Bryan Bishop, The Verge:
The Wall Street Journal reports that Google will open up its own online store, where it will market and sell tablet devices directly to consumers. In an interesting twist, it’s said that the company won’t actually manufacture any of the offered hardware itself, instead leaving that duty to partners (Samsung and Asus are both named). The tablets will reportedly feature official Google co-branding, however. Google is even said to be considering subsidizing the cost of the tablets, in order to make them price-competitive with the Amazon Kindle Fire.
I’m somewhat bemused by this. On the one hand, the “Nexus” brand tends to effectively mean “reference implementation” in the Android world, and that’s good. And a great Android tablet that was priced like a Kindle Fire would certainly make inroads against the iPad.
But subsidizing the tablets to get to that point is boggling. This isn’t like a game console, where you expect to make all your money on the ongoing purchases. Apple makes most of their money on the hardware, and Google makes nearly all of their money on advertisements. If Google spends $100 to get a Nexus tablet into your hands, they’re going to need to serve you a lot of ads to make that up.
A lot of ads.
Watts Martin has this exactly right. If Google does intend to release even a halfway decent tablet for under $200, the still-just-hinted-at implication is that they may subsidize it. A tablet sold for under $200 and not sold at a loss is going to be a piece of shit, pure and simple.
So let’s assume that Google does sell it at a loss (subsidizes it). They only way they make their money back is if people click on Google ads. More than they do now. A lot more than they do now. Or the product is going to be a black hole of money. Sort of like Microsoft’s entire online services division.