Google's tablet strategy: Follow, follow, follow

Google's tablet strategy: Follow, follow, follow

Summary: Google needs to push a new tablet model---like a free device supported with ads---if it's going to be a player. Following Apple and Amazon isn't good enough.

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Google will roll out a tablet with Asustek that goes for $199 and is aimed at Amazon's Kindle Fire. Wrong target.

According to Reuters, an Asustek exec pre-empted Google's keynote to spill the beans about the tablet, which wasn't much of a secret anyway. Google needed a 7-inch tablet since Amazon took Android, remade the OS and sold a bunch of devices.

Tune in to CNET's live blog from the Google I/O keynote starting at 9:30 a.m. PT Wednesday.

The unfortunate thing for Google is that it's aiming at the wrong rival. What Google really needs to do is launch an array of tablets powered by Android that can roughly match Apple's iPad. The price: Near free.

Also: Google's 7-inch Android tablet should be $149, not $199Google appears to aim low with new 7-inch Android tablet

In other words, Amazon's move to subsidize e-readers with special offers and ads could easily be ripped off by Google. After all, Google is an ad machine.

Instead, Google partners with a hardware ecosystem that can't match Apple's supply chain. If Google really wants to be a tablet player---prosumer, consumer or business---it needs to hand out devices like Chiclets and make the difference up with those lucrative blue contextual links.

Google also needs to play to its strengths. Apple's strengths are integrated software and hardware with a supply chain that's second to none. Amazon's strengths are turning devices into commerce kiosks. Microsoft is pushing the needle with its tablet designs, but will leverage Office.

The search giant to date hasn't worked Android only apps or cooked up models that are differentiated.

Google's tablet strategy looks a bit messy. Roughly speaking, Google's tablet plan goes like this.

  1. Follow Apple.
  2. Follow Amazon.
  3. And maybe even follow Microsoft's Surface.

Bottom line: Google is following the tablet parade. It needs to lead.

Topics: CXO, Amazon, Google, Hardware, Laptops, Mobility, Tablets

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Talkback

33 comments
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  • Get the gong

    Let's subject this idea to a sanity test. Could Amazon do this, using profits from the sale of goods, movies, music, etc.? If not, then doing this for the revenue from ad clicks is insane.

    According to the tear-down folks, a tablet that "can roughly match Apple's iPad" will cost $275 to $300 to build. So that's the number that has to be made up if the devices are to be "handed out like Chiclets."

    We know from Amazon's annual report that their operating margin is 1.5%. That's the percentage they get to keep from every dollar of stuff sold. Dividing $275 by .015 gives us $18,333 worth of stuff that Amazon would have to sell per tablet given away. Let's just say that's not going to happen.

    Neither is Google going to break even funding $275 devices with ad clicks.
    Robert Hahn
    • Your accounting is seriously flawed

      For starters, if an iPad costs $275 to make with its bigger screen, additional memory, cameras, etc; the Kindle Fire should be a fraction of that.

      Second, operating margin is not what you would use in figuring the value of such a program. Instead, look at the average gross profit of a Prime user. If the dollar value of that profit > cost of producing Kindle Fires, then they could give them away. Now, if the program greatly increases administrative overhead (which does figure into operating margin), then doing so probably isn't a good move. If, however, it greatly expands the number of high-value customers and can be managed with existing corporate infrastructure, then the operating margin could increase as a result of such a program. Also, a free Kindle Fire program would probably amortize the cost of such devices over a 3 year span (typical depreciation for computer-related hardware assets), so the per-customer purchasing requirement would be less. Finally, after 3 years, a percentage of devices would still be in use, off the books, and those customers would be substantially more profitable.

      And then there are ancillary benefits, such as that from eviscerating Apple and driving more traffic to purchasing music and apps from Amazon instead.
      jvitous
      • It's the same thing

        It doesn't matter what the Kindle Fire does. The author explicitly stated that the device he was proposing should "roughly match Apple's iPad."

        Your method of doing the dollars will end up being very close to mine. If the operating margin is 1.5%, then the "average profit per customer" will hit $275 around the time the average customer has purchased $18,333 worth of stuff. The advantage of my method is that you are left saying, "If the dollar value of that profit > cost of producing Kindle Fires" as if that were an unknown, whereas I know that to reach breakeven, the customer has to buy over $18,000 worth of stuff... a decidedly iffy proposition.

        The rest of your stuff is all arm-waving that no one can assign a dollar value to.
        Robert Hahn
      • A fraction?

        Ever heard of super size. Why is it you can get a bigger burger for only slightly less amount. Because the cost of small burger is not that much different to the cost of a big burger (labour is the same, packaging almost the same, marketing the same...sometimes more).

        Same applies for tablets. You think that just because a 7" tablets is half the size of a 10" tablet the cost is hugely different...think again.
        global.philosopher
  • Western world vs. 3rd world/developing countries

    Another perpective by western IT-advocates. But let's take a look what's waiting for consumers of this great big world. Remember hardly 1/6 of them living in "rich" west.

    Surface with price of 499 dollars. Then there is iPad with some 499 dollars. Then there is Nexus, with price of just 199 dollars. Which one is for you? It depends what's your banking manager is saying. Those of you whom 500 dollars is just pure nothing you're gonna make choice between iPad and Surface. Most of you will trust iPad.

    However many, perhaps most of western consumers want save those 300 dollars. They are eager to get new shoes or perhaps new printer. Or perhaps their finance looks not good at all. So their choice would be Nexus.

    How about those 6 billion people in developing countries and 3rd world. 98% of them will make choice between device like Nexus and even much cheaper devices of Android army.

    Folk there, honestly. Could it be possible that you start to solve this puzzle by taking little bit different perspective than just that western one? We are now living in real big change and the change is there were huge majority of new consumers are living - outside the western world.
    Matsi66
    • If you can't make money... You can't make money.

      No matter what the situation is with say 6 Billion possible consumers. It won't happen if a company can't make a profit. If I were one of those 6 Billion I'd purchase a decent Netbook rather than a tablet cause as a computer system the netbook will do more as a computer and the price for that more is very reasonable. It is less mobile than a tablet heavier and such but lets be honest as a full blown computer it will do more as well and would be the better investment of my hard earned money. As a further note I don't think that volume sales based on razor thin margins is a healthy way to do business. I think that getting a good solid margin for every single sale one makes is the better system even if that means lesser volume. In technology i can point to any number of companies, some of whom no longer even exist, who were at one time the sales volume kings but have had stumbles directly related to razor thin margins. It's simply not a healthy method in my mind to doing business at least for the long term.

      Pagan jim
      James Quinn
    • Dev Countries-Android does not show local language fonts in its browser

      The biggest issue with Android for developing countries such as India is that it does not display Indian fonts. Go to hindi.samachar.com or prajavani.net on an Android device, you will see rows of small blank rectangles. It works perfectly on an iPad, though. Now, nobody knows how to download and install fonts on Android. Search the web, and there is no answer that works properly. If a techie finds it difficult to make it work with Indian languages, how do you expect the common man to use it?
      GoForTheBest
      • Language support.

        I am from Southern India. As per the reports I read, Jelly Bean would render various South Indian scripts correctly.
        danishvet
    • Well put, Matsi66...

      Some of us in the West do watch our money. I actually make a decent living, but 1) chose not to feed the Apple machine (that decision gets easier and easier with every frivolous lawsuit Apple enters into) and 2) chose not to spend $500 for a tablet that I am primarily going to use to check email, do Facebook, maybe read some articles, read an e-book, do some online banking, etc...
      I will save that money and use it to purchase a Laptop (or possibly a Surface tablet, if it proves to be more powerful/useful than the iPad for doing extra tasks).
      Facebook is finding out that Ads are not going to drive everything (especially when you force them down people's throat).
      Google DOES need to continue to innovate it's applications AND where possible continue to make the crossplatform (they can be better on Android, no shame in that). There are always going to be folks who chose Apple or Microsoft OSes for one reason or another. Alienating them doesn't do anyone any good in the long run.
      jkohut
  • Google is just doing what it does best: copy

    Google tablet haven't exactly set the world on fire, so they have properly concluded that the Fire/Nook business is the one shot they've got left. Once Win 8 devices are out, no one at all will buy a Google tablet. The market will be iOS and Windows, except perhaps in the niche markets like the color e-readers.
    cantbeme
    • Microsoft tablets will fail

      Just like they have done for the past 20+ years.
      The Danger is Microsoft
      • I think it's a mistake

        For anybody to presume they cant foresee the future. None of us know what the future has in store for Android, Apple or MicroSoft and their products.
        non-biased
  • What is the use of android tablet?

    Could somebody explain the real use of an android tablet?

    Surface, Win 8 tablets and iPad are going to eat most of the tablet market, google tablets have no real use....Kindle fire and nook will grab the e-reader market...
    Android can target the $99 market...
    owllnet
    • I have an IPad and Android Tablet

      I find myself using the Android Tablet (a modified Viewsonic GTab) much more than the IPad. It's easier to organize my multimedia and install applications. In fact I can install multiple applications at once. Something an IPad still can't manage. Seriously, why is anyone developing a tablet with 4:3 ratio when the world switched to 16:9 over 5 years ago?
      fldbryan@...
      • Lol...

        Most people use tablets for consumption, particularly web browsing. Web browsing is significantly better in a 4:3 format than a 16:9 which is for movies (haven't you ever noticed that web pages look like pieces of paper which conveniently fit perfectly on an iPad and look terrible on a widescreen device.) And besides, I can fit any HD movie snugly in my iPad 3 screen with room for controls above and below.

        Even if the "world switched" to 16:9, which is a bold overgeneralization, that doesn't mean they were right, as is being shown by how many 4:3 tablets are being sold by Apple. Obviously people who are willing to pay for a quality product want a serious device with a serious and useful form factor.

        App installations are queued up on the iPad which ends up getting it done faster than it would if it was trying to install them all at once. And Android will never get as many quality apps as iOS because no serious developer wants to worry about 200 different screen sizes, 10 different versions, and hundreds of hardware configurations just to be on an OS that has one of the lowest purchase rates of apps. I mean seriously, how many apps did you actually pay for on your tablet? Android users are not a good market to sell to.
        zach037
      • Really?

        Installing more than one app at a time is what you come up with? Talk about a sad argument to back up your device choice. And organizing multi media, how hard is that? I select a song of movie to download and it goes right where it's supposed to go on the iPad, not sure what is so difficult about that.
        non-biased
    • Android tablets will do much better that Microsoft ones.

      Microsoft OS tablets will fail. EOS.
      The Danger is Microsoft
      • LOL right up there with all your past "expert" guesses -

        fail - oh EOS.
        TheBottomLineIsAllThatMatters
    • Care to explain?

      Please explain why you think the iPad and Surface both have a real use but Android tablets don't? I don't agree with it when Apple haters say it about the iPad and I don't agree with it when somebody says it about Android tablets.
      non-biased
      • Many of that opinion...

        believe that if it's not MS Office (usually Excel is the example provided) it's not "real work". And yes, I agree, if you're plugging away in a spreadsheet with thousands of cells and rows and full of macros or typing a 50 page document with complex formatting, a tablet is inferior to a laptop/desktop. However, while that may be typical of some professional's work, it's not typical of everyone's. Many people use the traditional office apps very minimally and spend a much greater portion of their time in e-mail, viewing dashboards, in ERPs, CRMs, reviewing docs, etc. rather than creating complex MS Office (or comparable) documents. That type of work is certainly "real" and is much more conducive to a tablet. In many cases, it's structured data (data entry in fields) or eveny queries to look up records. But trying to tell those who climb inside spreadsheets that anything else is real work is like trying to convince Oliver Stone that Oswald was the lone gunman.
        TroyMcClure