Google Nexus One – Upfront Analysis Ankan Jain James Wade Peter You Satya Dash

Slide 2 Competitive analysis Past year’s analysis of marketing elements Marketing research Perceptual maps Industry analysis Lessons Learned SWOT analysis Brand positioning Statement 8 8

Communication industry Slide 3 Communication Wired Television Internet Phone Wireless PagingCellular Wireless phoneSkype wireless Tablet PCs/eReader iPad Kindle Advanced PCS Home School Hotel

Wireless telecommunication Slide 4 Advanced PCS - Wireless networking in homes, schools, offices, wireless hotspots Cellular services – 1G, 2G, 3G and 4G $152bn

What is a smartphone? Slide 5 Two categories of mobile phones Feature Phones Basic phones with one or two advanced features like a camera or a basic web browser Very inexpensive Primary uses are calling and texting Smartphones Advanced phones with multiple features including full web browsers, , music players, maps and 3 rd party apps Prices from $100 to $500 Consumers use multiple functions beyond calling and texting

Market Structure - General Slide 6 OS Developers Handset Makers Carriers Retailers Consumers 3 rd Party App Developers 3 rd Party Accessory Makers One firm may be all 3 or any combination Apple, RIM, Google, MS, Palm, Nokia Apple, RIM, HTC, Samsung, LG, Palm, Nokia, Motorola Verizon, AT&T, T-Mobile, Sprint Carrier Stores, Web sites, Best Buy, Wal-Mart

Slide 7 The players

Operating System Players Slide 8

Smart phone handset makers Slide 9 Source: Razorfish, "FEED: Digital Brand Experience Study," November 10, 2009

Carriers Slide 10

Market Structure – iPhone, Blackberry, Droid Slide 11 iPhoneBlackberryDroidNexus One OS DeveloperAppleRIMGoogle Handset MakerAppleRIMMotorolaHTC Carrier(s)AT&TVerizon, AT&T, Sprint, T- Mobile VerizonT-Mobile RetailersApple, AT&T, Best Buy DozensVerizon, Motorola Google

Slide 12 Industry Growth

Major market segmentation Slide 13

Feature Phone Sales Maturing Slide 14 91% of US population has a cellphone Growth rate dropped to single digits in 2007 and is not expected to rise again

Smartphone Sales Exploding Slide 15

Smartphone Industry Trends Slide 16 Switch from feature phones to smartphones Skyrocketing popularity of 3 rd party apps Shift from business to personal and mixed use Fierce competition at all levels of industry

Trend – Switch from Feature Phones to Smartphones Slide 17 Since launch of iPhone in 2007, consumers are increasingly moving from feature phones to smartphones Shipments of smartphones are projected to exceed feature phones in 2012

3 rd Party Apps Take Over Slide 18 Since launch of iTunes App Store, 3 rd party applications have skyrocketed in popularity Creates additional revenue stream for app developers and OS developers VoIP apps threaten to disrupt market structure by competing with carriers

Top Five Mobile Content and Services Slide 19

Slide 20 Industry Trends

Trend – Shift from Business to Personal Use Slide 21 Smartphones were originally used mostly for business applications such as constant access Since launch of iPhone and iTunes App Store, biggest growth has been in phones for personal use Many consumers use smartphones for both business and personal use

Trend – Ferocious Competition and Innovation Slide 22 Just since February 2010, handset and OS makers have announced the following new products: Palm Pre Plus and Pixi Plus Can create mini-hotspots to connect other WiFi devices to 3G Microsoft Windows Phone 7 Series Completely redeveloped OS from Microsoft HTC Evo 4G 4.3” screen WiMax 4G service 8 MP camera

Implications of Industry Trends Slide 23 Rapid growth from new customers, not just churn of existing customers Network effects will drive app availability. Power of carriers decreases as consumers pay less attention to calling. Consumers call the shots, not corporate IT departments. Feature advantages are not sustainable, even in the short term (<1 year).

Slide 24 Competitive analysis Past year’s analysis of marketing elements Marketing research Perceptual maps Industry analysis Lessons Learned SWOT analysis Brand positioning Statement 8 8

Slide 25 Key Competitors

Slide 26 Direct Competitors iPhone BlackberryDroidPalm Pre Samsung LG Nokia

Slide 27 Smart Phone Competitive Landscape Personal Use Business Use Nokia Samsung LG Palm Droid Blackberry iPhone

Slide 28 Indirect Competitors iPadKindle

Slide 29 Phone Features

Slide 30 iPhone

Slide 31 Blackberry

Slide 32 Droid

Slide 33 Palm Pre

Slide 34 What makes iPhone different?

Slide ,000 apps and counting

Slide 36 Distribution

Slide 37 Retail Stores

Slide 38 Retail Stores Web Site - Walmart.com

Slide 39 Online Retailers - Amazon.com

Slide 40 Only Mobile Phone Retailer - Wirefly.com

Slide 41 Carrier Web Site

Slide 42 Carrier Retail Store

Slide 43 Manufacturer Web Site – Blackberry.com

Slide 44 Manufacturer Retail Store – Apple

Slide 45 Used Phones Market– eBay.com

Slide 46 Price Comparison Sites– Shopping.com

Slide 47 Pricing

Slide 48 Who wants to pay for the phones?

Slide 49 How about 0.01 cents?

Slide 50 Unlocked Phones – Pay full price

Pricing comparison Slide 51 CompanyModelCarrierPrice AppleiPhone 3G (s)AT&T$199 – 16GB $299 – 32GB AppleiPhone 3GAT&T$99 – 8GB RIMBlackberry PalmPalm Pre PlusVerizon$ PalmPalm Pre PlusAT&T$ PalmPalm Pixi PlusVerizon$79.99 PalmPalm Pixi PlusAT&T$49.99 MotorolaDroidVerizon$19.99

Same model but different price Slide 52 ModelDistribution Store CarrierPrice Palm PrePalm.comVerizon$ Palm.comAT&T$ Amazon.comVerizon$29.99 Verizon.comVerizon$24.99 Sprint.comSprint$149.99

Slide 53 iPhone – monopoly

Slide 54 Carrier Promotion

Slide 55 Retailer Promotion

Slide 56 Advertisement

Slide 57 PhoneCarrierTVPrintDigitalBillboard iPhoneAT&TYes BlackberryAT&T, T- Mobile, Verizon Yes Palm PreVerizon, Sprint Yes Motorola Droid VerizonYes

Slide 58 Punch line

Slide 59 Carrier Advertisement

Slide 60 Carrier Advertisement

Slide 61 Carrier Advertisement

Slide 62 Carrier Advertisement

Slide 63 Carrier Advertisement

Slide 64 Retailer Promotion

Slide 65 Print Advertisement – Wall Street Journal

Slide 66 Editorial Reviews

Slide 67 Online Videos – Youtube.com

Slide 68 PR Smart Phone + Social Media (Twitter)

Slide 69 Competitor Size

Company Size & Advertising Spending Slide 70 Company2009 Annual Revenue 2009 Ad SpendAd Spend as % of revenue Apple$36bn$501mn1.37% RIM$11bn$337mn3.06% Motorola$22bn$412mn1.8% Palm$735mn$89mn12.1% Source – 2009 Annual Company Reports

Slide 71 SEO

Visits to company websites Slide 72

Search Engine Optimization Slide 73

Slide 74 Search Engine Results – Google.com Free SearchPaid Search

Slide 75 Mobile Apps

Spend on Apps Slide 76

Spend on Apps Slide 77

As A Group, iPhone Owners Are Wealthier And Younger Slide 78 Source: Forrester’s North American Technographics® Benchmark Survey

iPhone = Mobile Internet Access Slide 79 Source: Forrester’s North American Technographics® Benchmark Survey

Magic Quadrant for Mobile Application Platforms Slide 80 Source: Gartner Magic Quadrant for Mobile Consumer Application Platforms Dec 2009

Mobile developers' mindshare Slide 81 Source: Apr 2 nd 2010http://brainstormtech.blogs.fortune.cnn.com/ Of 3,000 mobile app projects begun in the past 90 days, 67% were for iPhones, 22% for iPads

Mobile Operating System Preference Slide 82 Source: March 31, 2010http://brainstormtech.blogs.fortune.cnn.com/tag/iphone/ While demand for BlackBerries and Palm Pres is drying up, according to ChangeWave

Mobile Operating System Preference Slide 83

Slide 84 Competitive analysis Past year’s analysis of marketing elements Marketing research Perceptual maps Industry analysis Lessons Learned SWOT analysis Brand positioning Statement 8 8

Online-Only Ad ‘Campaign’ Slide 85 Marketed through a website, text-based search advertising, and a few sidebar ads on select websites Not available in any store, whether for purchase or trial No other marketing activities of any sort from Google or T-Mobile

Nexus One Sales Flop Slide 86 Nexus One receives excellent reviews in most publications Analysts report very low sales in comparison to iPhone and to another Android-based phone – Motorola Droid

Slide 87 Competitive analysis Past year’s analysis of marketing elements Marketing research Perceptual maps Industry analysis Lessons Learned SWOT analysis Brand positioning Statement 8 8

Mobile phones used today Slide 88 Kinds of phone used today 100% of people use a cell phone. 30% of people use a land line 19% of people use skype phone Kind of cell phone used 94% of people use a cell phone with advanced features: text, camera, internet and video 6% of people use a cell phone without advanced features.

Very Important Smart Phone Features Web Browsing Texting Search Maps Camera Social Networking Work Applications Slide 89

Google features being used by People Slide 90

Willingness to pay for Dream Phone Slide 91

Insights from Market Research 78% of people would like to test drive a phone in the store before buying it. 64% of people would like to pay subsidized price for their phone instead of full price. 51% of people have never heard of Nexus One smart phone Slide 92

Wordle – iPhone Slide 93

Wordle - Blackberry Slide 94

Wordle - Google Slide 95

Slide 96 Competitive analysis Past year’s analysis of marketing elements Marketing research Perceptual maps Industry analysis Lessons Learned SWOT analysis Brand positioning Statement 8 8

Web Browsing vs. Slide 97 Full HTML Browsing Poor HTML Browsing Support Less Trendy

Price vs. Camera Slide 98 High Price Low Price High Resolution Camera Low Resolution Camera

Number of Apps Available vs. Number of Downloaded Slide 99 High Number of Apps Low Number of Apps Large Number of Apps Downloaded Small Number of Apps Downloaded

Slide 100 Competitive analysis Past year’s analysis of marketing elements Marketing research Perceptual maps Industry analysis Lessons Learned SWOT analysis Brand positioning Statement 8 8

Slide 101 Branding

Lessons Learned iPhone is considered trendy Blackberry is perceived as tool for business Google is considered innovative The mobile phones have very high brand loyalty Very low brand awareness of Nexus one even among heavy Google users.

Slide 103 Distribution

Lessons Learned Most users would prefer to try the phone before purchasing Even users who buy it online would prefer to try it once Most would prefer to go to carrier stores over retail stores

Slide 105 Pricing

Lessons Learned Most people would prefer to get a subsidized phone Carriers offer discounts. So there is room to negotiate the price with carriers.

Slide 107 Advertisement

Lessons Learned The key competitors spend between 1 – 3% of marketing expense on advertisement. Palm spends around 10%. All competitors use print, TV, internet and billboard channels.

Slide 109 Competitive analysis Past year’s analysis of marketing elements Marketing research Perceptual maps Industry analysis Lessons Learned SWOT analysis Brand positioning Statement 8 8

Strengths Google recognition and dominance in internet searches iPhone / Android Gaining Mobile Internet Usage Share - Symbian (Nokia) + RIM + Windows Mobile Losing Share Processor speed (1 GHz) Available on multiple mobile carrier networks 7 Hr Battery life Camera resolution (5 MP) Expandable Memory Open-Source Smartphone Platform-of- Choice  Most robust open-source alternative to iPhone platform with incentivized partners Free software for device manufacturers / carriers

Strengths (continued) Second Most Vibrant Developer Community  10K+ apps in Android Market, second only to iPhone App Store  Least restrictive application approval policies + flexible revenue sharing with carriers  Easy alternative Potential Scalability from Beyond Smartphones  iTunes App Store benefitted tremendously from iTouch users; Android is making inroads on media devices Storage: 4 Gb Standby time: 250 Hrs Multitasking

Strengths (continued) Source: JP Morgan

Strengths (continued) Source: JP Morgan

Weaknesses New entrant into mobile phone industry Sub-Optimal User Experience  Device manufacturers complain about Google’s lack of technical support when it comes to developing new Android smartphones Pricing iPhone available for $99 Market share Fewer applications Fewer accessories No physical keyboard

Opportunities Long term, Google Android’s open / free operating system (combined with clever device manufacturers), standardization of more powerful mobile web browsers, emerging markets competition and carrier limitations may pose challenges to Apple’s market share upside. RIM may maintain enterprise lead owing to installed base, but long-term outlook is challenged. RIM BlackBerry may maintain enterprise lead for foreseeable future, but long- term outlook is challenged – consumer offerings likely to prove increasingly uncompetitive owing to software / application disadvantages. Open mobile web potentially more attractive to developers / consumers – Google / Opera leading transformation of mobile browsers into development platforms. Apple ‘walled garden’ approach somewhat constrained by Apple’s approval process + carrier capacity. Highest Handset Vendor Operating Margins at High End of Market – 20%+ for Smartphones vs. 8% for Low-End Vendors Highest for iPhone over Motorola, Sony Erickson, Nokie, LG, Samsung and RIMM

Opportunities (continued) Growing Android app marketplace Exclusive carrier deals could limit Apple’s market share upside – AT&T Insufficient battery capacity could continue to prevent effective multitasking In Technology, Products with Most / Best Apps Usually Win – In Mobile, Apple is Clear Leader and Newcomer Android Has Quickly Surpassed the Old Guard

Opportunities (continued) Source: JP Morgan

Opportunities (continued) Source: JP Morgan

Threats Network Effects Apple Near term, Apple is driving the platform change to mobile computing and leading in user experience. Its mobile ecosystem (iPhone + iTouch + iTunes + accessories + services) market share / impact should surprise on upside for at least the next 1-2 years. Revenue opportunities for developers Decreasing cost of manufacturing Other smartphone manufacturers will experience decreased bill-of- materials Lower BOM (Bill-Of-Material) Costs + Prices Stimulate Smartphone Demand – iPhone 3G Price to $99 from $199 = 89% Demand Increase

Threats (continued) Source: JP Morgan

Threats (continued) Source: JP Morgan

Threats (continued) Source: JP Morgan

Threats (continued) Source: JP Morgan

Threats (continued) Source: JP Morgan

Threats (continued) Source: JP Morgan

Morgan Stanley iPhone Interest Survey, 11/2008 (Top 3 barriers) #1 Purchase Barrier = Monthly Plan Cost ($95) – 55% of interested respondents cited service costs as reason for not purchasing #2 Purchase Barrier = Device Price ($199 / $299) – High iPhone price kept 53% of interested respondents from purchasing; price reduction to $100 increases unit demand 89% among respondents Apple has eliminated this barrier #3 Purchase Barrier = Carrier Exclusivity (AT&T) – 41% of interested respondents would not purchase iPhone due to carrier exclusivity – citing coverage / pricing issues with AT&T + switching costs from existing carriers Nexus One currently available on multiple networks

Morgan Stanley iPhone Interest Survey, 11/2008 (continued) Source: JP Morgan

Morgan Stanley iPhone Interest Survey, 11/2008 (continued) Source: JP Morgan

Cycle of Successful App Marketplace Source: JP Morgan

Slide 130 Competitive analysis Past year’s analysis of marketing elements Marketing research Perceptual maps Industry analysis Lessons Learned SWOT analysis Brand positioning Statement 8 8

Brand Positioning Statement Slide 131 Target Audience: New smartphone users. This group is not yet wrapped up in a competing ecosystem and values the ability to choose a service provider. Frame of Reference: Smartphones. Nexus One is comparable to all smartphones, not just touch screen versions. Point of Difference: Innovative, integrated Google applications, choice of carriers. Nexus One takes the Google product suite and makes it even more useful everywhere you go. Nexus One offers the freedom to choose your carrier and your apps. End Benefit: Clarity, convenience, control. Nexus One seamlessly weaves together the Google products you already use and gives you control over your world. For new smartphone users, Google Phone is the smartphone that offers Google innovation with the freedom to choose, providing clarity, convenience and control.