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Here’s the secret to Amazon’s, B&N’s tablet strategy

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Barnes & Noble (s bks) is holding a press event on Nov. 7, where it’s expected to launch a successor to its popular Nook Color. Details and specifications of the new Nook Tablet have already leaked to the web: The 7-inch slate gains performance, loses weight, and holds the same $249 price point as the prior model. It’s too bad other tablet-makers aren’t taking a cue from Barnes & Noble as well as from Amazon and its Kindle Fire tablet: Simplicity and reasonable prices, not specs, will win the tablet wars.

Sometimes, less is more

Both Amazon’s(s amzn) and Barnes & Noble’s tablets share this idea of simplicity and relatively low cost, with each priced far below the typical $499 entry point for a larger tablet. But neither is meant to handle some of the heavier computer-like tasks of their bigger brethren. While some people have used an iPad (s aapl) or Android (s goog) tablet to replace some — or in a few extreme cases, all — of the functions of a laptop, neither the Fire nor the Nook are computer replacements.

And that allows both companies to focus on providing a great experience for the functions that consumers most want: reading digital media, browsing the web, consuming video content, checking email and running a handful of popular applications found in curated application stores. Think of the controlled Apple iPad experience in a cheaper, smaller form factor.

I say “controlled” because although both the Fire and Nook are built on Google’s Android platform, each has a custom interface that completely hides any of Android’s warts. Both also have their own third-party app stores filled with compatible Android apps, but those apps are chosen by Amazon and Barnes & Noble; the approach eliminates tens of thousands of marginal software titles. Also eliminated is a lengthy carrier contract. Since both devices are Wi-Fi only and have no mobile-broadband radio, there’s no contract, nor a monthly fee for 3G or 4G service.

Other times, more is too much

Contrast the approach of these two tablets with the array of iPad-competitors from Samsung, Motorola (s mmi), HTC and others. Most of these cost far more. Yes, many Android tablets are similar in size to the iPad, if not larger, but Samsung and HTC both offer a 7-inch slate as well. I bought a 7-inch Galaxy Tab last December for $300 — $100 more than the Fire and $50 more than the new Nook — but it came with a contract for the 3G radio, which costs me an additional $40 per month. I gain more mobility since the device has connectivity anywhere, but it’s not always $40 worth of additional mobility on a monthly basis.

The real problem is that traditional computing companies making tablets have used a computing-centric approach to their tablets. The devices are often marketed more though the specifications and not on the experience the devices can provide. Throwing more hardware inside the tablet doesn’t guarantee a best seller. Instead, a focused ecosystem with digital content, paired with inexpensive but capable hardware is a likely better recipe for success. Both newcomers to the tablet market have content; the computer-makers don’t.

Even from a strict hardware perspective, Barnes & Noble has out-maneuvered the traditional computer makers when it comes to tablets. If the leaked Nook Tablet specs are accurate, the $249 device has a dual-core processor, 16 GB of memory with an SD card expansion port, a 7-inch display with 1024 x 600 resolution and an expected battery life of 8 hours. Compared to Samsung’s new Galaxy Tab 7.0 Plus, now available on Amazon for $399, it’s nearly a mirror image of specifications, yet costs $150 less.

Another lesson learned for the traditional hardware makers: You can sell your hardware at cost, or a loss, if you can sell content to make up the difference.

One tablet market is suddenly two

Barnes & Noble essentially created the beginnings of a second tablet market by releasing the original Nook Color last year. This holiday season, the market expands with a $199 Kindle Fire and a new $249 Nook Tablet. And the original, and still capable Nook Color from last year is expected to see a price drop to $199. At this price range, these smaller slates get closer to becoming an impulse purchase and are surely good candidates for top sellers as holiday gifts. The same can’t be said of larger tablets that cost twice as much or more.

Surprisingly, it took two booksellers / digital content companies to figure out there’s a market for smaller, less expensive tablets that focus on key consumer activities. The Fire and Nook may not be computer replacements, but for most people, neither is the iPad, yet it’s easily outselling comparable Android tablets by a large margin according to the limited data available.

It’s almost a shame that the computer makers didn’t see what we saw more than a year ago: Building a solid, but inexpensive tablet that does a few desirable things very well may be the better strategy for selling a tablet that isn’t called the iPad.

21 Responses to “Here’s the secret to Amazon’s, B&N’s tablet strategy”

  1. Kevin, you said “The devices are often marketed more though the specifications and not on the experience the devices can provide.” That’s a spot-on assessment.

    FYI, I have experienced this phenomenon first hand. I recently proposed an “application scenario” product review to a couple of the major Android Table and Chromebook manufacturer’s PR teams.

    No takers, so far. They all seem puzzled by this approach — why would someone describing their personal applications and usage experiences be of interest to potential device buyers?

    Most of the PR folks believe that once CNET and others have done the typical specs and feature/function evaluations, then their publicity task is complete. Mission accomplished, move on to the next product launch requested by the marketing team.

    I’m guessing that these same PR people also discount the benefit of mainstream consumer feedback, or informal comments on social networks, etc. — they’re victims of their own “old school” mass-media mindset.

  2. Tom Burke

    You’re paying $40/month ON CONTRACT for the Galaxy Tab data when you could have had an AT&T iPad data plan for $15/month with NO CONTRACT? You must really hate Apple to be willing to throw away that much money to avoid their products.

    • I don’t hate any company and I do have an iPad. ;) The 7″ form factor was appealing to me – still is – and there was no WiFi version of the Galaxy Tab at the time. Also, the $40 per month is 5 GB of data with included tethering. Your $15 example is 200 MB and no tethering. And the lowest price iPad with 3G is $629, or more than double what I paid for the smaller tablet. You can’t just look at the monthly cost / contract data. Thx!

  3. Even though the Nook Tablet has a spec advantage over the Kindle Fire, Amazon has such as advantage because it sells all media directly to the customer. Barnes & Noble has to rely on content partners. A simple and unified purchasing experience is much better than a fragmented one. I see the Fire slaughtering the Nook Tablet.

  4. Unless something drastic happens for this Hanukkah its either an Amazon Fire or an Asus Transformer 2. A 7″ cheap or a 10″ monster. I can’t see people going much beyond that short list.

    My problem is all of this mayhem is as usual my pocket size. Can’t these people make it say 6.5″ with almost no bezel? ~4″ wide is a magic number they haven’t mastered yet.

  5. “Surprisingly, it took two booksellers / digital content companies to figure out there’s a market for smaller, less expensive tablets that focus on key consumer activities.” Since neither has come out yet, I don’t think it’s yet been proven that there is a market for it. They are hoping there is, but they haven’t figured out jack yet.

    • That’s a good point, but bear in mind two things: the original Nook Color has reportedly sold at least 3 million units and Amazon’s Kindle Fire pre-order figures are also high. We can wait until the new devices ship, but I think the market for low cost media tablets has already been proven.


    Archos is selling more cheap Android tablets than Amazon and B&N combined. They are not selling those at cost or at a loss, it now costs less than $200 to manufacture such a tablet. The Kindle Fire might even cost below $150 to manufacture if you calculate that they invest enough to mass manufacture millions of it, so you have to average the cost of the availability of the product which may be one year.

    Archos has been selling sub-$300 and sub-$200 Android tablets for 2 years now, they know it works, they instantly sell out every tablet that they can afford to manufacture. The difference is Archos, Amazon, B&N take about 15% profit margin per sale and Apple, Samsung, LG, Motorola want to take 150% profit margin per sale.

  7. Good post – Agree 100%
    Am thinking Apple will follow the same approach they have with the iPhone when the iPad3 comes out, the iPad2 will be priced to compete with the Fire and Nook. That will ace out all the “computer” type android manufacturers without other ecosystem revenue streams behind they.

    • Apple can’t price iPad 2 at $250. Amazon and B&N cut some corners to get it in that price range. Plus Apple will want to retain a very healthy margin. Maybe they can do it with the original iPad, but both the Kindle Fire and the Nook Tablet will be twice as fast performance wise, so it wouldn’t be that competitive.

  8. I agree, the others missed this opportunity offering a more stripped down tablet for the masses, that can still accomplish 80% of the tasks, and considering they have many of the important apps on them. Hopefully, Samsung and others will want to enter this $200-$250 market, too, with new products next year.

    Also, Apple is crazy or in denial when they say this is helping them. How would this help them exactly? No one is going to buy a Fire/Nook AND an iPad. It’s an either/or decision for most people. This Christmas a lot of people will be choosing to give a Kindle Fire or a Nook Tablet to their friends instead of an iPad, unless they know them to be long-time Apple lovers and they have double the cash to spare.

    • “Apple is crazy or in denial when they say this is helping them.”
      Neither if they do as I outline in the next comment – The current android tablet manufacturers will be aced out and Apple (with their ecosystem) can compete with the Fire, Nook and their ecosystems.

    • Another thing to keep in mind is that people have already invested in the apple ecosystem – music, movies, tv shows, even books. So the value proposition of the nook doesn’t look as great when you find out you cannot use any of your digital purchases made on apple stores on the B&N device.

      Whereas if you have an ipad you can always download the B&N book reader or the kindle app to consume content from the respective stores on an ipad

      • Correct me if I’m wrong, but I don’t believe you can copy apps or media to multiple iOS devices, so your argument, if I’m correct, is mute. Further, to any degree that your ecosystem is correct, it would be to the android devices benefit to a greater degree than Apple’s as more significantly more people are bought into the Android ecosystem.