Is this any way to make a profit from a tablet?

“In a disappointing move, Google announced that a 7-inch Nexus 7 tablet, built by Asus, would ship in July,” Gene Steinberg writes for Tech Night Owl. “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),” Steinberg writes. “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.”

Steinberg writes, “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.”

Much more in the full article here.

Related articles:
Spec Shootout: Apple iPad vs. Google Nexus 7 vs. Amazon Kindle Fire vs. Microsoft Surface – June 28, 2012
Analyst: Google Nexus 7 threatens Microsoft Surface, Amazon Kindle Fire, not Apple’s iPad – June 28, 2012
Analyst: Amazon, not Apple, should worry about Google’s tiny screen Nexus 7 tablet – June 27, 2012
Google sells tiny screen tablet aimed at Amazon’s tiny screen Kindle Fire – June 27, 2012
Google ‘Nexus 7′ tablet ships in July with Tegra 3, 7-inch display, $199 for 8GB, $249 for 16GB (with video) – June 27, 2012
Apple’s revolutionary iPad widens lead as tablet sales surge – June 15, 2012
Apple’s massive domination of tablet market unabated as Amazon’s tiny screen Kindle Fire demand tumbles – June 5, 2012
Apple’s iPad remains dominant in Q112 while Amazon’s tiny screen Kindle Fire fizzles – June 4, 2012
Amazon’s tiny screen Kindle Fire shipments have dropped off a cliff – May 9, 2012
Amazon’s Kindle Fire shipments fizzle to anemic 4% market share – May 4, 2012

27 Comments

  1. “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.”

    Clueless “We have to do something or we are toast.” better late than never exec. decision, while he gets his headhunter moving.

    1. I’m sure Asus isn’t making these devices out of the goodness of their heart. Google is buying them from Asus for something like a reasonable price, and then selling them at a loss, hoping to make it up in later sales.

    1. That’s not what Apple did with the iPod or iPad.

      It worked for the PC and phones, because these became “had to have” items (commodities). iPod and iPad are not must haves, but “want to haves” and therefor must have have something special for people to buy into them… this is why Apple took both markets.

    1. No, he’s not the dope, Genes very respected, so that makes the one that can’t take the truth to see it for What it is the true dope.

      Google has its boys out in force, unfortunately all they are doing is licking their wounds.

      Truth sometimes is very hard to swallow, face the truth.

  2. Heres’ my fantasy Tim Cook keynote.
    5″ iPod Touch
    Actual Apple 47″+ TV that is truly smart. (Display your game scores without disrupting your wife’s kleenex movie…list the days selection of movies and shows upon Siri command)
    Sleeker, smaller slightly curved iPod Nano with
    quick wrist clamp attachment that controls the TV via
    Siri. Hands free sitting on the couch…no searching/fumbling…throw it on the table when going to bed…clamp it to your wrist when sitting on the couch. Talking to your wrist is better than talking to other Apple devices, and could pull up Facetime to answer calls.
    If you lose the nano remote, use your iPhone/pod/pad as a backup. The remote would be more exciting than the TV and would fuel sales.

    1. ‘Display your game scores without disrupting your wife’s kleenex movie…’???
      Why are you in the same room together if this is a good feature?
      ‘…with quick wrist clamp attachment’
      ??
      I give up

  3. The analogy of razors and razor blades is just not applicable – a beard grows every day. Just like printers and toner, except you can decide to reduce your number of prints. With a tablet, you have the buying frenzy brought on by it being new but then you taper down on your app and content purchases. So if the seller does not make their money upfront, they may be out of luck. I think that is what was seen with Kindle and will be with any loss leader.

    1. The analogy is perfect and applicable. What is imperfect is all the (brief) execution and best laid plans going by the wayside not working out the way you (Amazon, Google) wanted. Cheap tablet + services&products = profit in their minds. Only Apple gets it’s cake and eat it too.

  4. The success will only come if sales are strong and the component prices drop rapidly.

    Technically speaking they delivered some impressive specs but its a gamble that could end up costing them

  5. Google is doing the same thing with their phone, the Google Nexus. The problem Google is having is that although there are plenty of Android phones and tablets very few are running Android 4.x. Google needs to get the latest version on the street just so it shows up on some statistics report that someone is using the newest version. For Google this is a tested strategy.

  6. > Worse, at a list price of $199, industry estimates have it that Google and Asus will be making exactly zero profit.

    I think that is wrong. At $199, the lower specs Kindle Fire was making “negative” profit for Amazon, who hoped to make up for the per sale loss with profit from content sales. That means the higher specs Nexus 7 must be an even larger “intentional” money loser. Furthermore, since Asus is just a hardware maker, they are not going to stand for losing money per unit sold. Therefore, Google is probably paying Asus enough so that they make a marginal profit to produce each Nexus 7, and Google is taking an even larger hit. “HIgher sales equals higher loss” is the road to bankruptcy, so you know Google will strictly control the number being produced and sold, even if it happens to be popular. That’s not a recipe for success.

    > real origins of this marketing scheme go back the original Gillette razor concept.

    That’s also wrong. With a “Gillette razor,” there is no choice but to buy the razor blades from Gillette, or the razor is useless. With a cheap inkjet printer, it is useless without ink cartridges from the printer maker. However, with the Nexus 7 (and Kindle Fire), buying content is completely optional. The device can be used without additional purchases. Therefore, the “razor and razor blade” analogy does not apply here.

    1. Yes the razor blade analogy fails for tablets. That fact does not mean that some dumb exec isn’t using it as a justification and/or relying upon it. It just means that the company will lose money. Note: Gillette was hit by imitators who made cheap blades. They lost out also. Hence now they sell disposable razors so there’s no cutting them out.

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