Google to spend $500 million to market Moto X

That's more than the mobile marketing budgets of smartphone leaders Apple and Samsung.

By Forbes Digital Jul 11, 2013 3:38PM

Google (GOOG) isn't fooling around with the upcoming Moto X phone due out later this summer or fall.

It's set to spend $500 million or more marketing the showcase smartphone of its Motorola Mobility unit, according to a report late Monday in the Wall Street Journal. 

Such a sum would easily top the mobile device marketing budgets of both Apple (AAPL) and Samsung, the runaway market leaders in smartphones.

That's one big nudge. 

I've always thought that Google's main interest in hardware of any kind was less to make a lot of money on devices but instead to push others in the industry to up their game. The better, faster, and cheaper phones, tablets, and computers out there, the more money Google makes from placing ads (ahem, useful content) in front of the people using them. As I said in a post explaining why Google didn't introduce any hardware at its I/O developer conference:

What many people don’t realize about Google is that it has become a master of the nudge. Everything from Android itself (which doesn’t make any money directly) to its Nexus phones and tablets (which are reputed to be doing no better than breakeven), from its 2008 bid for radio spectrum (which it lost, perhaps purposely, to get Verizon and others to buy it and eventually expand wireless Internet access) to its new fiber broadband service in various cities–all those moves were intended to push other developers, hardware partners, carriers, and competitors to improve their offerings. And the better the hardware, software, and Internet access they provide, the better Google’s business does.

Now, even for Google, $500 million is a heck of a lot of money to spend nudging others. So it's possible that Google CEO Larry Page has heard the siren song of smartphones and figures that he might as well take a flyer on making Motorola -- which lost around a billion dollars last year -- earn its $12 billion purchase price. What's more, Google knows that carriers such as Verizon (VZ) and AT&T (T) want a third credible high-end smartphone maker to counter the Apple-Samsung duopoly and perhaps force prices down, so Google executives may figure that there's a market opening.

There's some uncertainty about market positioning of the Moto X. The Journal says it will be on par with the iPhone 5, Samsung Galaxy S4, and the HTC One, costing around $200 with a carrier contract and $600 without. But The Verge says the Moto X will be more midrange despite the positioning, costing just $199 off-contract. It's hard to see how Motorola could sell a $200 unlocked phone that would compete with high-end smartphones. But either way, it's clear that Google is pushing to make the most capable smartphones a lot cheaper and thus more appealing to the phone-toting masses, not just in the developed world but the rest of the planet where feature phones still rule.

Still, I can't help thinking that Google is still mainly playing the nudge game, and not just on the hardware front. Indeed, the smartphone boom may be peaking, so it's doubly hard to imagine that Page wants to bet too awfully much on the market itself.

So part of the nudge is likely on the software front. Rumor has it that Google has persuaded the carriers to install a minimum of their own software, known to many as bloatware or crapware, and offer the phone with largely standard Android software. Bloatware angers users as it often usurps apps they might prefer, a significant reason Apple's phones, which don't allow it, remain more appealing to many people than Android phones.

The other great shortcoming of Android phones is that many cannot be updated to the latest software until the carrier decides to allow it. That has led to fragmentation of Android and accompanying annoyance by users who may or may not get the latest features and apps on their phones. So by setting a shining example of a high-end smartphone that works like Google intended Android to work, the company could push the entire industry toward better software, more frequent updates, and thus faster innovation.

What's more, maybe that $500 million figure for marketing, which sounds a little too round and a little too just-enough-more-than-Apple-and-Samsung, isn't quite what it seems. First, it could easily be a message to Samsung and HTC: We're serious about Motorola, so you better get serious about Android phones without crapware. And given Google's many media properties, from its search engine to YouTube, perhaps some of that $500 million will come right back into the company.

The bottom line is that whatever Google spends to boost the fortunes of Motorola phones, it seems likely to end up boosting Google even more.

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