While its Android operating system is an undisputed success, direct sales of Google?s Nexus One have not met expectations?a sign that round one of the handset distribution battle has gone to the carriers.

With both Sprint and Verizon Wireless refusing to offer the Nexus One at a subsidized price, Google has had to rely on its direct-to-consumer ecommerce portal?selling the smartphone at $529 a pop?and on distribution through T-Mobile USA, the No. 4 carrier nationwide. That strategy has not enabled the Nexus One to live up to the hype.

?The decisions of Verizon Wireless and Sprint to forgo offering Google's Nexus One are an indication that carriers want to maintain their relatively high level of control over handset distribution in the U.S.,? said Alex Spektor, analyst of wireless device strategies at Strategy Analytics, Newton, MA.

?When Google offers the device through its own channel, it limits the carriers' influence on pricing and promotion,? he said. ?The independent channel can also potentially decouple the carrier from the handset in the consumer's mind.

?As a result, the carriers are more eager to give their attention to their own, co-branded devices, such as HTC's Incredible [on Verizon Wireless] and EVO 4G [on Sprint].?

Google had hoped that the Nexus One would be a game-changer that would give its Android operating system a boost in competition against rivals such as Apple?s iPhone and Research In Motion?s BlackBerry (see story).

Designed by handset manufacturer HTC using the open-source Android 2.1 operating system, Google Nexus One is available via Google?s Web store unlocked for use on any GSM carrier for $529 or for the subsidized price of $180 as part of a two-year contract with T-Mobile USA that includes an $80 monthly data plan.

Google promised that other carriers would soon follow T-Mobile in embracing the Nexus One, most notably Verizon (see story).

In January, Google sold 80,000 Nexus One units in the first month it was available, which pales in comparison to the first month of the original iPhone?600,000 units sold?and the Motorola Droid?525,000 units sold in the first month.

The Nexus One just barely crossed 100,000 over the first quarter.

And now, both Verizon Wireless and Sprint have about-faced on their nonbinding commitment to carry the Nexus One.

?When the Google Nexus one came out in January, everyone was saying ?Oh my gosh, it?s going to be an iPhone killer, it?s going to be a Droid killer, but I said, ?No guys, it?s just a phone,?? said Ramon Llamas, senior research analyst for mobile devices at IDC, Framingham, MA. ?Trying to sell it on their own made me scratch my head, and they haven?t had a lot of success.

?Originally when it came out on T-Mobile and was supposed to come out on Verizon, I liked that,? he said. ?Now it?s not going to be on Sprint and it?s not going to be on Verizon Wireless, and that hurts, because you?re missing out on half the subscribers in the U.S.

?There?s a direct correlation between shipment volumes and how much market share you have via the carriers.?

Sales via Google?s Web portal have not lived up to initial lofty expectations.

?Google had noted that [the Nexus One] was exceeding expectations, but it has not sold well in the U.S.,? said Ross Rubin, director of industry analysis at the NPD Group, Port Washington, NY. ?The Nexus One was the subject of two experiments?to sell a smartphone across carriers without their active involvement and to sell them exclusively online.

?However, it only appeared in one of the four major U.S. carriers, and online distribution is responsible for only about a tenth of cell phone sales in the U.S., which made it difficult to create high volume, especially unsubsidized,? he said.

Google has acted as if it did not need the carriers, which are skittish about hardware and software that they did not have a hand in shaping.

?This could have come down to a dispute over control, over supporting certain apps the carrier wanted, about not being able to offer the Nexus One in its stores, or simply having a portfolio roadmap that had the Nexus One too close to more powerful handsets such as the Droid Incredible or Evo 4G,? Mr. Rubin said.

Touchy-feely
Some have noted that the underwhelming results of the Web store may simply be due to consumers? try-before-they-buy philosophy. They want to at least try out a device before they drop $500-plus on it.

?In order for people to decide to buy it, they have to touch it, feel it, play with it, and?hello??they can?t do it online,? Mr. Llamas said. ?With Android devices by HTC and Motorola, consumers can test them out see if they like it, but they can?t do that with a Nexus One.

?Google said the Nexus One didn?t meet expectations," he said. "For the first quarter, it just crossed 100,000 units sold, and that says to me, from a numbers' point of view, will it be as successful as iPhone or BlackBerry? The quick answer is no?there have been certain obstacles they couldn?t overcome to reach the end user, including immediate access and experimentation.

?How often do you buy a car without taking a test drive? If you?re putting down several hundred dollars on this, don?t you want to try it out??

Google, to its credit, seems to realize that a shift in its distribution strategy was in order and has responded quickly.

?As Google noted in its blog [on May 14], it is switching to retail availability in new countries where it offers the Nexus One and will no longer offer the Nexus One direct on the Web,? Mr. Rubin said. ?Rather, it will promote a wider variety of Android handsets online, which should promote the ecosystem.?

Nexus One changes in availability
In response to the underwhelming performance of the Web store, Andy Rubin, vice president of engineering at Google, Mountain View, CA, made the following blog post:

We launched Nexus One in January with two goals in mind: to introduce a beacon of innovation among Android handsets, and to make it quick and easy for people to buy an Android phone.

We?re very happy with the adoption of Android in general, and the innovation delivered through Nexus One.

Already, a lot of the innovation that went into creating Nexus One has found its way into numerous Android handsets, like the HTC Evo 4G from Sprint and the Verizon Droid Incredible by HTC.

But, as with every innovation, some parts worked better than others.

While the global adoption of the Android platform has exceeded our expectations, the Web store has not. It?s remained a niche channel for early-adopters, but it?s clear that many customers like a hands-on experience before buying a phone, and they also want a wide range of service plans to chose from.

So today we?re announcing the following changes:

More retail availability. As we make Nexus One available in more countries we?ll follow the same model we?ve adopted in Europe, where we're working with partners to offer Nexus One to consumers through existing retail channels. We?ll shift to a similar model globally.

From retail to viewing. Once we have increased the availability of Nexus One devices in stores, we'll stop selling handsets via the Web store, and will instead use it as an online store window to showcase a variety of Android phones available globally.

Innovation requires constant iteration. We believe that the changes we're announcing today will help get more phones to more people quicker, which is good for the entire Android ecosystem: users, partners and also Google.

All about Android
Even though the Nexus One has not become the iPhone killer some predicted, perhaps Google is content with the fact that its Android operating system is on its way to No. 1, not this year, but soon.

?Nexus One?s numbers are not as spectacular as the iPhone or BlackBerry, but that?s not really the goal here, rather it's 'Let?s champion the Google/Android platform,'? Mr. Llamas said.

?Apple promotes the entire OSX via the iPhone, RIM promotes its OS via BlackBerry devices and that?s what the Nexus One was for, to champion the Android platform along all of the handset manufacturers, although getting to that point has been a struggle,? he said.

?If you want to sell as many handsets as possible, you have to go through the carriers?selling hardware is much, much different than championing software and selling search.?