by Anthony John Agnello | March 30, 2012 1:23 pm
Come on, Google (NASDAQ:GOOG). You’re never this flustered. When the smartphone market started bumping, with Apple (NASDAQ:AAPL) making headway against Research in Motion (NASDAQ:RIMM) and Palm five years back, you didn’t panic. You made Android and got it partnered up with an army of strong (at the time) phone makers like Samsung (PINK:SSNLF) and Motorola (NYSE:MMI), staking your claim on the market.
That strategy hasn’t really worked with the tablet market, though. With the exception of Amazon’s (NASDAQ:AMZN) Kindle Fire, which controls about 14% of the tablet market, Android tabs from MMI, SSNLF, and an army of others have gotten smacked down hard by the iPad.
Still, Google, your new plan to sell your own tablets through an online store just seems desperate.
Perhaps “desperate” is too harsh. To clarify, rumors that Google has been gearing up to sell its very own Android tablet have been circulating in the press since 2010, but those rumors are increasing in clarity today. A Thursday report in the Wall Street Journal said that Google plans to sell a line of official tablets through a new online store, similar to Apple’s online storefront and Amazon’s retail empire.
These tablets will carry the Google brand, but also the brands of manufacturing partners that Google already works with, including Samsung and AsusTeK (PINK:AKCPF). These will be new devices, so rather than a Samsung Galaxy Tab with a Google sticker on it, the official Google Samsung tablet will be something new. The arrangement will be similar to the one Google has with its official Android phone, the Nexus One, which is manufactured by HTC (PINK:HTCXF).
That’s not all, though. Google will start manufacturing tablets in addition to slapping its name on machines made by others. While a number of Wall Street analysts expected that Google wouldn’t keep the gadget producing arm of Motorola Mobility after it acquired the company, these new reports claim that Google will use MMI to make itself a manufacturing player as well.
Google’s plan, then, is this: It’s going to have all its Android tablets in one little stable with its brand on top so consumers can shop with confidence, and the company will double down by making a bona fide Google Tablet alongside a bunch of other officially sanctioned ones. With all those options, consumers will follow!
Then, with more Android tablets on the market, Google will start upping its share of the growing tablet advertising market — the iPad controls 88% of tablet ad traffic — and Google will finally have the new mobile revenue stream to add to its $38 billion per year ad pull.
It simply won’t work, though. The biggest problem is that Google simply can’t match Apple’s retail footprint. Even if it does set up an online store and distribution center without a problem, it still won’t have anything close to the 361 hugely popular brick-and-mortar retail outlets that Apple has to sell iPads. There’s an entire culture of waiting in line at stores that fuels Apple’s mobile device business, and Google can’t match it.
The other problem is that even if it starts manufacturing its own goods, Google will still have to find a way to woo customers. What will the official Android tablet do that the iPad doesn’t? Will it be cheaper than the Kindle Fire? It either needs to be the sexiest machine in the world or the cheapest, because otherwise Google will have an impossibly difficult time trying to communicate to consumers why its tablets are worth buying.
The next major version of the Android operating system, called Jellybean, is expected out by the end of the second quarter. We should know more about Google’s grand master tablet plan then.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.
Source URL: http://investorplace.com/2012/03/googles-tablet-gambit-cant-work-goog-aapl-ssnlf-mmi/
Short URL: http://investorplace.com/?p=148844
Copyright ©2013 InvestorPlace Media, LLC. All rights reserved. 700 Indian Springs Drive, Lancaster, PA 17601.