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Google’s Coming Tablet: A Response To Kindle Fire, Not The iPad
The Kindle Fire is a deeply flawed tablet — yet it has disrupted the nascent tablet market and especially other iPad challengers. Indeed, it may have even motivated Google to develop its own branded tablet, similar to the Google-branded Nexus series of smartphones.
By pricing its heavily skinned Android device at $199 and taking a slight loss on each one sold Amazon is making a bid to dominate the Android tablet market. And the company appears to be well on its way, with millions of Kindle Fires already sold.
Millions of Kindle Fires Sold
Amazon said that it sold more than 1 million Kindles per week during December (how many of those were Kindle Fires is not precisely known). It’s probably safe to say however that the Kindle Fire is now the most successful Android tablet on the market — and perhaps more successful than all other Android tablets combined. It was reported previously that Amazon increased production orders response to growing consumer demand (with as many as 5 million units ordered for 2011).
Google is probably frustrated that no one (other than Amazon) has made a really competitive Android tablet (not even Samsung) and alarmed by the idea that Amazon could control the Android tablet market by dominating sales and, later, developer interest. Amazon’s Android Market alternative is perhaps especially threatening to Google.
Amazon The Appstore Gatekeeper
The Kindle Fire doesn’t provide direct access to the Android Market, only its own Appstore (which has fewer apps). There’s an elaborate workaround to get access to apps in the Android Market. However that involves connecting Kindle Fire to the PC and jumping through several other hoops. Having tried to set it up I can say with confidence that it’s only going to be used by a tiny determined minority.
If Kindle Fire were using the Android market it would simply be another Android device and part of the larger Android ecosystem (Amazon would be like a wireless carrier). But Amazon’s proprietary appstore means that Kindle Fire is making a bid to become an ecosystem unto itself, with Google on the outside.
“Highest Quality” Google Tablet Coming
In an interview with an Italian publication, Google’s Eric Schmidt said (as translated in VentureBeat), “In the next six months, we plan to market a tablet of the highest quality.” My view is that this is primarily a response to Amazon and the idea that Amazon might entirely co-opt and control the Android side of what will become a very strategic tablet computing segment.
As you know Kindle Fire has its own “Silk” browser and could easily sell the default search rights to Bing/Microsoft. In fact I would see that as likely. And what if Amazon were to buy a mobile ad network to compete with Google-AdMob? I see that possibility as better than 50-50. (Didn’t include that in my mobile predictions last week.)
Imagine a Q3 2012 scenario where the tablet market consisted of 55-60 million iPads, 10-15 million Kindle Fire devices and 3 or 4 million “other” tablets (some of which are non-Android). On top of that if Amazon were to continue to be the tablet-app gatekeeper it is today developers would need to work through Amazon first and then the Android Market, second, to distribute tablet apps. (Currently there are very few Android tablet-specific apps; however Ice Cream Sandwich supposedly mitigates the need to develop separately for tablets and smartpones.)
Android Irrelevant To Kindle Fire Users?
You can see why all this presents a potential dilemma or challenge for Google. In addition, the version of Android running on Kindle Fire doesn’t matter so much given how heavily branded and skinned it is. Indeed Amazon has totally marginalized Android branding on Kindle Fire; I would bet a majority of Kindle Fire owners have no idea that it’s running on the Android OS.
Let’s assume that Schmidt’s remark is a promise and Google does bring out a “highest quality” tablet (or tablets) by Q3 this year. Google will face similar price/cost issues as other OEMs (perhaps it will use Motorola to develop the device). How will it price this tablet or tablets plural?
I’ve argued elsewhere that, because of Kindle Fire, hardware makers now can’t really charge more than about $300 (or so) for an Android tablet regardless of size. Amazon is taking a loss on Kindle Fire to build market share with the justifiable expectation that it will sell movies, music, periodicals and other stuff to consumers hooked in to its content ecosystem. Google has some of that same content-sales capability but it’s not as well developed.
Pricing Will Be The Big Decision For Google
Pricing will be the strategic decision Google has to make with its branded (“Chome” or “Nexus”?) tablet. It won’t be able to stem the tide of Amazon Kindle Fire sales without matching or beating its price. If it declines to offer a 7″ tablet and only goes after the 10″ category, it could have success with a “good enough” tablet priced aggressively ($300 or below). Would Google equally be willing to break even or take a modest loss to ensure tablet sales? My guess is that it would.
Google has seemingly lost confidence in its OEM partners’ capacity to make and sell tablets and is now taking the matter into its own hands. Yet by doing so it also risks alienating those same Android smartphone partners by bringing out a lower-priced Google-branded device.
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