Google has given up on its plans to rethink the way branding and distribution works in the portable gadget market. But the move could be bad news for rival companies and partners alike.

According to Wall Street Journal sources, Google is going to set up its own online store for tablet computers to sell direct to the public, likely in a more explicit and prominent manner than the way it sold the Nexus One smartphone (known unofficially as the Google Phone.)

Not only that, but for the first time Google will explicitly market tablet computers under its own brand name, rather than simply leave manufacturers to use the Android system under their own name. It appears Google won’t be making the devices themselves, but they will be co-branded with the name of the manufacturer, which could include Asus and Samsung. It’s not known at this stage how the Google takeover of Motorola fits into the picture.

Another point of uncertainty is what control Google will exercise over the tablets it sells under its own name. While Android is great for developer freedom and allows a range of prices, one disadvantage is that quality can be inconsistent, compared to the iPad where Apple controls exactly how each model performs.

There must surely be a temptation to simply produce *the* Google tablet (albeit in different storage capacity and connectivity variations) to start a straight fight with the iPad, but this could upset other Android device manufacturers.

The Nexus One was an experiment to see if direct advertising selling to Google users was financially viable. Andy Rubin, who heads the Android project, told the Journal that although the project broke even, one of the big problems was that sorting out compatibility and network carrier deals for foreign countries proved too much hassle. A WiFi Google tablet could much more easily be marketed around the world, allowing even greater economies of scale.

There’s also speculation that Google might subsidize the tablets in an attempt to compete on price with the Kindle Fire, which is widely believed to be sold at a loss by Amazon. The problem is that Google wouldn’t have such obvious ways to make back the cash such as the Amazon Prime membership service, or simply selling more goods to users.