Tablet Wars: Amazon Punches Google First
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
They say that the fighter who delivers the first punch is most likely to win the fight. That may not always be the case, but it sure helps to be the first mover. In the tablet wars Amazon (NASDAQ: AMZN) is gaining some traction against Google (NASDAQ: GOOG), and the online search giant will need to do a big effort in order to regain some traction with Android in such an important business.
According to data from Comscore, Amazon is running way ahead of the competition when it comes to Android operated tablets and that´s bad news for Google. Kindles work with Google´s Android operating system, but Amazon is pushing its own Apps Store and leaving the Android Market, now called Google Play out of its tablets. Right now, Amazon owns the low price segment of the tablets business by using free software developed by Google, but the online retailer is closing the doors for the most important competitive advantage that Google has: its powerful ecosystem.
Comscore reports that Amazon´s Kindle has taken a 54.4% of the market in February, while it had a much lower 29.4% in December of last year. Samsung and Motorola lost a lot of ground. Samsung went from 23.8% in December to 14.4% in February and Motorola´s share of the Android tablets market fell from 11.8% in December to 7% in February.
Motorola (NYSE: MMI) Xoom has never gained much traction, but Samsung Galaxy used to have a respectable position in the market. The problem is that many Samsung tablets lack competitive advantage versus the successful iPad from Apple (NASDAQ: AAPL). They are not cheap enough to compete, and they certainly don´t have the same quality as the iPad, so it looks like Samsung doesn´t have much to offer in that department.
In the smartphone business Samsung has been successful at selling products like the Galaxy at below IPhone prices, being the cheaper alternative among high end smartphones and targeting customers who prefer Google´s opened Android platform versus the closed platform offered by Apple. But it hasn’t been so easy in tablets, maybe it’s because the market is still young and underdeveloped, but Samsung is lacking a competitive product in the high end tablets market almost completely dominated by Apple.
That´s probably the reason why Google is rumored to be launching more Android operated tablets this year, including a new Google tablet at the low price segment. Google is supposed to be launching its own tablets in the $200 / $150 price range, which would clearly be targeting Amazon and its low priced Kindle products.
Amazon is heavily subsidizing the price of the Kindle to gain market share, so Google won´t probably make much money from those products even if they are successful from a sales perspective. The fact that Amazon is already running strong in that segment means that Google will have a double challenge in this business.
Developing a competitive product in terms of both quality and price is no small task, and Google doesn´t have much experience at developing hardware. Google tablets will need to be particularly good and the sales, marketing, and distribution networks will be an important aspect in the competition among Amazon.
The decision from Google to enter the hardware business seems to be based on regaining market share for the company´s ecosystem via Android tablets providing access to all the other Google products, even if it´s not an attractive business from a financial point of view. The move is not so much focused on a new opportunity; it’s a defensive maneuver against Amazon.
Amazon has delivered the first punch by successfully introducing the Kindle products which don´t allow access to Google Play. Now Google needs to strike back, but it won´t be easy: the one who strikes first, strikes two times.
acardenal owns shares of Apple and Google. The Motley Fool owns shares of Apple, Amazon.com, and Google. Motley Fool newsletter services recommend Amazon.com, Apple, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
