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The Start of the 7-Inch Tablet Showdown

Google gets rolling by promoting the Nexus-7 on its homepage

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Any doubt surrounding Google‘s (NASDAQ:GOOG) seriousness about the tablet business have surely been put to rest with the appearance of the Nexus 7 on Google’s otherwise pristine homepage.

Tablets are officially big business, and Google is determined to carve a chunk of that business out for itself — even if it takes extreme measures to preemptively protect that turf from the threat of Apple’s (NSADAQ:AAPL) expected foray into the 7-inch tablet market with the iPad Mini and Amazon‘s (NASDAQ:AMZN) Kindle Fire.

While Apple is expected to stick with a premium-price model (Tech-Thoughts did a breakdown and estimated that a $299 price point would net a tidy profit), Google sells the Nexus-7 at a loss, starting at $199. The result has been an early sellout of the $249 16GB model and numbers that have greatly exceeded Google’s expectations. Where it was hoping to move 3 million tablets by the end of 2012, analysts are now predicting between 6 million and 8 million.

While Apple is expected to continue selling tablets for profit — earning $9.2 billion in revenue from iPad sales last quarter alone — Google and Amazon are playing a different game. They want tablets in consumers’ hands so people will use them to buy their online goods.

So far, Android (which Google gives away for free as an open-source platform) was supposed to drive users to Google’s online store, but the best-selling Kindle Fire runs a customized version of Android that steers users to Amazon instead. The Nexus 7 is Google’s attempt to capture users before they lock in with Amazon.

And between the Nexus 7  — which is riding strong demand and positive reviews — and the coming iPad Mini and the expected replacement for the Kindle Fire, this holiday season is going to be an all-out war for consumers’ wallets, budget-tablet market share and flogging online content — apps, e-books, movies and music.

Forrester Research pegs the number of tablets in global use for 2012 at 191 million, but predicts huge growth to 760 million by just 2016. Google’s move to tout the Nexus 7 on its home page (which is off-limits to other advertisers) was a big opening salvo. Gizmodo points out that a large percentage of the 190 million unique visitors to Google sites in July landed on that home page, making those eyeballs worth millions of dollars in free advertising.

There are also other contenders in the 7-inch tablet market.  Research in Motion (NSADAQ:RIMM) and Barnes & Noble (NYSE:BKS) all come to mind, but of these, the only one that’s really made any headway is B&N with its Nook tablets — and those are getting a bit long in the tooth.

The 10-inch market will also be hot, but it’s pretty much wrapped up already by Apple’s iPad. It’s expected that Amazon will release a 10-inch Kindle tablet and Microsoft may well have its Surface tablets on the market, but with all due respect to the late Steve Jobs, I expect that smaller tablets is where the action is going to be for the near future.

Why? Here are four reasons:

Article printed from InvestorPlace Media,

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