Google is giving up on one of the most revolutionary aspects of its attempt to corner the smartphone market: it’s shuttering its web storefront for selling its Nexus One phone. They’re not abandoning the phone or the attempt altogether—but apparently the demand for a phone absolutely free of contract limitations (and carrier subsidies, and, well, a service provider) wasn’t what they’d anticipated.

Initially, the plan was for several carriers to offer month-to-month subscription services, but only T-mobile followed through (Sprint and Verizon initially pledged to offer service, but never followed through). So now Google will work on getting their phone into more carriers’ stores. Once they’ve gotten a number of partners selling their phone, they’ll discontinue the storefront.

Instead, Google will be shifting to the model it’s using in Europe. Two weeks ago, Google began offering its phone in Europe through Vodaphone—literally. The European carrier is selling the phone in its stores, on its website and over the phone.

Google’s not saying how many Nexus phones it was selling through the storefront, according to CNET. However, initial reports indicated the phone was off to a slow start.

Meanwhile, Google’s not abandoning its attack on Apple, either. At the annual shareholder meeting this week, CEO Eric Schmidt characterized Android phones as the antithesis of their competitors, especially Apple’s devices with the company’s iron fist controlling the apps and even developers’ tools available for their platform. Clearly Android will continue to be a major part of their strategy—as well offering a number of Android devices.

Google premiered the Nexus One and its storefront in January. Later that month, the FCC sent Google a letter over the company’s high termination/return fee. It’s possible that part of the reason Google’s moving from directly selling the Nexus is to avoid any extra government scrutiny, since it has several other agencies and inquiries pending.

What do you think? Is Google trying to avoid government scrutiny, suffering from slow sales, or just not seeing enough support from carriers to make the storefront viable?