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Amazon & Google pricing models = dangerous territory for manufacturers
- Thread starter MRU
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There is this misconception that you cannot buy an iPhone for less than $699, and iPad's are marked much higher than the unreleased Nexus 10...
The general public subsidizes their iPhone with their choice of carrier starting at $199. The Nexus 10 is a mere $100 more expensive than the newest iPad. And when you consider where iOS is content wise for iPad versus Android for tablets, it is a fair $100 investment.
Sure, the Nexus 4 is a great off contract/unlocked value. But it comes with compromises. Specifically with carriers, it is only on GSM networks. There is no LTE. It is $399 (I quote this price b/c iPhone and GS3 start at 16 gb) if you want it on AT&T at the moment and $199 on T-Mo.
The point of the article is missed. Google and Amazon are in the software business. For Google it doesn't matter how many Nexus devices are sold as long as people are buying Android. For Amazon, as it was stated before they make their money off of their online content.
Apple is in the hardware business, and they have a monopoly on devices that run iOS. Money is everything, and Apple being the most profitable company is not going to give free handouts.
But what about those of us that end up paying for things we don't use? I get far more talk time than I'd ever need (but it's offset with the unlimited data plan that I do use extensively - we're talking around 60 to 100Gb a month tethering).
Look at the value of these setups for my circumstances:
iPhone 5 16GB with unlimited data on Three (subsidiesed and SIM locked to the carrier).
£79 upfront cost for the handset.
£36 per month for 24 months.
Total cost of ownership: £943
This includes 2000 cross network minutes and 5000 three to three minutes - far more than I need.
iPhone 5 purchased from Apple with a sim only plan and unlimited data.
£529 upfront cost for the handset.
£15.90 per month on a 1 month rolling contract (cancel any time within a 1 month period.
Total cost of ownership over a 24 month period: £910.60
Nexus 4 16GB purchased from Google with a sim only plan and unlimited data.
£279 upfront cost for the handset.
£15.90 per month on a 1 month rolling contract (cancel any time within a 1 month period.
Total cost of ownership over a 24 month period: £660.60 (Reduced to £620.60 with the 8GB model).
The greatest things about the last two options is the fact you aren't locked in to a set timeframe, nor is your handset locked to a single carrier so if a better price plan comes along, you are only a phonecall away from cancelling your current plan and moving to a cheaper one.
As a consumer, I know which way I'll prefer to do things.
There are profit models in every business, and the Amazon model has yet to be proven. If the additional content is really worth Amazon selling their hardware for no profit, we should see a steady rise in Amazon profits and stock price.
The fact they had to start selling advertising on the Fire leads me to believe it was not as profitable a model as they had hoped.
Google knows how to make money selling ads, and they have extended that model to their Android store pretty successfully so far.
Apple makes money of the hardware with good margins, makes money in the App Store, iTunes selling books and music, textbook sales, and advertising.
Seems like a pretty good, working strategy to me. Their hardware sales don't seem to be suffering.
The fact they had to start selling advertising on the Fire leads me to believe it was not as profitable a model as they had hoped.
Google knows how to make money selling ads, and they have extended that model to their Android store pretty successfully so far.
Apple makes money of the hardware with good margins, makes money in the App Store, iTunes selling books and music, textbook sales, and advertising.
Seems like a pretty good, working strategy to me. Their hardware sales don't seem to be suffering.
Did i mention ANYTHING about Apple ?
You seemed to have missed the entire point of the article, and seemed to have turned it into something to do with Apple which it clearly wasn't, and why are you arguing with me for I didn't write the article...
And drop the potty mouth "BS argument is BS' nonsense.
Did i mention ANYTHING about Apple ?
You seemed to have missed the entire point of the article, and seemed to have turned it into something to do with Apple which it clearly wasn't, and why are you arguing with me for I didn't write the article...
And drop the potty mouth "BS argument is BS' nonsense.
Neither you (nor the article) have to mention them by name. Samsung has a $250 tablet, as do Amazon and Barnes&Noble..... so their degree of hurt is limited. That basically leaves Apple, Motorola and Lenovo. The latter two have barely sold tablets.
I agree with you on those points. When you have a situation that fits your needs that is definitely a competitive advantage. And I guess I don't know too much about the mobile carriers outside the US, so I apologize for generalizing our situation in the US.
But in the US the situation is quite different. With pay as you go plans (T-Mobile) the situation comes at a great compromise in the form of talk, text, and coverage. Sure their plans may fit some people, but the general public still wants those advantages covered by other carriers.
And while price is definitely one consideration, it's not the only. In many cases it is worth the 2 year investment for better coverage, 4G, more minutes and text, etc. With some of the drawbacks being the price, lack of early termination, etc. But definitely if you have found something that works for you, that is great.
I agree w/ the OP. Sure the Nexus device and Kindle sales might eat in to Apple's profits. But it is the other Android device makers that really feel the brunt of this move.
Like I said before, Apple has a monopoly on iOS devices. The 'degree of hurt' is felt when two hardware companies release their device that do identical things, running identical software. Google has a different agenda, and that does affect its hardware partners. Apple profitw off of running iOS and marketing iOS as an attractive alternative.
I'm just as guilty of generalizing the situation in Europe to be honest.
Thanks for the reply.I really doubt even at the low entry cost that the Nexus 4 will impact on contract prices here in the UK at least as lots of people will see the free phone (initially) and just pay into a contract month after month.
HTC seems to be offering competitive smartphones over here too with the likes of the HTC 8x only going for around £225. Yes it's midrange but it does look great for the money! http://www.mobilefun.co.uk/sim-free-htc-8s-black-white-p36368.htm
There does seem to be a price war brewing which may do more harm than good, we'll have to wait and see how it all pans out.
It doesn't disclose information explicitly. However, but directing users to personalized ads, advertisers can use information about which ads a given user was directed to as a basis for making inferences about the characteristics of the user. It is a little naive to think otherwise.
In a very narrow sense you are correct. Google gets paid for allowing advertisers to exploit Google's knowledge about you to personalize ads. IMO this is functionally the same thing as selling the information outright, and until somebody can convince me that Google's true customers cannot make inferences about the user based on which personalized ad was shown, I have very little confidence in Google's reassurances about privacy.
As noted above you are correct in a very strict sense. Thus, the second option I listed in my post applies to you: your definition of selling is so narrow as to constitute splitting of hairs. I used to work in telemarketing. Sad, but true.
I would sell leads to the proper sales people based on how close they matched their criterion for a good prospect. So, I didn't 'sell' personal information about potential customers per se, by the sales people could pretty much infer who they were targeting. The same applies to Google - they sell leads. However, as I said above, don't be naive. It is in the interest of Google's advertiser customers to extract as much information about you as they can. Google's online policy about privacy (which I have read) is not very reassuring about this: Nothing in their policy states that personalized ads cannot be used by advertisers to infer various characteristics about you.Having said that, I recognize that the type of information that Google allows their advertiser customers to exploit or infer is limited (gender, age, interests, previous search queries etc.). Many people have no problem about that, for they're going to get bombarded with advertising no matter what information is collected about them. In my view however, Google's business model seems very strange. I prefer working with companies that view me as a customer rather than a product or lead to be auctioned to the highest bidder, even if I have to pay a little bit more.
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You're still confused, advertisers doesn't exploit nothing, it is Google who targets ads with advertisers requests
Sigh. So what do you think Google's true customers - advertisers - are paying billions for?
Sigh, they pay for target advertisement, they don't know who Google shows the ads nor they know nothing about the target people.
The same thing that advertisers in magazines, on the radio and the TV pay for. My eyes and attention?
Football game on TV? Beer, cars or cologne.
Gaming magazine? Latest hardware and games with some tech on the side.
Pop hour on the radio? Justin Bieber and Lady GaGa's latest albums.
Browsing a holiday review site? Here are some ads for flights, weekend breaks and places to go.
Playing a racing game on your iPhone? Here are some iAds associated with the car brand.
Targeted advertising happens across all media spectrums.
I believe it was the hugely popular fire sale HP TouchPad that sold at $99 that got everyone to realize that the only way to get a non iPad tablet to sell was to undercut Apple on price. Even if none of these tablets are as good as the iPad they will come close, and ultimately beat Apple in price. Because think about it, every other tablet that wasn't iPad crashed, and burned outside of the Touch Pad. No one bought the Touch Pad because it was good, people bought it because it was cheap, and it offered similar functionality as the iPad. Remember, no one wanted a Touch Pad at the regular $699 price.
Uh, you're comparing a product that has sold less than 1 million (mostly due to the drastic drop in price) to another product that has sold over 84 million...
Look, there is always a market for free or nearly free. The TouchPad failed b/c HP lost money selling it... that's surely a nice business model to beat Apple... And HP only dropped the price on the TouchPad b/c retailers refused to buy anymore and HP needed to sell off their stock pile of TouchPads.
Granted no one was buying the TouchPad at full retail, HP only gave it 6 weeks on the market before they decided to shelve it, and sell it at a loss. How much of it is the lack of consumer demand vs. the change in CEO with a focus on the cloud, and services vs. hardware is a different one. The point I am trying to make is that no one was buying all of the other Android tablets out there at full retail. I believe it took the TouchPad firesale and the frenzy HP drummed up for Amazon, and Google to realize that if they were going to move any tablets, they were going to have to price them REALLY cheap! Heck look at all of the other full sized Android tablets that are out on the market today. I think it's quite fair to say that no one is really buying those either.
So the question I'll ask is this: Do you believe people are buying the Nexus 7, and Kindle Fire because of their low price point, or because of their feature set? No one should be faulting Apple because they don't want to give their iPads away at cost. If it weren't for the iPad in the first place, these other tablets wouldn't even exist.
I totally agree with this and it was discuss amongst the press that in order for any tablet other than an iPad to succeed it would have to be priced much lower than the iPad. In fact the HP TouchPad was used as an example.
The difference for Amazon and Google is they can make up for it buy selling content. That's the luxury both companies have.
I agree w/ you about what you say about the Touchpad. And yes, it is the price point which consumers like most in the Nexus 7 and Kindle Fire, no doubt about it.
I forget what I was trying to argue earlier, but despite the price tag on iPad, it will always have a strong market until something better (in both hardware and software) comes along. Where Google and Amazon's pricing hurts is in Google's hardware partners. There is no way any of those companies can be profitable at a break even price.
I wonder what Android tablet makers plan on doing to compete with the Nexus 10 to be honest. One can argue no LTE, no CDMA as disadvantages to a Nexus 4. But in the tablet market, the other Android counterparts to Nexus 10 are going to have to be better spec and priced between a Nexus 7 and Nexus 10 to be competitive.
Of course they do this, but i felt you were implying that Google hands over our personal data, and this is not true.
They aren't selling information, they are selling advertising and any data the advertiser receives about respondents to those ads is anonymous, aggregated and not of a personal or identifying nature.
Umm, no, they sell advertising. In particular they sell advertising that is targeted....that is all. At no point does Google imply I might purchase something based on the advertising so it's not a lead.
It's like saying TV stations are selling leads to advertisers because I have a TV, The only difference is that Googles Ads are more targeted and as mentioned before, Google can provide feedback regarding click throughs.
The advertisers don't need to "infer" who they were targeting, they know who they were targeting because they told Google who they wanted to target,
Don't be so paranoid.
Explain to me how you think the advertisers do this?
It seems to me your trying to merge two completely different issues:
1. What data does Google disclose to advertisers about me, and;
2. How does Google target advertising at me.
They are mutually exclusive because the advertisers aren't aware of why I was targeted or who I am.
Think of it like this, the advertiser tells Google which demographic they want to target and then Google provides them information on the demographic that actually responded. It's a feedback loop to more finely target the advertising and it's nowhere near as sinister or invasive as you were previously trying to imply.
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It's fantastic for consumers and given that I am in fact a consumer and not an investor, I couldn't agree more.
That's exactly it, well put. Google never hands over your personal data to anyone.
They sell exposure to your screen, via intelligent targetting using your personal data.
Which for all intents and purposes, is close enough.
Make no mistake, google is a business, and your attention is the product.
The data is not that personal. Ever go look at your Google advertising profile? (Which you can change, btw.)
It's made up of your probable age, sex, interests based on latest searches, etc. Pretty vague really, and as reporters have noted, sometimes it even guesses wrong about your age or sex. (It had me pegged as being 15 years younger, for example. I appreciated that! However, I deleted its mistaken idea that I was still looking for new car. I had gotten one and didn't want any more ads like that.)
Apple does the exact same thing with iAds, btw, except they probably have far more personal data at their disposal due to the requirement to have an iTunes account. Credit data, address, music / media / app sales history, even device purchases because of the need to activate through Apple.
It's amazing how many people worry about Google's ads, yet not give a single thought to Apple's iAds.
Neither company sells that personal info, though. They keep it quite secret and anonymous. Instead, they sell anonymous targeted ad views.
For example, a company might contract with Apple for ads targeted at 20-30 year olds with good income and who like football apps. Whenever someone like that uses an iOS app with an iAd in it, Apple sends down one of the ads that they've been given for that target audience. The advertiser only knows this has happened because of either a) Apple charging them for the view or b) you actually clicking on the ad.
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I'm not so worried about the targeted advertising.
What concerns me more is the search bubble. If i search for something I want all viewpoints, not just stuff relevant to what google thinks I am.
What concerns me more is the search bubble. If i search for something I want all viewpoints, not just stuff relevant to what google thinks I am.