So the Nexus One is doomed?

Shares of Google (NASDAQ:GOOG) are down more than 4% since the Tuesday introduction of its new Android-powered smartphone. My own Foolish colleagues haven't exactly been flattering in their assessments of the device and Google's strategy.

"Nexus One may turn a few heads initially, but it's unlikely to revolutionize the market or live up to the early hype," my Foolish colleague Rick Munarriz wrote Wednesday.

He goes on to write that the smartphone market, dominated by Nokia (NYSE:NOK) globally and Research In Motion (NASDAQ:RIMM) and Apple (NASDAQ:AAPL) here in the U.S., is rapidly maturing. "This is no baby, baby," Rick writes.

Really? Here's a look at the worldwide market for mobile handsets in the third quarter:


Handsets Sold*









Sony Ericsson






Source: Gartner, Inc.
*In thousands of units.

And here's a look at the smartphone market during the same period:


Smartphones Sold*



Research In Motion












Source: Gartner, Inc.
*In thousands of units.

Do the math; smartphones accounted for just 13.3% of the overall market in the third quarter. This industry is no better than a toddler, Rick.

My view of the (ahem) "gPhone" mirrors that of another of my colleagues, Anders Bylund, who argues that Nexus One is a reflection of a broader strategy:

Google expects to launch several Android models in the just-born online Google phone store, but none of them will devour the mobile market, nor kill any specific competitor. What Google is doing is simplifying the consumer's phone-buying process -- choose a phone, then pick a network.

A better subsidy
Another possibility is that Google will further circumvent carriers such as Verizon (NYSE:VZ) and Deutsche Telekom's (NYSE:DT) T-Mobile to subsidize Nexus One handsets on its own. Why? The Big G is an ad company. Trading users phones for the right to serve on-the-go pitches could be good business.

Call it the AdMob mentality at work. Google is in the process of acquiring mobile advertising network AdMob for $750 million.

Plus, Google has more than enough cash to make this plan work, and it could be structured to aid partners. Imagine if The Big G agreed to cap subsidies at a certain level, ensuring that its own devices would never undercut offers from Motorola (NYSE:MOT), HTC, or any of its other Android handset partners.

Imagine also if Google's storefront that sold ad-supported subsidized phones never gave preference to a Google device, but instead allowed you to shop by feature, network, and price. That Google would be your advocate as a mobile consumer, one you might be more willing to trust to deliver you mobile ads.

Nexus One is doomed? No, I don't think so. This is a toddler of a market that only recently put down the baby rattle. Google has more than enough time to prove itself a responsible parent.

Apple is a Motley Fool Stock Advisor selection. Nokia is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers had stock and options positions in Apple and a stock position in Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy prefers honey over sugar when it comes to sweetening a steaming cup of Earl Grey.