Google Will Probably Lose Money on Nexus 7 Sales…and Why That Doesn’t Matter (GOOG)July 9, 2012 3:32 pm ·
It may seem like a big deal at first, but it shouldn’t come as too big of a surprise that Google won’t be making a whole lot of money on the sale of its 8GB Nexus 7 tablet. In fact, a new report from BGR reveals that the Web giant may actually lose money each time it sells one of the new tablets.
“Fudzilla did some calculations based on the TechInsights teardown and found that every 8GB Nexus 7 tablet has $184 worth of parts, or just $15 less than the Nexus 7’s sale price,” BGR notes. This, of course, doesn’t take into account other costs that companies typically consider in product pricing—including marketing, R&D, and other logistical costs—the report also mentions.
While BGR and Fudzilla suggest that such losses could ultimately be offset by the “handsome profit” Google stands to generate with sales of the 16GB model of the tablet, it is likely that Google’s game plan is a bit more involved than that. As I discussed in my initial take on the Nexus 7 at its debut, the purpose of the new Google tablet is not to be an end in and of itself, but rather a portal to its ad-supported ecosystem.
And what better way to do that than with a cheap tablet that undercuts more expensive models like that Galaxy Tab and the iPad, even if that means selling it at a loss? Given Amazon’s success in doing the same with the Kindle Fire (and at an even bigger loss), it only seems appropriate for Google to follow suit with the Nexus 7.
With more features and products available (most of them free of cost) than that of Amazon, not to mention the ubiquity of the Google brand, selling the 8GB Nexus 7 at a loss to get users indoctrinated into Google’s mobile network seems like a no-brainer—with or without the “handsome profit” of a 16GB version.