The change is not entirely unexpected. Google's Nexus One has not fared well in the marketplace, available as a full-price unlocked model or on contract with T-Mobile, the nation's smallest carrier.
Without a Verizon partnership, Google loses access to the carrier's more than 90 million customers.
Bloomberg had the following to say about the change:
The breakdown of the deal signals Verizon may view Google as a competitor rather than a partner when it comes to Nexus One sales, which are probably at less than half a million since the phone's January debut, said BGC Partners’s Colin Gillis.
But this view is not entirely fair, as Google's operating system is also loaded on the HTC Droid Incredible, which is made by the same manufacturer that makes the Nexus One.
Still, it shows that Google may have to fight its two battles separately: first, the move to offer its own branded phones; second, the move to sell them at full price online only.
The change also means AT&T may be less inclined to formally offer the Nexus One, as had also been rumored at the phone's launch this winter.
The bottom line? Google still wins overall as the Android ecosystem expands. But it may have to refine its approach when it comes to making money.