Google kills Nexus One; smiles all the way to the bank

With little fanfare, Google killed its Nexus One phone. This is good news, not bad news for Google, because the device served its purpose: It paved the way for the explosion of Android-based phones. Now Google can get out of the phone-selling business and focus on making money with Android via mobile advertising and services.

Google announced the death of the Nexus One on its Nexus One blog. This should have surprised no one. Sales have been unimpressive. Google said in its blog:

This week we received our last shipment of Nexus One phones. Once we sell these devices, the Nexus One will no longer be available online from Google.

The device will still be sold by some Google partners, notably Vodafone in Europe and KT in Korea.

It never made sense for Google to be directly in the phone business long-term. Hardware engineering and design is not its expertise, and there's no direct synergy between selling phones and its other lines of business. So no matter Google's original intention, the death of the Nexus is a good thing, because it could have distracted from Google's core businesses --- selling services and advertising.

The Nexus One accomplished its primary mission, to show the world the capabilities of an Android-powered phone. It paved the way for the Droid, the sold-out Droid X, and Droid Incredible, the upcoming Droid 2, and countless other Android phones out there. Google estimates that by late June, some 160,000 Droid phones were being activated every day.

So where does Google's money come from, if not by phone sales? Via search and other mobile services. All of those Android devices use Google as the default search engine. They use a variety of Google location-based searches and services, for which Google will ultimately be able to charge a premium from advertisers.

And it's clear that the more advanced the Android phone, the more people will use it for data services --- and therefore more money will flow into Google's coffers from the associated advertising. Verizon business development executive director Jennifer Byrne said at paidContent Mobile's conference that Droid X owners use five times the data of owners of other Verizon phones.

So as Google bids the Nexus One a farewell, there's unlikely to be any weeping at the company. Instead, the company will celebrate all the way to the bank.