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Google Wants Cheap Android Phones for Push Into India

By Daniel B. Kline - Aug 12, 2015 at 2:00PM

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The company has reaffirmed its commitment to Android One.

While it's busy changing its corporate identity, Google (GOOG 5.20%) (GOOGL 5.11%) has not given up its plan to conquer the world with cheap Android phones.

The company told The Financial Times that it plans to move forward with plans to bring Android One, its model for inexpensive phones produced by partners, to India. Essentially, Android One is a set of standards that various manufacturers in select countries use to make low-cost Android phones.

It's a way to bring some form of Internet access to people who otherwise might not have it, and the company describes it on its website in lofty terms:

The world is filled with potential. People who are ready to leave their mark, and have fun doing it. People eager to create, listen, learn, explore, collaborate, speak, and dance. Right now, only 1 in 4 people own a smartphone. Imagine what's possible if everyone has a phone as ambitious as they are.

Even though rolling out the lower-cost phones in India has not gone as smoothly as planned, the company intends to keep trying.

What is Google doing?
Rajan Anandan, who heads Google's efforts in India and Southeast Asia, reconfirmed the company's commitment to Android One in India in an interview with The Financial Times. The program, which launched in September, has had its problems, which he blamed on supply chain issues causing a shortage of phones.

"It is like any company when you try to launch a new initiative -- we had a few hiccups," he told the financial publication.

Anandan also acknowledged that the original phones offered, which cost around $100, were too expensive. He said the pricing for Android phones aimed at the "sweet spot for mass-adoption in India's cost-conscious smartphone market," which is between 2,000 rupees and 3,000 rupees ($31-$47).

Why does this matter?
Google is not alone in trying to bring high-function, low-cost smartphones to populations that cannot yet afford higher-priced models. Other OEMs have attempted to do the same thing, and the reasoning behind it is fairly simple.

Get into a developing market early, and you can define what a smartphone is to that audience. In addition to the ability to sell apps and other content to phone users, the company also has a chance to sell higher-priced devices as the market matures.

In essence, Google, like its rivals, is attempting to build itself a new market by getting in on the ground floor. Building that audience also expands the reach of the company's core search product.

Consider it a slow-building investment in the company's future that's nearly free because its partners will be doing the actual manufacturing.

It's a long-term play
While pushing Android One in India makes sense, the program is likely going to take a long time to pay off. Android is free to OEM partners, and the market for digital advertising -- where the company makes most of its money -- is just beginning to develop in India.

Though the manufacturers will be paying for the cost of the phones, Google has still had to invest heavily in building products that work well with the company's slow Internet infrastructure. 

"Strategically [India] is very, very important," Anandan old the FT. He continued:

Don't get me wrong, the revenue is interesting, but [...] we're here really because 10 years from now, a billion Indians will be online, and when we have a billion Indians online, we think that's going to make a huge difference to the global Internet economy.

Getting a new audience of potentially a billion people hooked into your ecosystem early on makes sense, and it will eventually pay off. This is a long-range play for Google, but it's a very smart one.

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