Thinking About Google’s Smartphone Problems (Premium)

Google’s smartphone problems are easy to identify and hard to fix: They’re too unreliable, too expensive, and too hard to obtain. This business, which was built to rival Apple’s iPhone, is nothing short of a failure, despite its reputation for computational and photographic excellence.

Sound familiar? It should: I’ve been harping on two of those three issues ever since Google moved from the Nexus brand to Pixel, and about all three of those issue for the past two generations of Pixel handsets.

But now, with a somewhat stunning admission from Google, others are finally starting to wake up to the failed realities of Pixel. And are starting to question whether Google should even be in this business in the first place.

I believe, and strongly, that Google needs to make its own smartphones. But the Nexus lineup satisfied this need, and the last Nexus products—the Nexus 6P and Nexus 5X—were wonderful in ways that no Pixel has been since. This truth is what has weighed so heavily on me as Google moved on to the Pixel Lie, as I called it, raised prices, and then proceeded to experience self-inflicted Surfacegate levels of reliability problems over two generations of handsets.

So, let’s go back in time and remember what was so great about the last Nexus, which was released in late 2015. At that time, Google’s flagship handset, the Nexus 6P, started at just $500 for a 32 GB configuration, and you could upgrade to 64 GB for just $50 more; a fully-loaded, maxed-out Nexus 6P with 128 GB of storage came out to just $650. Apple’s flagship, the iPhone 6S Plus, was fully $300 more expensive. $300 more.

That the Nexus 6P was better than the iPhone in some key areas, most obviously its best-in-market camera, was the icing on the cake. It was the “sweet spot” in flagship smartphones, as I wrote at the time.

A year later, Google released the first Pixel-branded handsets. And the Pixel XL that replaced the Nexus 6P was an affront: The base price, again for a 32 GB configuration, had jumped by $270 to $770, completely erasing the lineup’s pricing advantage over iPhone, given that a comparable iPhone 7 Plus was the same price. That it was blandly styled—remember, the original Pixels were obvious iPhone clones from a look and feel perspective—would have been acceptable at the Nexus pricing levels. But not at iPhone prices.

And then Pixel 2/2 XL and 3/3 XL happened, bringing with them an entirely new problem: Reliability fell through the floor with both product lines. So not only were they too expensive, and for the most part blandly (or, in the case of the Pixel 3 XL, bizarrely) styled, but now they were unreliable too. It’s no wonder they haven’t sold well.

And they have not sold well. Not at all.

The Pixel 2 lineup was one of 2017’s high-profile failures. Google sold only 1.7 million units in 2017, good for .26 percent marketshare. Not 26 percent. Point two six. (Nokia sold 4.4 million handsets in the final quarter of 2017 alone.)

As for the Pixel 3 lineup, it’s done even worse. Which we know because Google just admitted it in their recently-released quarterly financial report. The Pixel 3 lineup has not sold as well as its predecessor. Which did not sell well at all.

Worse, Pichai was asked in a post-earnings conference call whether we had “another Microsoft on our hands,” referring to Microsoft’s tiny Surface business, which has had some reliability issues of its own. Ouch.

To be fair, Google’s hardware business is much bigger than Surface: That business unit posted $5.5 billion in revenues in the most recent quarter, so it’s about three times as big as Surface. (And Surface is, for some reason, considered a huge success in Microsoft circles, when in fact all the business has to show for itself after seven years is no profits, no reliable upgrade schedule, no embrace of modern technology, and no meaningful marketshare. Sorry, that’s the truth.)

Reply to the dig about Microsoft and Surface, Pichai said that Google was “committed for the long term,” but of course he’d say that. I’m sure Google was committed for the long term to products and services like Google+, Wave, Reader, Inbox, and others before they were coldly murdered. That’s the Google way.

Look, Google has an important role to play in hardware. The problem is that it is not playing that role.

Fixing this business is easy, assuming you believe that getting ahead of the reliability issues is easy. But I will point out that these issues were never present when they allowed other phone makers to build their handsets. Huawei, in an interesting foreshadowing of today’s smartphone market, made the Nexus 6P, for example, and LG made the Nexus 5X. Maybe the problem with Pixel is, well, Google.

But, OK, I get it. We can’t roll back the clock. Google almost certainly couldn’t endure the failure of an in-house hardware business, which, by the way, competes with its hardware partners, and then reach out to those same partners to please build them phones in the future. It’s just too comical to even process.

So, let’s move forward assuming that Google continues in hardware. And that, improbably, it magically fixes the problems it caused over two generations of Pixel handsets and gets its act together. What now?

First up, Google needs to do what I’ve been recommending for three years and lower the damn prices on its phones. Interestingly, it is already moving down this path. The Pixel 3 and Pixel 3 XL, like Microsoft’s Xbox consoles and all of Apple’s products, have been quietly on sale for virtually the entire time they’ve been in the market, so no one should ever expect to pay full price. (OK, virtually no one has paid a full or reduced price, either, but let’s move on.) Clearly, the current price levels—with Pixel 3 starting at $800 and the 3 XL starting at $900—are too damn high.

No one should expect Google to sell these handsets for half-price, as they did recently with a one-day Google Fi sale. But surely there is a reasonable middle ground here. $600 for the Pixel 4, perhaps. $750 for the Pixel 4 XL maybe.

Google is also about to announce its new mid-level Pixels, the stupidly-named 3a and 3a XL. These handsets will deliver on lower prices—perhaps inline with my imagined prices noted above—but there are questions about performance, given that they will ship with lower-end processors and chipsets than their more expensive siblings. Perhaps this is the new sweet spot for Google, we’ll see.

Or will we?

OnePlus is about to announce new handsets, but its current flagship, the OnePlus 6T, starts at just $580 and offers even better specs than the Pixel 3 XL. The only comparable downside, really, is the 6T camera—which is very good, but not Pixel quality.

And let’s not forget Huawei, which is about to sweep the rest of the smartphone industry aside to claim the top spot. Huawei’s Mate 20 Pro has a better overall camera than the Pixel 3 XL, and better overall specs, but its lackluster Android skin is inferior to Google’s clean Android image. This handset costs a bit under $850 in the United States. That’s $50 cheaper than the 3 XL, though one wonders if it would be even cheaper if Huawei handsets were more readily available here.

Perhaps Google needs to reconsider—or just remember—the point of Pixel, which is the same point that Microsoft made previously with its Signature PC lineup: Here it is, the platform maker, watching its beloved software creation mauled and abused by the hardware partners on which it relies for sales. What it wants to do is create an aspirational device family that will inspire both customers and partners, showing both that, in this case, a clean Android image combined with great hardware is the very best experience.

But pricing one’s handsets far too expensively and then delivering unreliable hardware is not the very best experience. That these handsets are hard to acquire—only a handful of wireless carriers even bother to sell them—is problematic as well. With Pixel, Google has lost its way.

That Surface comparison, then, is quite apt.

Microsoft, too, experience mammoth reliability issues. And it finally came to realize that its Surface products were too expensive. So, it fixed the reliability issues—-subsequent generations of Surface hardware are notable for the lack of endemic problems—and lower prices across the board. This includes lower prices on existing PCs, and a new entry-level product, Surface Go, which drove down the ASP (average selling price) even further.

The results speak for themselves. Microsoft is clearly selling more Surface PCs than before, because the business’s revenues have gone up: Higher revenues with lower ASP equals more devices sold.

Google, I’ve been begging you for years. Lower the prices and give consumers an incentive to even consider your handsets. And get ahead of the terrible reliability problems: Anyone can have a bad year, but two generations of balky hardware are inexcusable.

And while we’re at it, change the messaging. Pixel is never going to rival iPhone. It should be recast as an aspirational product line that doesn’t need to sell in big numbers to be considered successful. Lead with design and integration. Lead with unique hardware components that you can then sell to your partners, too. Lead with pricing. Lead with reliability. Just … lead, dammit.

Pixel is too important to be this terrible. And it’s all Google’s fault.