It seems that Google seriously underestimated demand for its 16GB Android "Jelly Bean"-powered Nexus 7 tablet. Demand has been so great that it has had to temporarily pull it from the Google Play store in both the U.S. and the U.K. as the company struggles to keep up with demand.
According to The Guardian, Google had believed that the cheaper 8GB model which sold for $199 would be the the most popular version because the free cloud storage offered with the device would more than make up for the lack of on-board storage.
However, it seems that consumers have been more than willing to pony up the extra $50 for $7.50 worth of extra storage so as not to have to rely on cloud storage.
While the actual storage chips are cheap, consumers have proven with the 16GB Nexus 7 that they are willing to pay a premium for more on-board storage. And why not? It's a trick that's worked for Apple.
Apple uses the exact same strategy with the iPad, which comes in 16GB, 32GB and 64GB models, each with a $100 price jump between the models. However, it costs Apple less than $20 to bump the storage from 16GB to 32GB and about $35 to bump it from 32GB to 64GB.
Just as Apple has done with the iPad, Google has adopted the strategy of charging a premium for higher storage capacities, and has even gone as far as to force people’s hands by not offering a cheap storage expansion option via microSD card, as is the case with most other Android devices.
If Google can already get away with charging $50 to bump the 8GB Nexus 7 up to 16GB -- additional storage which only costs Google $7.50 -- then consumers would be more than willing to pay an additional $50 to bump the storage up from 16GB to 32GB. This extra 16GB or storage is going to cost Google less than $20, which means is pockets an extra $30 profit.
People want more local storage, and they're willing to pay for it. Google now knows this and is in a position to take advantage.
A 32GB Nexus 7 is the next logical step.