To understand which firms are going to end up dominating the market for tablets and mobile phones, it helps to notice that we now live in an era in which every successful company selling hardware and content is giving something away for free. And the companies that can't afford to give something away for free are now competing with commodity manufacturers that could drive them into bankruptcy. Subsidy - either of hardware by content, or content by hardware - is the common thread running through Apple's iPad mini (due to be announced Tuesday), Microsoft's move into hardware with its Surface tablet (due later this week), Nokia's slow demise, Amazon's ascent, and the modest success of every regional Android handset manufacturer on the planet. It's notable that the successful firms have opted for either one model or the other: none makes significant money from both content and hardware. Here are the implications for the biggest players:
Google Google practically gives away its hardware, in order to get users onto a mobile experience that it can control, and where it can sell advertising and continue to dominate search. Google is selling its current Nexus 7 tablet at cost, and is absorbing the associated marketing expenses. For something that costs only $200, it's a fancy device, so it's no surprise that the company may have sold a million of them since they became available three months ago. Google also levies no licensing fees associated with its open-source Android mobile operating
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system. So how does Google make money? 96 larger than other 7-inch tablets like those from Google, Samsung and Amazon, it remains different enough from its competitors to justify Apple's usual premium. Rumor has it that the device will be priced between $299 and $349, or at least $100 more expensive than competing tablets of similar size. Apple can continue to command these prices because of its wealth of apps and content, and not only because of its hardware. Google, meanwhile, will probably soon release both a larger, 10-inch tablet to compete with the original iPad, as well as a remarkably inexpensive, $99 version of its 7-inch tablet. By selling its hardware at cost, Google will continue to drive all but no-name, commodity competitors out of the marketplace for low-end devices. All this means that any firm that now wants to start building mobile devices, and especially tablets, faces an extremely high barrier to entry. It must choose between trying to create a content ecosystem comparable to those belonging to Google, Amazon and Apple - which are already deeply entrenched - or stay small and regional, and accept cutthroat competition and slim margins. How Cadbury lost the right to sell its own chocolate in the US Flu deaths and spousal abuse spike during big sports events like the Super Bowl Jay Z wants to sell you high-quality music subscriptions How to watch the Super Bowl online, for free This article originally published at Quartz here Read more: http://mashable.com/2012/10/22/apple-google-are-profitable-since-they-knowwhere-to-lose-money/ Apple, Google Are Profitable Since They Know Where to Lose Money
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