Google may have missed a big chance to become a major smartphone maker

Since its October launch, Google's Pixel phone has received rave reviews, and Google recently confirmed to the Android-focused publication Android Pit that it will release a new Pixel this year. Yet despite these successes, it seems the phone may be experiencing some trouble on the sales front, and it may have missed an opportunity to capitalize on competitors' missteps.

Although Google doesn't break out its numbers for Pixel units sold, analysts estimate that customers bought about 552,000 Pixel phones by the end of 2016, according to USA Today. In comparison, Apple Inc. sold 78 million iPhones between late September and December. Samsung sold 2.5 million Galaxy Note 7 phones between its mid-August launch and its October discontinuation.

To put that in perspective, Google's market share for smartphones shipped is now less than 1% worldwide — as compared with Samsung's 18% — said Ramon Llamas, a research manager for the analysis firm International Data Corp. So if Google is making its mark, it's still a small one relative to the Samsung empire, which also runs on Google's Android operating system. (Apple, meanwhile, is at 18.2%, according to IDC.)

Google, a subsidiary of Alphabet Inc., did not respond to a request for comment.

So what’s going on? On paper, the Pixel seemed like it should have been a slam dunk for Google given the Pixel's Google branding, Samsung's Note 7 problems, and criticism of Apple's latest iPhones not being that revolutionary. The Pixel is also an undeniably good phone, particularly in the absence of strong competition, thanks to its quality construction, pure version of Android and special Google features such as the voice-controlled Assistant. And Google has great brand recognition; it came in eighth in a reputation ranking looking at the world's most visible companies. Samsung, on the same list, was 49th in the wake of its Note 7 problems and other issues.

And it's not as though Google isn't trying to sell this phone. It has sunk considerable effort and a reported $3.2 million in marketing costs, according to Reuters, into making the Pixel stand out as the "Google phone." A profile of Google's ad campaign from Fast Company revealed that Google chose to feature its well-known search bar in Pixel advertising to closely tie in the smartphone with its most iconic product.

The big problem for Pixel is that only one carrier, Verizon, sells the phone, said Jeff Moore of research firm Wave7 Research. Although users can get it directly from Google for the full price of $649 — and take it to another carrier if they want — that's not an option that a majority of wireless customers consider.

"That's a big minus," Moore said.

Companies sometimes offer phones with just one carrier, particularly when launching a new line; Apple's iPhone was an AT&T exclusive at first, and Google has tapped Verizon as a carrier partner for its co-branded Nexus phones in the past.

According to Wave7's research, the Pixel got off to a good start, with many in the survey saying demand was as high for Google's phone as for other well-known manufacturers’. But some of that excitement is starting to cool. Verizon representatives surveyed by Wave7 estimated that the Pixel accounted for 6.2% of activations in February, a decline from the previous three months.

Compounding the availability issue, Moore said, is that stores are having trouble keeping the phones in stock. That's a good sign for Google in terms of demand, but it’s a bad sign for the company in terms of being able to capitalize on that demand, he said.

Because of unexpectedly high demand, Google has had some trouble getting enough parts to make its phones, according to reports from the Verge as well as other industry analysts.

That's not to say the Pixel couldn't pick up more steam over time. After all, the smartphone world seems a little boring right now, judging by the headlines coming out of last week's Mobile World Congress. The most-discussed phone launched at the usually jam-packed show was a revived Nokia phone that last saw its heyday in 2000. But Samsung is set to announce its new phone March 29; if it's a hit, analysts said, Google is set to face fiercer competition.

Google professes to be happy with the Pixel's sales. When talking to investors about Google's last earnings report, Chief Executive Sundar Pichai said he was "thrilled" with the reception that the company's hardware had received this past holiday season.

Moore, the Wave7 analyst, said he's still bullish on Pixel: "They've gained a foothold at Verizon, and I'm sensing that demand is there." Google, he said, has the deep pockets and the branding to push it forward.

But as it stands right now, Google's Pixel is more of an interesting experiment than a full-blown success, said IDC's Ramos. "It's great as a Verizon customer," he said. "But we're five months into this, and still at a point where supply cannot meet demand."

Tsukayama writes for the Washington Post.

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An earlier version of this article wrongly stated that Google is a subsidiary of Apple Inc. It is a subsidiary of Alphabet Inc.
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