So the big reveal has happened, and now it’s down to the Christmas race, in which everyone is going to be talking about the different mini-tablets on offer – principally, the Amazon Kindle Fire family, Google’s Nexus 7, and Apple’s iPad mini.
Here’s an easy prediction: the iPad mini will sell far more than either of the other two. In fact it might sell more than both put together. The reason why is simple: it’s going to be sold in many more countries than either of the other two. Apple plans to sell the iPad mini starting from 2 November
Through the Apple Online Store (www.apple.com), Apple’s retail stores, and select Apple Authorized Resellers in the US, Australia, Austria, Belgium, Bulgaria, Canada, Czech Republic, Denmark, Finland, France, Germany, Hong Kong, Hungary, Iceland, Ireland, Italy, Japan, Korea, Liechtenstein, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Puerto Rico, Romania, Slovakia, Slovenia, Singapore, Spain, Sweden, Switzerland and the UK.
Count ‘em – that’s 34 countries. By contrast, the Amazon Kindle Fire range will be on sale in the US, UK, Germany, Italy, France and Spain – that’s six countries (though of course the US has at least 250 million potential buyers, and the five European countries have millions of buyers too).
Meanwhile the Google Nexus 7 – expected soon to get a 32GB storage bump, and perhaps even a 3G version – has been on sale since July in the US, UK, Australia and Canada, and since August also in France, Germany, Italy and Spain.
Possibly more countries will be announced in this Monday’s event. That’s eight countries – and while those too are very big, covering hundreds of millions of potential buyers, it’s not a patch on 34 countries. So let’s take it as read that the iPad mini is going to sell millions and millions this quarter.
The more interesting question is what happens in the countries where all three are going head to head. And although Apple is trying to do the same thing that it did with the iPod market – conquer the high end, and then move down the price and size space to sweep up what’s left – there’s a very different dynamic going on this time. Look at the specs, and a few things jump out:
• The iPad mini has a larger screen than all except the Kindle Fire HD (which arguably is going after the “standard iPad” market)
• The iPad mini weighs less than any of the others, despite that larger screen
• The iPad mini costs a lot more than the others.
How come on the last one? Because Amazon and Google are both selling their products at or below cost – in Amazon’s case because it wants to make profits back through selling media for them, and in Google’s case because it wants to kickstart the Android tablet market at what previously looked like a niche in the market (one which only Amazon had attacked previously with 2011′s release of the Kindle Fire in the US).
This means that it’s not quite like January 2004, when Apple launched the iPod mini – a physically smaller device that was its first move into the burgeoning smaller-capacity market, which it had previously left alone while it put bigger capacities into the “full-size” iPod.
At that point, even though it was (again) more expensive than some rivals – a 4GB iPod mini cost $249 (approx £155) – it was price-competitive with others, such as the Rio Nitrus, launched in the same month.
Now that has changed, because Amazon and Google are willing to eat the losses on the hardware if they can make it up on the software – or even, in Google’s case, just grab some market share while getting people to use the web.
Estimates about sales of the first generation of Kindle Fire tablets range from between 5m and 7m. Amazon will likely want to sell more than that this time around, but as Horace Dediu of Asymco points out, “Amazon will sell as many Kindles as they make, but the number they will make will not be the most they could make.”
Amazon doesn’t want to win the market share game; it wants to win the “most enthusiastic buyers of content” game. It’s in this business for entirely different reasons from Apple, and indeed Google.
The worst outcome for Amazon is to sell out its stock of tablets to people who don’t then buy ebooks, Amazon MP3s, videos and other Amazon-sold media to view on it, because they’ll effectively have burnt its money. That’s part of why Amazon has its own app store; it’s also probably why it has prioritised giving those tablets multiple user logins (eg parents and children) – because then with one tablet you can access multiple piece of content. It only has to bear the cost once.
Not persuaded? Listen to Jeff Bezos, Amazon’s chief executive, announcing the company’s latest quarterly figures: “Our approach is to work hard to charge less. Sell devices near breakeven and you can pack a lot of sophisticated hardware into a very low price point … And our approach is working – the $199 Kindle Fire HD is the No1 bestselling product across Amazon worldwide.
“Incredibly, this is true even as measured by unit sales. The next two bestselling products worldwide are our Kindle Paperwhite and our $69 Kindle. We’re selling more of each of these devices than the No4 bestselling product, book three of the Fifty Shades of Grey series.”
He doesn’t say whether that’s for sales of Fifty Shades book three in the US, or worldwide, nor whether that’s for the Kindle version, paperback version or both (maddening imprecision is one of Bezos’s hallmarks in his public statements), and as only EL James’s publisher knows quite how many of those books are selling on Amazon (though it’s probably in the tens of thousands per week) we’re still left wondering a bit. But Bezos’s aim is clear: sell at a loss, make it up on content sales.
Is it a good strategy? Consider that Amazon announced a net loss of $274m in that quarter and that it’s forecasting in next quarter to do anywhere between a net loss of $490m to a net profit of $310m. That’s the biggest variance I’ve ever seen in such a forecast; even if you allow for the $290m of stock-based compensation that it may have to pay, Amazon is saying it’s going to make anything between a $200m loss and a $310m profit. Half a billion one way or the other.
So the Kindle Fire is great news for customers, who get a cheap device, though Amazon’s shareholders might wonder a little. (Another thing to wonder about: if you buy content via a Kindle Fire, do you get subjected to Amazon’s user-variable pricing? Is it higher than a first-time visitor to Amazon?)
Meanwhile, Google wants people who will browse and watch YouTube videos a lot– because they are the ones who will see more web pages, and so be more likely to be exposed to Google adverts of all sorts.
Google doesn’t benefit greatly if people buy games apps from Google Play, because a minute spent there is a minute not spent browsing; this may be part of the reason why I’ve been hearing from Android developers that Google isn’t moving as quickly as it might to prevent piracy of apps (whereas Apple does, because every app sold or downloaded ties that user a little more tightly to its OS).
This essential difference between how Google and Amazon are approaching this market may be one reason behind the surprising finding by Chitika Insights, which said in its October tablet report that in the US the Kindle Fire had just 0.5% of the US and Canadian web browsing market.
The market is so polarised in web browsing though that all the non-iPad tablets combined had only 8% of share; the Nexus 7 came fifth, with 0.78%, but it’s a long way even from Samsung’s 1.2%.
(Mobile users: graphic here.)
That’s why the calculations suggesting that Google may have sold 1m or 2m Nexus 7s in the US sounds about right; if you multiply that around the world, and add in a bit of knowledge about what’s happened in the past, then like Sameer Singh you get an estimate of about 2.9m units shipped in the third quarter, and that for the year Google will ship 6m-8m units.
Gene Munster at Piper Jaffray puts the third-quarter figure rather lower – giving a top number of 1m – and until Google comes out and says it, we’re not going to know for sure. (Unless someone starts getting clever with serial numbers.)
So Google’s strategy isn’t like Amazon’s; it doesn’t really want to sell content to make up the difference. It wants to monetise your viewing of the web. Depending how much you think it loses per hardware purchase, that could easily happen in just a couple of months – if, as has been estimated, your data is worth $700 per year to Google. (For most people it’s likely to be considerably lower, or Google would be pricing the Nexus 7 much, much lower.)
And Apple’s strategy? Its aim is to make profits on its hardware. That’s how it rolls – it produces a device and sells it at a profit. A bit revolutionary, but there you go.
But how are people going to buy when they get the chance to see these devices? I haven’t been able to put them all side by side, but quite possibly many buyers won’t either.
Just going by reputation, you could guess that Apple will do well when people get their hands on the iPad mini; from my brief moments using it in San Jose after Apple’s announcement, it’s extremely light, and yet the screen is big. Plus all the existing iPad apps – already a provably strong ecosystem – work straight away.
By contrast, the Nexus 7 is heavier, and the screen is smaller. Amazon, meanwhile, has its website – one of the best shop windows online – which it’s already using to push the Kindle Fire for all it’s worth.
If I had to guess who’ll do well, I’d say that Amazon and Apple are going to shift plenty of tablets. Google’s likely to bring up the rear. And then the real question is what happened to everyone else who’s making 7in tablets. Yes, I could be looking at RIM and its PlayBook. But having lost around a billion dollars on that ill-fated expedition in order to ship 1.74m devices in six quarters, I don’t think we need to wonder how long the PlayBook has in this world.
guardian.co.uk © Guardian News & Media Limited 2010
Seit 1996 bin ich freier Mitarbeiter der Salzgitter-Zeitung, als Experte für das Geschehen im hiesigen Kreisfußball. Daneben sind meine Kolumnen seit 2005 fester Bestandteil im Lokalteil der Salzgitter-Zeitung. Zusammen mit Frau und Tochter sowie zwei gefräßigen wie faulen Stubentigern versuche ich das zu meistern, was das Leben, das Universum und der ganze Rest an Absurditäten für uns bereithalten.