Nexus One shows online isn’t best sales tool

Google’s (NASDAQ:GOOG) Nexus One didn’t have the most stellar first month in sales, although no one was really surprised. The company sold around 80,000 of its self-proclaimed “super-phones” in January, according to mobile analytics firm Flurry Analytics. This builds on Flurry’s week one projections of 20,000 sold and suggests that consumers might not yet be ready for an online-only sales process.

According to Flurry, Nexus One owners’ mobile application usage suggests sales of the Nexus One stayed relatively steady — no big surge or decline — throughout the month of January. Comparatively, the iPhone sold 600,000 units in its first month. Fellow Android device, the Motorola Droid, sold 575,000 devices in the first month, suggesting this wasn’t necessarily Android’s fault.

Google took a unique approach to retailing the Nexus One by launching its own online service to sell the device directly to consumers. The purchase of both the hardware and carrier service takes place at a new Google Web store using a Google account and a Google checkout account. The service was designed to simplify the billing process and bring together several carriers in one location. Verizon Wireless, T-Mobile and Vodafone are the first three carriers Google has gotten on board.

The carrier-neutral approach to mobile phone buying is gaining traction as places like Best Buy and Wal-Mart increase their options, but there is a lot to be said for being able to test-drive a new device before purchasing it. That’s clearly the biggest difference between brick-and-mortar stores and Google’s online option. It could also be the case that consumers aren’t comfortable buying hardware from Google online, whereas they might be with their carriers. While consumers don’t always enjoy their experiences buying from carriers, they are used to it. Google, on the other hand, is asking consumers to engage in a new buying experience for a phone that has confusing options in service plans attached to it.

The handset did have other factors working against it, namely that it launched after the hot holiday buying season with virtually no marketing from Google or T-Mobile. The hype it received from the technocrati just didn’t transfer to the general public, who were also turned off by a string of customer service snafus and the hefty $530 price tag for the unlocked version.

Google has shown it’s willing to right its wrongs though. This week, the company lowered the fee it will charge Nexus One customers who drop the phone service early after pressure from an inquiry from the Federal Communications Commission, addressed to Google and the Tier 1 wireless operators. Now consumers who drop the service will only be charged a $150 “equipment recovery fee,” down from $350, but on top of the $200 T-Mobile charges. Google also announced that it would include live customer support for Nexus One issues.

Google’s online model could prove viable in the longer term, especially as it continues to adapt and adds more carriers and models to it. In the meantime, it will continue to face challenges as it figures out what works best for distribution (as well as marketing, pricing, carrier relationships and branding).

E-mail me at sarah.reedy@penton.com.

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