Books written by Ray Sullivan

Thursday, 25 October 2012

Apple Targets Google

I don't know if you've noticed, but there's a three horse race going on right now.  In the lead, by a country mile, is Apple who have just this week notched up their 100,000,000th iPad sale.  100 million iPads! Just in case you were wondering why Apple is the richest company in the world right now.

Second place is being hacked out by Google and Amazon with their Nexus 7 and Kindle Fire offerings.  Amazon are on their second generation of the Fire and about to launch in the UK for £169 for the HD version or £129 for the lower spec offering.  The Nexus 7 kicks in at a notional £159 for the 8GB version, rising to £199 for the 16GB model.  I say notional because it appears the 8 gig version is now unavailable and the word on the street is that Google are muscling up to launch a 32 GB version, announcement in the next seven days.  My guess is that they will drop the price of the 16Gb to the price of the HD Fire or perhaps a tenner above.

So it would seem that Apple have two horses to outrun on the trot up to Christmas.  Well, obviously yes but in an incredible act of self denial, no.  First off, Apple have another competitor.  You may have noticed they have launched their own mini tablet, the iPad Mini.  Come on, you know I've mentioned it once or twice recently, as have one or two other bloggers.  Well, they've pitched the iPad mini at £269 for the 16GB version which is probably at least £20 more than it needs to be.  Apple estimate that they will sell five million iPad minis between launch and Christmas day but that the product will take 1 million full sized iPad sales away from them.  So there's one competitor not factored in above.

So why £269 for the iPad mini?  Well, given that the device is pretty much a shrunk version of the iPad 2, which costs £329, it is getting dangerously close to the price point where consumers will either choose to pay the difference for the full sized version or will choose to buy an alternative and cheaper product.  As I said above, it probably should have been pitched at £149, which is virtually the US price with VAT stuck on.  Apple want to differentiate their product from the others and have chosen to decide that the Nexus is their biggest threat.  So much so that they made overt negative references to the Google tablet in the iPad mini launch and,as far as I'm aware, didn't mention the Amazon Fire.

Is it just that the Fire doesn't present the same amount of commercial threat to Apple that Google do with the Nexus 7?  Maybe, but I think the price point is more critical - by being reassuringly more expensive, but hopefully (from their perspective) not excessively so, than the Nexus they are saying - hey, we're better than that device and only £60 more.  To identify against the Amazon Fire is to say, Hey, we're better than that device and only £100 more.  Which might seem reasonable but I'm not aware that the Nexus has made any major inroads into Apple's sales so far, however it was clear last Christmas that the Amazon Fire, launched in the November, did punch a hole in the Apple numbers in the US.

Hence Apple is targeting Google, because that makes their product seem less unreasonable.  However, if the 32 GB version of the Nexus is released and that pushes the 16GB price down a tad it will surely put the iPad under a lot of pressure.  Perhaps they've factored that in and are prepared to drop the price once the initial surge has taken place.

So where does this leave the consumer and for the betting fraternity, is the race already decided?  Well I think Apple will maintain their lead initially but may lose some ground if they keep the price so high.  I wouldn't disregard the Amazon Fire, either, even if Apple have.  They are promoting the Fire heavily on TV right now and offering a real good price for the device.  I'm not a fan of the concept of push advertising that comes with the Fire to keep the price down but understand a one-off fee of £10 removes that.  Don't know if that can be paid retrospectively or not, though.  The Nexus is a fine machine and one I'm enjoying on a daily basis, so deserves to be in the race.  If the 16GB drops in price then the pressure is really going to be on Apple and Amazon to compete, so perhaps Apple are right to target it.


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