Google Building Its Own Phone? Beware the Surface Curse

Posted on June 27, 2016 by Paul Thurrott in Android, Hardware, iOS, Microsoft Surface, Mobile, The Sams Report with 0

Google Building Its Own Phone? Beware the Surface Curse

A new report claims that Google will build its own smart phone for release by the end of 2016. But the search giant should learn from the past, lest it fall prey to what I call the Surface Curse.

As you must know, Google has been selling Nexus-branded smart phones for several years. But these phones aren’t built or designed by Google, though the firm has apparently begun exerting more influence over the design since the Nexus 6/Nexus 9 debacle of 2014.

Google’s Nexus program is, then, roughly analogous to Microsoft’s Signature PC program. But only roughly: While both provide customers with a clean OS image with no crapware, Nexus devices are only available via Google. You can’t buy those exact phones elsewhere (and with crapware), as you can with Signature PCs.

What Google has avoided, so far, is building its own smart phones. The firm has of course built its own Chromebooks, via the Chromebook Pixel lineup. And more recently, it shipped its first-ever tablet, the confusing Pixel C. So an Android smart phone is perhaps inevitable.

That said, Google should think carefully about releasing such a phone. And it should understand that the events which led to the creation of Surface are simply not an issue with Android-based smart phones today.

If you look back on the world of 2011-2012, when Microsoft was prepping the release of Windows 8, you’ll see that the PC market was set for collapse. In the wake of the iPhone, users had begun moving from their staid old PCs to smaller, more personal, and touch-based devices like smart phones and tablets. And Microsoft, in a mad bid to curtail this migration away from its core product, was set to make Windows 8 a touch-first system that would be more at home on tablets than on traditional PCs.

But its ever-cautious PC maker partners were not on board. The PCs they planned for late 2012 were largely traditional designs, without touch capabilities, that would not show off Windows 8’s strengths. And Microsoft, with no time to lose, greenlighted Surface, an in-house effort to create the aspirational Windows devices that its partners refused to build.

From the safety of 2016, I can easily see that Windows 8 and Surface were a one-two punch that forever changed the dynamic of a PC industry that was already reeling from the iPhone. PC makers reacted to Surface as the direct threat that it was. And they responded not with new devices inspired by Surface, but by releasing new Chromebooks based on Google’s Chrome OS.

The PC market still hasn’t recovered from this collective blunder, and the collapse continues today in 2016 with even the rosiest projections calling for a leveling off, and not a rebound, of PC sales. The PC market will never again be as big as it was before the release of Windows 8 and Surface.

Since then, Microsoft and its PC maker partners have reached an uneasy state where Surface is still seen as a competitor, but PC makers are likewise free to simply copy the design of Microsoft’s products with no fear of retribution. After all, with the PC market sinking, these companies still need each other. And while Windows 10 was another rough spot for this relationship—by making Windows 10 a free upgrade for one year, Microsoft effectively killed yet another year of PC sales—this new system is at least well-regarded, and should help with future sales.

In a sense, Microsoft did get what it wanted: PC makers are now building touch-based 2-in-1 systems just like Surface. (Literally.) But was this really a success? Those Surface-like 2-in-1 PCs aren’t exactly innovative, they just copy Surface. And while PC makers publicly back Microsoft and Windows 10—like they have a choice—I’ve been told by many PC maker insiders that bad blood remains. It’s an alliance, but it’s an uneasy alliance. And you can tie it all back to Microsoft’s initial decision to compete with its own partners with Surface.

(Some will correctly argue that the PC makers brought this on themselves when they stopped trying and sunk into a regular rhythm of releasing tired, uninteresting PCs that were full of crapware. Fair enough. Like any disaster, this one has numerous architects.)

So, Google.

Today, Google presides over a market for smart phones that is still growing, though more slowly than before. This market is the largest chunk of the broader market for new personal computing devices, by far, with annual sales outstripping PCs and tablets combined by about 3 to 1. And Google’s Android is the dominant smart phone platform, with roughly 80 percent market share.

As important, Android phones are today at the center of innovation in the smart phone market. Google’s partners are delivering devices with curved screens, multiple form factors, and other innovations. There’s no hole that Google needs to fill.

Google is, in other words, in a completely different situation than was Microsoft when it OK’d Surface. The smart phone market is not collapsing. And Android is not collapsing. Google doesn’t need to sell its own phones, and create a potential rift with its partners.

So why would Google even consider such a thing? Like Microsoft, Google is probably driven in part by Apple jealousy and a belief that it can only create a truly seamless user experience by controlling both the hardware and the software. It may be driven in part by growing legal concerns around Android, especially in the EU, and its ability to govern which Google apps and services appear on those phones. It may simply believe it can do a better job of delivering innovation than its partners.

And to date, Google’s Nexus and Pixel products haven’t really resonated with consumers or driven strong sales: Chromecast is the only Google hardware product that’s generated any appreciable interest, and it’s inexpensive enough to give away in boxes of cereal. So this may seem like a low-risk proposition.

But designing and building its own phone would send a tough signal to Android licensees, especially if Google tried to sell the device more broadly than through its own web site. (The initial report about this says Google is talking to wireless carriers.) This will alarm its hardware partners.

As a consumer—and, more important, as a fan of Nexus devices, especially the Nexus 5X and Nexus 6P that shipped in the past year—I would love to see a Google-designed smart phone. But it’s not necessary. Nexus already stands tall against iPhone, as do various smart phones from Samsung and others.

Google, think carefully about this. If you do go down the Surface route, be sure you prep your partners ahead of time, understanding that a cold war could settle in regardless. And that could undermine everything you’ve built with Android.