Is This a Way to Make a Profit From a Tablet?

June 29th, 2012

In a disappointing move, Google announced that a 7-inch Nexus 7 tablet, built by Asus, would ship in July. Disappointing? Well, you have to wonder whether it’s a mark of foolishness or desperation, and what sort of message Google is sending to their Android licensees.

Certainly the Nexus 7 comes across as a rush job. How do I know? Well, that foolish admission from Google’s Andy Rubin that it took four months to develop (Apple worked years to bring the iPad to fruition). Worse, at a list price of $199, industry estimates have it that Google and Asus will be making exactly zero profit. Clearly, they’ve followed the Amazon Kindle Fire playback, which is to depend on the sale of apps, movies and TV shows via Google Play to generate profits. Of course, the real origins of this marketing scheme go back the original Gillette razor concept. You got the razors real cheap, or even free, but paid and paid and paid yet again for the blades.

The very name, Play, implies that the Nexus 7 is meant strictly as a consumption device, which means any productivity capabilities are meant as an afterthought. If Google Play delivers good sales as the result of Nexus 7 adoption, Google may turn the thing into a money-making proposition. So far, however, Google hasn’t made huge revenues from Android. It’s still mostly ad-clicks.

But trying to imitate Amazon may not be a smart strategy. Yes, it appears the Kindles have been successful for Amazon, particularly as a way to generate e-book sales. But it’s also reported that the Kindle Fire, which is similar to the Nexus 7 in some respects, only registered good sales during the 2011 holiday season, and essentially tanked after that. So why does Google, with no proven reputation as an online retailer, expect to do any better? Or were they desperate to come up with something, anything, in time to present at this week’s Google I/O conference in San Francisco.

The other major product intro was the Nexus Q, a successor to Google TV that has some nice features but, at $299, is going to have a high mountain to climb against the $99 Apple TV. Some design choices seem curious, such as the built in 25-watt two-channel amplifier. One expects that the built-in audio system on most any TV these days is roughly comparable. If you want an external speaker system, you can choose from many models that contain far more powerful electronics. Curious indeed.

At the same time, Google does have one potential bragging point, which is the claim that the Nexus Q is assembled in the United States from mostly domestic parts. As you know, Apple’s products are mostly built in Asia, although some parts in an iPhone and iPad, such as the glass and some of the internal components, are American made.

Now the argument over where Google and other tech companies assemble their products is a worthy one, with lots of political implications. But that’s no reason to buy a Nexus Q if it is otherwise far more expensive than the competition, and fails to deliver compelling features to justify the higher price tag.

Curiously, I’m not seeing much chatter suggesting that the Nexus 7 and the Nexus Q are potential Apple killers in any respect. The Q seems nicely designed, however. At $99, minus some of the wasteful features, it may have been considered a decent alternative to Apple TV. Unfortunately, it doesn’t appear that Google fully understands what Apple is doing with hardware development. That said, the next Android upgrade, version 4.1, also known as Jelly Bean, does seem to have some useful features, although most appear to be under-the-hood, such as the promise of greater touch responsiveness. But that won’t mean a thing if most of the people who own Android gear are unable to upgrade.

In the scheme of things, Google’s new products amount to a non-event. Those desperately seeking an iPad killer will, once again, look to Microsoft for solace. But the Surface tablets leave lots of questions unanswered, the most prominent of which is whether they will truly see the light of day. As you recall, the reporters who attended last week’s media event were given very little face time with tablet prototypes. One reporter described touch responsiveness as lagging, a problem that has long plagued Google tablets. Sure, you can chalk it up to a preproduction glitch that will be fixed in the shipping product, but Microsoft doesn’t have a lot of time to get it ready for a fall release.

I still have the nagging feeling that Microsoft’s announcement was, first and foremost, meant to strike fear in the hearts of their OEMs. If they cannot create competitive tablets, Microsoft will do it for them. At the same time, few members of the media have learned the lessons of history, it seems, that Microsoft often announces new products that do not actually see the light of day. Or they are released in a form that loses key features with the usually unfulfilled promise those features will arrive later. Shades of Windows Vista.

But at least you can expect Microsoft to sell the Surface at a profit if it really comes out, although some analysts are suggesting Google’s aggressive price for the Next 7 might cause problems for Microsoft. The show may not be over, but it doesn’t appear that the iPad is has a part.

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4 Responses to “Is This a Way to Make a Profit From a Tablet?”

  1. Kaleberg says:

    With all these new tablets coming out, I’ve been waiting for a large “utility” screen, basically a tablet in the 15-21″ range that I could use as a working display (wired), an auxiliary picture frame like display (unwired) or for media consumption and light weight interaction. Display prices keep coming down, but they are still awfully clunky and are incredibly specialized. I have to choose what I want to use it for and allocate a whole desk top when I buy one. Why not make a light, easy to place one with some processing power and apps so I an use it as a mirror, but have it show me the headlines or pretty pictures when I’m not grooming or surfing the web with it?

  2. DaveD says:

    Well, it was another “Is that all there is?” presentation by Google. Without a rich ecosystem and a quality device like Apple’s, it ain’t going nowhere. Amazon has smaller ecosystem with a lot of Kindle e-books. Speaking metaphorically, the Kindle Fire is being tossed into the fireplace.

    I’m getting a front-row seat and popcorn to watch on the big screen, the Windows saga this fall. From the trailers of Windows 8 and Surface, it could become very riveting.

  3. Tim says:

    Who is stupid enough to use a tiny 7″ tablet when even the iPad at 10″ feels very small when you actually use it in real with your hands.
    In this respect, the Microsoft Surface Tablet at 10.6″ is certainly a good step toward possible one day 12″ tablets that should be the best size possible for a tablet.
    More, with an Intel Core i5 processor, the Surface tablet will be able to use any desktop applications if needed.

  4. David says:

    I don’t see the Nexus 7 as an iPad competitor.
    I’m actually very interested in it as a replacement for my second gen iPod touch.

    For the same $199 I get a significantly more capable device with a much larger screen. It might even be small enough to carry as often as I carry the touch.

    I don’t care if Google is losing money on it. Retailers frequently offer deeply discounted products as a way of getting you into their store instead of their competitors’ ones. Google clearly expects that users will buy items from the Play store and sign up for things like Google+ so they can get even more information about us than they already have.

    If Google were to tear that 16,000 CPU strong artificial visual cortex away from cat videos and put the computing power to analyzing all their G+ users and their Gmail, Docs, Drives, text and map searches, translations, blog comments, browsing history and Android GPS locations I’ll bet they could write a million highly accurate and detailed biographies. Heck with that much information they could probably make identity theft their new business model.

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