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Cost Analysis of Nexus 7 – Is Google Earning Enough Profit From The Nexus 7?

The first tablet ever branded with Google was sure to stir things up in the market. This rouse was not just for the consumers, but for the analysts as well. However, the cost of this tablet was the main thing that really made this tablet, the Nexus 7 headline news, with a price of just $199. The question that arises in the mind of analysts and people is that, is Google going to make enough profit from this venture of theirs or not? Or whether the internet giant is hoping to gain future customers rather than making money right now?

However, the hardware specialists of the Research firm UBM TechInsights come in here and did a preliminary cost estimate of the Nexus 7 to be $184 per device. This analysis was done by analyzing the components and the assembly of the Nexus 7. For a tablet that costs $199, the Nexus 7 is just making $15 for Google per device. As compared to the identically priced Kindle Fire, which costs $153, making a hefty $46 per head for Amazon.

Now, the question is, Why is Google willing to take this risk? There are two main possibilities here. The first possibility is that, Google is trying to snatch away the customers who are buying Barnes & Nobel’s Nook Tablet and Kindle Fires. The second possibility is that, Google is trying to lure enough share of the tablet market in order to construct revenue streams based on the use of the tablet.

Google is paying more for the hardware that goes into the Nexus 7, which can be taken as an approach towards better customer experience and satisfaction. The hardware used in the Nexus 7 is far advanced as compared to its competitors like Kindle Fire and Nook tablet. However, this is Google we are talking about who is doing all this, so we may be betting on the winning horse at the moment.

Let’s do a price comparison of the components that went into the Nexus 7 and its competitor the Kindle Fire. Nexus 7 has a higher resolution as compared to the Kindle Fire, standing at 1280 x 800, whereas the Fire has a resolution of 1024 x 600. According to UBM, this cost Google $49, whereas the Kindle Fire display cost only $35. The Nexus 7 also features a 1.2 MP camera for video chat on Skype or Google+. Kindle Fire does not have a camera, so this cost is saved for them. Although, the camera in Nexus 7 is not too great for taking pictures, but it is a huge step since its competitors does not have a camera to begin with. Google’s tablet also includes most near-field communications such as Bluetooth and GPS.

Processing speed is one essential thing to consider when choosing a tablet and Google is not left behind in this field with their Nexus 7, which features an Nvidia Tegra 3 quad-core processor with an additional fifth for housekeeping chores of the tablet. This cost $25 to Google, whereas the dual core of Kindle Fire cost only $18, according to UBM.

Both of these tablets will generate revenue from services and content as well, which can either be in the form of downloadable content or through advertising. In comparison, the Nexus 7 by Google is by far the best choice.