Google's Pixel 2 faces market headwinds

Android (Pixabay)
Pixel 2 is Google's flagship smartphone.

Google launched its Pixel 2 smartphones this week, going back to a model rarely seen since the early days of the iPhone: It made the phones exclusive to Verizon Wireless (though unlocked versions are available at the Google Store online).

That’s a move that offers a third-leg differentiation point for the carrier outside of the binary universe defined by the Samsung Galaxy and Apple products. If sales aren’t impressive, however, it throws Google’s branded smartphone fortunes into doubt.

The Pixel 2, Google’s flagship smartphone, offers a market-leading camera, unadulterated Android and a souped-up Google Assistant. The pricing seems reasonable: Verizon said that the 64 GB Pixel 2 is $27.08 per month for 24 months ($650), while the 128 GB version is $31.24 per month for 24 months ($750).

Meanwhile, the 64 GB Pixel 2 XL is $35.41 per month for 24 months ($850) and the 128 GB version is $39.58 per month for 24 months ($950).

The pricing is in line with the unlocked pricing, which starts at $649 for the Pixel 2, or $849 for the Pixel 2 XL. To sweeten the deal beyond the monthly installment plans it offers, Verizon is offering users a free Google Home Mini smart speaker with a Pixel 2 sale—and $300 off if they trade in another, recent smartphone.

“Verizon exclusivity with generous promotions suggest that they’re eager to provide differentiation against other competitors,” said Bill Ho, analyst at 556 Ventures, in an interview. “The promotion follows the similar playbook as the Pixel & Pixel XL launch. Pixel is a high-profile model for those Verizon buyers who aren’t receptive to heavily marketed Apple and Samsung products that dominate the sales landscape. Yet, it remains to be seen if users will swap carriers just to get the Pixel when unlocked versions are available.”

RELATED: Google touts AI, machine learning as it unveils Pixel 2

Verizon’s potential market headwinds don’t just stop with the unlocked availability at the Google Store, however. T-Mobile has rushed into the breach with a counter-offer that gives consumers a $325 credit if they bring in their unlocked Pixel 2s and sign up for at least one voice line.

“Verizon wants you to use your Pixel 2 on a network that’s struggling to keep up with unlimited data. And they claim the Pixel is ‘exclusive’—just like they claim to have a better network," T-Mobile CEO John Legere said in a statement. "I’m here to tell you it’s all BS! The Pixel 2 works great on T-Mobile, and now you can get it for half off when you come to the Un-carrier and #BYOPixel.”

Ho said that the counter-offer is to be expected; he also said that other carriers are unlikely to clamour for full Pixel 2 access unless market demand exceeds expectations.

“T-Mobile is following a similar playbook in specific promotions (as last year) to target Verizon Pixel users to entice them to switch. Verizon, with the largest postpaid base, is T-Mobile’s continual target for switchers,” he said.

However, he added: “With the acquisition of the HTC mobile device talent, Google is in the device business seemingly for the long haul. Pixel 3 and 3XL is a logical step if there are decent unlocked and Verizon sales. This begs the question on how many exclusivity years is the Verizon/Google Pixel agreement. The parallels to iPhone and AT&T cannot draw a comparison as iPhone was a home run for AT&T whereas the Pixel’s sale volume likely isn’t there for other carriers to want to break in.”

Ho also said that the Pixel launch may blunt the hopes of the Essential Phone’s progress, as the market may not support two high-end Android branches.

Essential, one of FierceWireless’ top 15 startups to watch in 2017 and beyond, is pioneered by Andy Rubin, the celebrity founder of Android, and is backed by $330 million in funding. It offers impressive specifications and is exclusively available from Sprint for $14.58 a month with no money down over 18 months, marking a 50% discount worth roughly $260. The carrier also offers Essential’s 360-degree camera, a modular add-on, for $200, or $16.67 over 12 months, on its installment plan.

“Essential and Pixel purport to have true Android experience,” Ho said. “They’re vying for the Google purists, who may or may not be numerous.”