and sustainable niche of its own. Other devices might emulate the iPhone, but cannot create their own sustainable niches unless they somehow create differentiated audiences, as we might say in the media business.

In other words, Nexus One has to create a fan base that uses and perceives the device to be different from an iPhone, not the same. So will the Droid and all other devices in the high-end smartphone segment of the market. There's only one "iPhone." All other high-end devices must essentially create their own sustainable niches.

Matters are different at the lower end of the device market, where price and functionality make more devices functional substitutes for each other. I don't think that is the case at the high end. We'll see.

66% of U.S. Mobile Devices Will Be Replaced Over the Next 2 Years

About 66 percent of U.S. mobile devices will be replaced within the next two years, says ICR/International Communications Research, a prediction that should not surprise anybody. Mobiles break, get lost and typically have two-year contracts.

As might be expected, the younger generation is more likely to make a change sooner: 77 percent of those 18 to 34 plan to replace their mobile devices within the next two years, compared to  46 percent of those 65 or older.

About 78 percent of respondents believe they will need to replace their devices within the next two years because the items will break or be lost, while only 19 percent think they will want to upgrade to the latest version.

Upgraders also vary by age with 26 percent of 18 to 34 year-olds saying they do so, compared to 14 percent of respondents 55 or older.

Over the Next 6 Months, 3 Million More U.S. Households Will go "Wireless Only"

At current rates, over the next six months about three million more U.S. homes will go "wireless only" for phone service, a new study by the Centers for Disease Control suggests.

About 22.7 percent of U.S. homes apparently had wireless-only phone service in June 2009, according to a preliminary analysis of the most-recent survey by the Centers for Disease Control, up from about 20 percent in December of 2008.

In addition, nearly 15 percent of surveyed homes had a landline yet received all or almost all calls on wireless telephones.

A "family" can be an individual or a group of two or more related persons living together in the same housing unit (a "household"). Thus, a family can consist of only one person, and more than one family can live in a household (including, for example, a household where there are multiple single-person families, as when unrelated roommates are living together).

Approximately 21 percent of all adults--approximately 48 million people--live in households with only wireless telephones.

The percentage of households that are wireless-only has been steadily increasing, and the 2.5-percentage-point increase from 2008 through the first six months of 2009 is about equal to the 2.7-percentage-point increase observed from the first six months of 2008 through the last six months of 2008.

The percentage of households that are wireless-only increased by about five percentage points in just 12 months, from 17.5 percent in the first six months of 2008 to 22.7 percent in the first six months of 2009.

There are about 113 million U.S. homes with fixed telephone lines, and about 118 million U.S. dwellings, according to the Federal Communications Commission. A five-percent increase in homes using wireless only would amount to about six million homes.

Should that rate of shift continue, one would expect a further attrition of about three million homes to the wireless-only category over the next six months.

A large majority of households using wireless-only communications (68.5 percent) were in households lived in by unrelated adult roommates. Think college students and younger workers early in their careers and you get the picture.

Likewise, 41 percent of adults renting their homes had only wireless telephones. About 13 percent of adults owning their home are wireless only, the CDC says.

Nearly half of adults aged 25 years to 29 years (45.8 percent) lived in households with only wireless telephones, the study suggests.

More than a third of adults aged 18 to 24 (37.6 percent) and approximately a third of adults aged 30 to 34 (33.5 percent) lived in wireless-only households.

Some 21.5 percent of adults aged 35 to 44 were wireless only; 12.8 percent of adults 45 to 64; and 5.4 percent of those 65 and over. However, the percentage of wireless-only adults within each age group has increased over time, the CDC says.

Among all wireless-only adults, the proportion of adults aged 30 years and over has steadily increased. In the first 6 months of 2009, the majority of wireless-only adults (57.2 percent) were aged 30 and over, up from 48.4 percent three years earlier.

Adults working at a job or business (19.5 percent) and adults going to school (21.1 percent) were more likely to be living in wireless-mostly households than were adults keeping house (12.7 percent) or with another employment status such as retired or unemployed (nine percent).

Adults with college degrees (19.7 percent) were more likely to be living in wireless-mostly households than were high school graduates (13.7 percent) or adults with less education (12.1 percent).

You might suspect that households with children are less likely to be wireless only, but that seems not to be the case. In the CDC survey, adults living with children (20.5 percent) were more likely than adults living alone (10 percent) or with only adult relatives (14.7 percent) to be living in wireless-mostly households.

You might suspect that more users are wireless only in urban area, and that seems to be the case. Adults living in metropolitan areas (16.9 percent) were more likely to be living in wireless-mostly households than were adults living in more rural areas (13.5 percent).

Apple iPhone and Android Top OS Satisfaction Ratings

When it comes to satisfaction levels, the Apple iPhone continues to lead all other major cell phone manufacturers, with 74 percent of owners reporting they're "very satisfied" with their iPhone, according to ChangeWave Research.

But 72 percent of Android users also say they are "very satisfied." There's a big gap to the number-three OS, where 41 percent of Research in Motion users say they are very satisfied with the operating system.

It is worth noting that the "very satisfied" rankings for the Palm OS primarily reflect experience with the older OS, not the new  Web OS (Pre, for example). About 58 percent of Pre users say they are very satisfied, while for smart phones using the older Palm OS it was just 29 percent.

Is Android Finally at an Inflection Point?

The Android seems to have hit a sales inflection point, and is poised to take share in the smartphone market, according to ChangeWave Research.

More buyers now are indicating they will be buying Android devices, and fewer say they will be buying an iPhone. In September 2009 about six percent of respondents to 21 percent of respondents to a recent ChangeWave Research survey.

At the same time, where 32 percent of respondents said they would be buying an iPhone in September, 28 percent said they would be doing so in the December 2009 survey.

The ChangeWave Research data suggests that Android has hit an inflection point, after roughly a year on the market, a time when some observers might have wondered whether Android would emerge as a viable alternative to the iPhone.

The ChangeWave survey also suggests that the Android is taking share from other devices as well, with the possible exception of the BlackBerry. Where 17 percent of respondents said they would be buying a BlackBerry in September, about 18 percent said they would be doing so in December.

But Windows Mobile buying intentions were about nine percent in September and had dropped to six percent by December. Likewise, about six percent of respondents suggested they would be buying a Palm OS device in September; just three percent in December.

Android Becoming a Factor in U.S. Mobile Ad Market

Android smartphones are becoming a bigger factor in the U.S. mobile advertising market, with ad requests growing 97 percent in just two months between October 2009 and December 2009, according to AdMob.

Of those one billion ad requests tracked by AdMob, 90 percent were from U.S.-based devices.AdMob tracks handset and operator data from every ad request in its advertising network of more than 15,000 mobile web sites and applications.

Much of the growth was driven by the release of the Motorola Droid. Before the Droid’s launch, HTC devices accounted for 98 percent of Android requests. In December, that fell to 56 percent, with 39 percent from Motorola (which also offers the CLIQ) and five percent from Samsung.

The Motorola Droid already is the leading Android handset in the AdMob network and generated 30 percent of requests in December.

Google Nexus One Unveiling Jan. 5, 2010?

Google seems to be gearing up for a Jan. 5, 2010 unveiling of its Nexus One smartphone. The somewhat controversial move might be seen as a misguided effort that will undercut Google's effort to support broad adoption of its Android operating system by all the major service providers.

Worse still, in the worst-case scenario, Google is aiming to become a service provider in its own right. That seems highly unlikely. That really would strain relationships with its carrier partners. Nor does Google seem to be angling to become a hardware supplier in the same way that Apple is.

True, it seems to be fostering development of handsets. But even a Google-branded device might be seen as a way of pointing out what it thinks could be done.

One suspects that the unveiling is more of a demonstration project, intended to showcase what might be done with the Android operating system when paired with mobile hardware. One reason for that belief is that unlocked smartphone devices are expensive enough that few actually are sold in the U.S. market.

More seriously, T-Mobile is rumored to be readying a contract-subsidized Nexus One deal, which would put the out-of-pocket cost of the device within typical ranges for some other leading smartphone models. The typical model is a two-year contract in exchange for a device subsidy, and that is what most observers expect to see.

That is a fairly well established business model, giving T-Mobile a period of device exclusivity before it also is made available to other service providers.

The other angle is that if Google were really serious about becoming a player in either the device or service provider business, it likely would have readied deals in multiple countries.

The key thing is whether the user experience winds up being something users clearly can perceive as offering a "delightful" experience. That would seem to be the point. Whether Google can deliver remains to be seen.