How Many Nexus One Units Will Sell in 2010? Does it Matter?

So how many Nexus One devices will be sold over the next year? At least one analyst, Doug Anmuth of Barclays Capital, believes five to six million units could be sold in 2010, a more than respectable number for any new device.

 

Perhaps that is not as strong a performance as Apple (News - Alert) likely will put up for its iPhone, which Barclays predicts will sell about seven million units in the first quarter 2010.

 

But that's the iPhone. It's truly in a class by itself, the aspirations of other manufacturers notwithstanding.

 

Anmuth thinks Google (News - Alert) could generate incremental revenue of between $2.6 billion and $3.2 billion on sales at that scale, though most expect little, if any, profit. Of course, that likely is not the point.

 

If all Google does is recover the bulk of its direct costs, it wins. Some people will speculate about what it means that Google is now “in the handset business.” At some level, one certainly can argue that point.

 

But that's like arguing Google is in the maps business. It is, but not the way some others are. Google wants people to build the Google Maps function into other applications, to create a broader base for its mobile advertising, search and other key business initiatives.

 

Does Google expect to make money directly from spending money to create a huge mapping function? Not really. It is a “cost of building a much-bigger business.”

 

In fact, Google used to lease map data from Tele Atlas (News - Alert) and NavTeq, the two suppliers of such features and data. Now Google has built its own database, adding the key “turn by turn” capability, which likely involves people driving real cars on real streets as well as mashing up other available data sources.

 

That has to be expensive. But it is not a “business” for Google in the way it is for Tele Atlas and NavTeq, or providers of stand-alone personal GPS units and services.

 

Google is really interested in location-based services as well. If its maps are distributed everywhere on the Internet and in every mobile device, it might control that framework.

 

Cash starved startups, building interesting and innovative mobile apps, will undoubtedly build on Google’s map API.  It’s rich, it is easy to use, and the price is right. Once Google Maps are ubiquitous, so will the advertising opportunities be.

 

Google likely has that sort of framework in mind for Nexus One. It isn't a business. It isn't really a revenue stream. It's an input to a bigger business opportunity.