Everyone seems to be bashing Google for only being able to sell 200K-300K NexusOne devices over the past few months, and not coming anywhere close to the popularity of iPhones or Blackberrys. Because of this, many believe Google’s NexusOne smart phone is a big flop. But is it really a flop? Not if you consider what Google got in return for this effort. I think most commentators are evaluating the NexusOne initiative on the wrong scale.

For Google, it was never about trying to out-compete iPhone or selling more devices than Blackberry or HTC or Moto (who also sell Android phones, but with their “overlay” on top). It wasn’t about Google becoming a phone company. It was about Google getting a significant number of devices out there to form a big “reference platform” testing/pilot environment where they could model, test and tune their ecosystem based on the real life use of the early adopters who would buy NexusOne.

It’s about Google being able to hone their products and strategy for mass deployments later on. Google doesn’t have to make money on the device nor sell lots of them directly to ultimately make a huge profit in the smart phone market. And I believe it never really intended to sell many phones. Even if it successfully sold a million or more devices, at which time many commentators would have deemed the NexusOne a big success, the revenues generated would be only a small fraction of its core business revenues. I see NexusOne efforts more an experiment than a full fledged attempt by Google to compete in the cut-throat smart phone market as a HW supplier.

But at 200K-300K or so devices deployed, think of all the feedback they can get on real world operations and user requirements. Even if its only 100K devices Google’s sold, it’s still a massive number of test subjects. Think about how much valuable information they can get from these active users. Google not only gets to test and tune the device OS, but also gets to tune their app store and delivery ecosystem before it goes live to tens of millions of users. Issues with the app store now would be fairly minor. Problems later on with huge numbers of users could be catastrophic. Further, no doubt a significant portion of the device sales went to developers who wanted to test out their own apps and develop new ones. So Google wins here as well – getting a capable device into their hands to stimulate their development efforts. Finally, Google got these devices into the hands of early adopters who are generally unlikely to be silent about any issues they may uncover. These are the kinds of debuggers you want working with your device in the early stages and giving you lots of feedback.

So if you call this type of an advanced ability to garner real world customer data and hone your ecosystem a flop, then so be it. I see it as a pretty positive effort on Google’s part. Don’t judge Google as a phone company having to sell millions of devices, generate huge HW profits and compete with Apple. Judge Google by what it is and does better than almost anyone. Google is a service provider that is trying to give itself an advantage in the market by making sure platforms are open, especially to their key revenue-generating offerings (e.g., search, ad serving, location services, YouTube, etc.). Evaluated in that light, I’d say Google’s first endeavor into the world of phones with NexusOne was a big success. And if Google never makes a dime in the HW market with its own Android-based products, it will still be a success.

Jack Gold is the founder and principal analyst at J.Gold Associates, an information technology analyst firm based in Northborough, Mass., covering the many aspects of business and consumer computing and emerging technologies.

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