Ina Fried for a site with a URL has this quote from Google’s Andy Rubin on the Nexus 7 tablet:
“When it gets sold through the Play store, there’s no margin,” Rubin said. “It just basically gets (sold) through.”
In other words: Google isn’t making a profit off the Nexus 7. I absolutely do not understand how shareholders continue to be OK with this mentality. Google now has several high-cost, low-reward, programs running that they are pissing away money on — let’s recap the ones I can think of:
- Google Glass
- Nexus 7
- Self-driving cars
- Space Elevator
Most of these projects can be found on this Wikipedia page. Perhaps I’ll look like a fool in ten years and Google will be rolling in cash from all these ventures, but more likely investors will be sitting back and wondering what the hell went wrong.
The idea of selling the Nexus 7 to users at cost is just a bad idea. Google didn’t need to sell a tablet for $200. Google doesn’t need to compete with the Kindle Fire, because the Kindle Fire doesn’t seem to be doing, well, stellar at all.
Apple makes a pile of cash everyday by selling a tablet at $4991 , which is exactly why Google should be trying to make a profit. If they break even at $200, why not sell it for $250 — that’s still half the price of the most successful tablet in the market.
In the end, I know why Google is selling at break even, because Google truly believes this:
The amount of tablet-specific apps have also been an issue, but Rubin said Google is sticking with its strategy of encouraging developers to write a single app for both phones and tablets, while taking some care to make sure the layout and button size are optimized for larger-screen devices.
Translation: we don’t give a crap about how much users like using the product, just that they use it.
Make no mistake, when this is the mentality you approach things with, then you very much need to sell your product at break even — or it won’t sell.
They were making money long before the $399 version. ↩