InMobi: iOS Leading Android on Network

Each of the ad networks presents somewhat different data on the question of who's got more market share iOS or Android. Nielsen reported that recent sales of iPhones have been "closing the gap" between Apple's handset and the "Android army." However networks Millennial Media and JumpTap show Android impressions being roughly 2:1 what iOS impressions are on their networks.

This morning inMobi released new data (for February and Q1) showing that the iPhone has a greater share of impressions on its network vs. Android. According to inMobi, "iOS has maintained its dominant market position over Android in North America since January this year, with iOS total share of impressions for the quarter at 37%, against Android at 34%."

The top three devices on inMobi's network in North America are: 

• iPhone -- 19.7%
• iPod Touch -- 12.2%
• iPad -- 4.9%

The network also reported that on a global basis, Nokia still had the largest percentage of ad impressions (35%), "although its OS share of impressions decreased slightly over the last quarter."

IAB: US Mobile Ad Revenues $1.6 Billion in 2011

The IAB is out today with its full year 2011 digital advertising report. There are a number of interesting things in the report, among them the mobile ad revenue estimates. According to the IAB mobile advertising in the US was worth $1.6 billion in 2011.

Of all the ad formats mobile showed the greatest growth, as one might expect. Below is a comparison of digital ad categories. Search increased its share of digital revenues and was by far the largest single category.

We haven't revised our mobile ad forecast for a couple of years, but it was very close to the IAB figures. I'm pretty happy with that. 

Survey Suggests Limited Demand for Lumia Phones

AT&T has said that Lumia 900 sales have "exceeded expectations." Gizmodo checks seem to confirm brisk sales (with some qualifications). The Lumia appears to be selling well on Amazon in the US. Yet reports from Europe suggest carriers have soured on the device:

Skeptics among operators say the sleek, neon-coloured phones are overpriced for what is not an innovative product, cite a lack of marketing dollars put behind the phones, and image problems caused by glitches in the battery and software of the early models . . .

"No one comes into the store and asks for a Windows phone," said an executive in charge of mobile devices at a European operator, which has sold the Lumia 800 and 710 since December.

The other day on the WP Central blog there was a poll of readers indicating some iPhone and Android users were abandoning their handsets for Lumia. That poll inspired me to create one myself on Google Consumer Surveys.

I asked "What will be your next mobile phone?" The survey had just over 1,500 US adult respondents. The responses (below), which are allegedly statistically significant, suggest very limited demand for the Lumia handset and Windows Phones in general in this market. 

What will be your next mobile phone? 

N=1,504 (Opus Research using Google Surveys)

The survey respondents were drawn from news and reference sites and almost evenly divided between men and women and across age groups. The questions were randomized so as to not bias the results. 

In terms of the "Other" responses (33%), some are probably intended Android buyers that aren't looking at Samsung models. They may also be non-smartphone buyers as well. This is suggested by the fact that when segmented by age, "Other" is the top category for those over 45. 

Those in the 35-44 age group were much more interested in the Windows/Lumia handset than other age groups (5.4% vs. 3.5% overall). Demand was strongest for Windows/Lumia phones in the South and US Midwest. Demand for BlackBerry phones was strongest in the Northeast. 

Interestingly Windows/Lumia demand was stronger than the norm among those earning at least $75,000 per year. This is a bit counter-intuitive because the phone is aggressively priced at $99, presumably to generate demand at all income levels. However, among those making less than $75,000 per year demand for Windows/Lumia was less than the survey norm above. These findings suggest that Nokia may not have needed to target the phone below $150 or $199 (with contract). 

We'll find out definitely over the next two quarters, as Nokia discloses sales figures, whether the Lumia handsets are selling well or not. But the survey I conducted appears to confirm my earlier prediction that they'll see only modest adoption in the US.

Without Apps Local-Mobile Search Queries Won't Beat the PC in 3 Years

BIA/Kelsey has just put out a prediction that local-mobile search will surpass local search on the PC in 2015. The following year (2016) BIA "expects mobile local search to exceed desktop local search by more than 27 billion annual queries."

There's a certain logic here -- 40% of mobile search carries a local intent (per Google) and mobile is growing faster than PC search -- but I think the crossover date is farther out than three years from now. (In developing countries it may be much sooner.) The press release doesn't mention apps and I suspect the prediction is largely or entirely about query volumes coming from the search bar on the mobile browser (which is 95% Google).

Source: Performics, 3/11

To achieve the local query volumes projected and surpass PC search equivalents by 2015, however, apps would need to be included in the calculation. Right now nobody really knows how much "search" and local search is happening in the context of apps. Nobody is actively tracking it. However, the recent Local Search Study from 15Miles, comScore and Localeze suggests that a substantial percentage of local-mobile search is happening within apps.

The survey of 4,000 US adults found that 49% of smartphone and tablet owners are using apps to find local information. I speculated that half of "local search" query volume, which might otherwise be on Google or other search engines on the PC, might be going through apps on smartphones. It's a leap but one not without some merit.

According to 2011 US survey data from Performics (chart above), 60% of mobile search users conduct fewer than 20 mobile searches per month, while 40% do 20 or more searches monthly. There are other data and surveys I could cite; this is just one. It illustrates, however, that there's a significant gap currently between PC and mobile search today. On the PC, comScore said last year that US adults conduct an average of 107 search queries per month.

If we use Google's 20% PC local search number, it would mean that in March there were roughly 3.7 billion local searches on the PC in the US. If we use Yahoo's 30% figure it would be more like 5.5 billion. The average of the two is 4.6 billion monthly local queries. (I believe these figures probably under count PC local intent search volumes.) If there are now roughly 125 million smartphone users in the US and roughly 90% of them use search, that means in any given month 112.5 million people are searching for stuff. If we assume they're all doing 20 queries a month (near the top end of the Perfomics range) that comes to 2.25 billion mobile queries monthly in the US. However only a subset of those are local.

If we use Google's 40% (of mobile search is local) figure, then roughly 900 million mobile search queries have a local intent on a monthly basis. (This number is likely higher than what's actually happening in the market given the assumption of 20 searches per month on average.) And again this doesn't account for local search queries happening in apps, which is probably hundreds of millions at least.

Indeed, "search" takes many forms on mobile devices, and much of it isn't running through a traditional search engine like Google. Yet mobile queries on Google are also growing rapidly. While overall mobile search volumes will continue to grow and while they could grow from 900 million to more than 4 or 5 billion monthly queries in three years I just don't see that happening unless we count app-based query volumes as part of the equation.

Will Payments Apps Become Next-Gen Local Directories?

Despite all the activity and hype in the segment, mobile payments and mobile wallets have been adopted by relatively few consumers in North America to date. It's well below 10% of the smartphone population according to data I've seen. Lack of availability, lack of awareness and consumer security fears are among the reasons.

Despite slow consumer adoption of mobile payments, companies such as Square, PayPal and Intuit are making major inroads on the merchant side. For example, Square is processing millions of dollars of payments per day at local businesses.

Its main product relies on a traditional card swipe, so the consumer does nothing new and needs no new apps or equipment. PayPal and Intuit have essentially copied Square's product. In particular PayPal's brand awareness and footprint have helped the company generate significant, immediate demand for the new PayPal Here product. 

These and other mobile payments apps (e.g., Levelup) include directories of merchants using their payments systems. It leads me to think these payments apps could become the next generation of LBS or local directory apps. It's natural for them to try and build out more comprehensive local listings, as well as get more deeply into offers and deals (not to mention analytics and CRM). 

It also makes sense for a company like Foursquare, which already has a large user footprint, to acquire or create a mobile payments capability itself -- as a complement to its positioning as a loyalty tool for SMB marketers.

Apple and Nokia Change Places As Lumia (So Far) Fails to Ignite

Ahead of Apple's quarterly earnings call next week, Fortune has rounded up analysts estimates regarding Q1 2012 iPhone sales. The consensus range is 30 to 35 million units:

The average among the Wall Street analysts is 30.5 million . . . To hedge our bets, we've singled out the six analysts who have turned in the most accurate estimates over the past five quarters. Their consensus: nearly 35.1 million units, an increase of 88.5% year over year.

Apple was the insurgent and Nokia the market leader. Now the roles have been reversed.

Nokia will report a loss later this week and expects a similar result in Q2. The bottom has fallen out of Symbian phone sales. However the company said it had sold 2 million Lumia handsets (globally) to date:

In the first quarter 2012, Nokia sold more than 2 million Lumia devices at an average selling price of approximately EUR 220 (reported within the Smart Devices business unit). Furthermore, Nokia has seen sequential growth in Lumia device activations every month since starting sales of Lumia devices in November 2011. Lumia has gained market share with both distribution partners and consumers. The Windows Phone ecosystem is also attracting developers and has expanded rapidly with more than 80,000 applications available.

Dpending on whether you think "it's still very early" or whether the company should have sold more units to date, you either conclude that the device is off to a good start or failing to take off. My view is in-between. I think it will sell moderately well to people interested in an inexpensive handset and not loyal to either Apple or Google.

The phone is apparently selling well on Amazon with overwhelmingly positive reviews, leading one person to question whether the reviews had been faked.  I do believe that some of the reviews are fake; though many if not most are probably genuine. Nokia, AT&T and Microsoft have a great deal riding on the success of the handset, creating incentives for people to generate positive reviews.

I have used Windows Phones and found them to be good but not great. The chief problem is a lack of apps. I also don't favor the homescreen UI.

If Lumia is as great as the reviews suggest then sales should pick up considerably in the next quarter. This is the make or break year for both Windows Phone and Nokia as a company.

Survey: US PC Internet Adoption Has Plateaued

This past week the Pew Internet Project released a mix of data drawn from 2011 surveys. This new "Digital Differences" report reveals that 20% of US adult population does not use the Internet for a range of reasons ("no need," etc). These are mostly older, less educated or less affluent people. These findings are not surprising. 

However the data argue more strikingly PC-based Internet adoption in the US has reached something of a plateau. While that could change over time, it's further evidence of the "post-PC" era we're now in. 

Pew also found that about 60% of PC-Internet users had a "broadband" connection at home. Like the PC-Internet adoption curve, broadband adoption has hit a ceiling and may even be seeing a downward trend, with a decline in the number of home-based broadband connections in the past year.

Many people who do not have a broadband Internet connection at home are using smartphones as their primary way to get online. While many seniors and other older adults will probably continue resist smartphones, several groups that are among the 20% are adopting them.

Pew found that "young adults, minorities, those with no college experience, and those with lower household income levels who owned smartphones were more likely to say that their phone was their main source of internet access." About 25% of Pew's smartphone-owning surey respondents said that their mobile devices were their primary Internet access method.

Indeed, a portion of the 20% of US adults that don't have PC-based Internet access at home are getting online now through smartphones. However this "mostly mobile" Internet group includes adults who do have at-home Internet but prefer their mobile phones for Internet access for one reason or another. 

In a recent online survey we conducted (n=1,502 US adults) we found a slightly lower percentage (17.6%) of respondents who preferred mobile devices as their primary Internet access method:

• Laptop computer -- 44.7%
• Desktop PC -- 35.2%
• Total mobile: 17.6%
• Smartphone -- 9.3%
• Tablet (iPad) -- 8.3%
• Other -- 8.4%

Perhaps the most interesting observation is how smartphone ownership and Internet access impacts overall digital media usage. According to Pew people who use mobile devices to go online become much more active and engaged Internet users, including creating more content:

Once someone has a wireless device, she becomes much more active in how she uses the internet–not just with wireless connectivity, but also with wired devices. The same holds true for the impact of wireless connections and people’s interest in using the internet to connect with others. These mobile users go online not just to find information but to share what they find and even create new content much more than they did before.

Are Tablets the True 'Second Screen'?

There's plenty of data that shows people are on mobile devices while watching TV. Many Superbowl ads assumed and tried to play off this, largely without success earlier this year. But it may turn out that tablets (iPads) become the primary "second screen" during TV viewing.

According to a Q4 multi-country survey from Nielsen, "88% of US of tablet owners and 86% of smartphone owners said they used their device while watching TV at least once during a 30-day period." In addition Nielsen found that 45% of tablet owners used their devices along with TV "on a daily basis and 26% said they did this several times a day."

While checking email during commercials was a primary activity of the second screeners, the survey also found that there was engagement with TV content and products:  

The most frequent tablet or smartphone activity across all countries while also watching TV was checking email — either during a commercial break or during the show. Yet device owners also seem to engage with content related to the TV as well, either by looking up information related to the show or looking for deals and general information on products advertised on TV.

While shows like QVC, American Idol and The Voice are already doing things with simultaneous TV-mobile use, we should see more formal incorporation of mobile devices into shows. (I'm sure there will be lots of interesting and creative implementations to come.) In a more mundane vein, advertisers may start to direct people to e-commerce sites or offer flash sale incentives to mobile users on the couch. It should be a very interesting trend to watch. 

Tablets are much more likely, however, than smartphones to generate e-commerce sales. This is why they will be preferred by marketers. They'll be preferred by consumers because of their larger screens. 

Google's AR Glasses Cool but Would Anyone Actually Use Them?

Make no mistake Google's augmented reality goggles are fascinating and "cool." I applaud Google for developing them (if they have actually been developed; I suspect there's no working prototype yet) but I also wonder if anyone would actually buy and wear them. Of course some people would; but could the product break out of cult status?

The effort, called Project Glass, is an initiative of Google's advanced products team ("Google X"). It represents a form of "wearable computing" and it's very interesting as an extension of the Internet beyond more conventional devices like smartphones. 

Putting aside the fashion dimension, which I think is awkward in the images shared by Google, AR glasses might be useful while driving, shopping or in an art museum. However they might equally be distracting and annoying, removing you from the experience of being in the "real world."

There's already a backlash building against living your life with your nose in your smartphone. This would take the smartphone obsession one step further.  

Pricing is uncertain. If they were expensive (more than $199) they wouldn't see much uptake I would imagine. And what about advertising? Imagine ads literally popping up in front of your eyes. That would be highly undesirable to say the least. Other issues include battery size and life, as well as data plans and costs. 

Glasses are a logical place to put a wearable computer and at some point we will see wearable computers. However I'm skeptical that this product has mainstream appeal. But prove me wrong; I'd love to see it in action.

Google Offers Free Mobile Sites to SMBs in Partnership with DudaMobile

Google announced this morning that it is offering free mobile websites to US small businesses for one year through its howtogomo.com portal. DudaMobile is the vendor providing the site building capability (DIY) and hosting.

After the year is up I would imagine that DudaMobile's pricing and rate card kick in. However its basic hosting is free already. So this must be a premium account that Google is offering. Accordingly it would likely cost business owners $9 per month to maintain their mobile sites on DudaMobile.

The company also offers a do-it-for-me service that costs $500 for the build/set-up fee and then $90 per year for hosting. 

What's interesting here is that Google isn't doing this with its own mobile site builder, which by implication the company is admitting is inferior to the DudaMobile product. 

Survey: 8.5 Million US Teens Have iPhones

Fortune's Philip Elmer-DeWitt reports on the results of the latest teen survey by investment firm Piper Jaffray. The survey polled 5,600 American teens, evenly divided between genders. The average age was 16. 

The following are a couple of the questions and answers from the survey:

• Do you own an iPhone: 34% yes (vs. 17% a year ago)
• Do you own a "tablet computer": 34% yes (vs. 22% a year ago)  

While the sample is very large, the question is: how representative of all US teens is this survey?

There are somewhere between 25 and 30 million teenagers in the US, depending on how "teen" is defined, according to the US Census Bureau. Thirty four percent of 25 million would be 8.5 million teens with iPhones. That seems plausible. Another 8.5 million teens have tablets/iPads by the same extrapolation. 

According to comScore's most recent figures 13.5% of US mobile subscribers own iPhones (or roughly 14.04 million people out of a total smartphone population of 104 million). These data points are from different sources but the numbers suggest that more US teens than adults own iPhones. That doesn't seem correct.

What's not exposed is the degree to which teens aspire to ownership of any other type of smartphone. Also not discussed is whether the tablet 34% of teens claim to "own" is actually theirs or owned by a parent. It would be interesting to know whether there are multiple iPads/tablets in the house. 

But Why Do iPhone Owners Use WiFi More than Android Users?

Beyond its February US smartphone marketshare data, released earlier today, comScore also exposed some additional, interesting data about WiFi usage among Android and iPhone owners in the US and UK. In general iPhone owners are apparently much heavier users of WiFi than Android owners. And UK residents are also generally bigger consumers of WiFi than their US counterparts.

In the US the percentage of Android WiFi users is half as large (32% vs. 71%) as iPhone WiFi users. But why?

As someone who owns both devices I can speculate about why this may be.

More Android handsets operate on 4G networks, whereas the iPhone is limited to slower 3G networks. The move to WiFi alleviates some of the frustration of being on slower networks for iPhone owners. Beyond this, on Sprint and Verizon in the US, iPhone owners can't access voice and data at the same time. Where WiFi is available they can. 

In addition, whenever a new WiFi network becomes available iPhone owners get a prominent, even disruptive, notification that takes over the screen. iPhone owners are thus much more likely to be aware of the presence of WiFi than Android owners. The process of connecting to WiFi is also faster and easier on my iPhone than it is on my HTC Android phone. 

Android at 50%: Is the Platform Surging or Stumbling?

There are two contradictory memes in the market about Android. One is that the platform is surging toward world domination; the competing narrative is that Android is losing adherents and is faltering.

ComScore boosted the first narrative today with a release (based on survey data) that shows Android crossing the 50% threshold in February. In other words, 50% of US smartphones now are Android handsets. 

Interestingly comScore's data show only 44% US smartphone penetration, while Nielsen shows 50%. 

In addition, Nielsen and financial analysts from Canaccord Genuity claim that the iPhone is "clawing its way back" among recent purchasers and closing the gap with Android. The Q1 2012 Appcelerator also appears to show mobile app developers losing some interest in Android. 

These indicators suggest Android is losing some momentum, although the comScore data directly contradict that assertion. Regardless, it's clear that Android is on its way to replacing Nokia as the leading smartphone platform globally.

The comScore report also confirms the accelerating decline of RIM and shows that US consumers are not buying Windows Phones. We'll see what happens after the massive marketing campaign that's about to be unleashed by AT&T, Nokia and Microsoft. 

We're Going to Discover the Capacity and Limits of Marketing with Lumia Campaign

Nokia, AT&T and Microsoft are about to begin their "do or die" marketing blitz for the Lumia 900. Nokia (or someone on its behalf) has set up a site that tries at once to be humorous, viral and to take down the iPhone with actor-dramatized "hidden camera" videos that purport to show its weaknesses (e.g., "death grip"). The site proclaims "the beta test is almost over" and features former "SNL" actor Chris Parnell.

This site is merely one of a multiplicity of efforts and campaigns on behalf of Nokia and Windows Phones that are about to unfold.

Hundreds of millions of dollars will be spent in the coming year seeking to get North American mobile subscribers to pay attention to the Lumia and consider buying it. AT&T has priced the device at $99 and says it's going to put more marketing dollars behind the launch than any other device, including the iPhone.

Depending on whose numbers you believe, Windows has less than a 5% share of the US smartphone market and an even smaller chunk of "recent purchases."

For all the spending we're about to see I think US Lumia sales will only be modest. I could be completely wrong but I think that when the smoke clears a year from now the postmortem will be (once again) that marketing dollars can only go so far in shaping perceptions and getting people to buy a product.

Most Mobile Ads Are Poorly Conceived, Executed

As I click on mobile ads in apps and around the mobile Web I notice that most mobile ad creative is simply lousy. Banners are difficult to read, the messaging and ad copy aren't compelling or innovative and landing pages are all-too-often not mobile friendly. There's a perfunctory quality to the whole effort in many of these instances. 

One of the reasons why search forms a bigger slice of the mobile revenue pie right now is because search doesn't have to work as hard to make the transition to mobile, whereas display has to be completely reinvented. The lackluster nature of most of the mobile ads I'm noticing makes those ads almost completely ineffective. 

Below are several examples drawn from the NY Times app this weekend. First an ad from optical retailer Site for Sore Eyes. The banner is tough to read and the call to action is washed out. But worst of all, the landing page is not optimized for mobile. It's all but impossible to read the text on the page, likely causing a user to click away.

There are similar problems with the following Lord & Taylor ad. The banner asks you to "text" to "stay in the  know." What the heck does "stay in the know" mean? How about something a bit more concrete about the benefits of getting on their list.

Beyond this, while you're looking at the ad on your phone, you're unlikely to text at that moment. So you need to remember to do it later, which you probably won't because the benefits haven't been made clear.

Finally, as with the ad above, the landing page is difficult to read. It's probably a page from the retailer's PC website. The images are too small and you can't see the text or prices at all. And people aren't going to "pinch and zoom" too see them. 

Those were two weak ads, the following one from Bank of America is not perfect but much more effective. Even though the banner text is small and hard to read the specific (and local) nature of the message motivates you to click through. The landing pages are mobile-friendly and geo-targeted (for greater relevance). There's also video, which is effective.

It's amazing to see so many weak mobile display campaigns. It seems like the agencies or personnel involved just aren't thinking very clearly about the user experience, despite the fact that they all probably own smartphones themselves and are equally "consmers" of mobile advertising. 

Mobile Search Engine Do@ Now 'Everything.me'

Last May Tel Aviv-based mobile app/search engine do@ (pronounced “do at”) launched with high expectations. The company raised $7 million against the promise of delivering a search experience to smartphones that was both more efficient and more elegant than Google.

Rather than indexing pages, do@ showed live sites that were optimized for mobile. Sites were initially ranked by default but users had the ability to re-order results. It was a radically different and smart approach to mobile search -- and one that might have been expected to work at some level. However nobody used it, reflecting the power of Google's brand and its prominence on both the iPhone and Android devices.

You can see a video of do@ in action here.

Now the company has re-imagined do@ as a kind of mobile meta-search engine: Everything.me. You enter a query and can search "vertically" in any of the many different sites displayed on the screen. Logos replace Google's blue links. 

Because Everything.me gives you access to familiar, branded sites (and some that are less familiar) it has a better chance than do@ did. However, many people have smartphone apps for common mobile search categories: restaurants, travel, shopping/price comparisons. Then, of course, there's Google for "everything else." 

Accordingly I think the company is fighting the same battle it was before. And even though this relaunch is a clever adaptation of the company's underlying technology it will face the same challenges of adoption and usage. 

Study Illustrates Problems with Offline Mobile Conversion Tracking

Earlier this week Marin Software released some very interesting aggregated data on mobile search trends. The report sees dramatic growth for mobile paid-search. It projects that smartphones and tablets will combine to generate 25% of all Google’s paid-search clicks and 23% of paid-search spending in the US by the end of this year.

Among the other data the report assembles are click-through (CTR), cost-per-click (CPC) and conversion rates in mobile. It compares them to comparable metrics in desktop paid search. The numbers are averages based on client campaigns.

Smartphones show higher CTRs and lower CPCs than PC search campaigns. But they also show lower conversion rates and thus higher per-conversion costs than either tablets or PCs. 

The smartphone conversion data appear lower likely because most conversions are happening offline and they're not being accurately tracked. Marin says as much in its recommendations for marketers about offline conversion tracking:

Mobile searches often result in conversions that happen via a call or a physical store. Unfortunately, most marketers lack the ability to glue these clicks together into a unified conversion funnel. Marketers should look to estimate their mobile-influenced revenue through the use of popular mobile ad formats such as click-to-call and store-locator. By combining the typical conversion rate for in-store and phone-based transactions with the average revenue per transaction, marketers can estimate a revenue per click for mobile devices, and adjust their mobile CPCs and budget accordingly.

Whether paid search or display ads, marketers need to track calls and have landing pages where "secondary actions" like store locator or map lookups can be tracked to see whether consumers are acting on the ads. If the tracking isn't set up properly then you're going to see fewer conversions or no conversions and the ROI data will be distorted. 

The conversions are there, they're just not visibile in many cases. 

Cheap Google Tablet Almost Certain to Be a Hit

Yesterday the Wall Street Journal published what amounts to a round-up of recent Google tablet rumors. None of the information was really new.

Previously Eric Schmidt confirmed that Google would be putting out a "highest quality" tablet at some point later this year. A Google-branded tablet (expected to be 7-inches) is intended to compete directly with the Kindle Fire. It's also a direct response to the failure of other Android tablets to date.

Here's are the quasi-factual nuggets extracted from the WSJ piece: 

• Co-branded Google tablets (think Nexus smartphones) will be made by Asus and Samsung
• Google's Motorola unit will make Google-branded tablets
• Pricing of a Google tablet would match or beat the Kindle Fire ($199); Google will subsidize the device accordingly

Earlier rumors suggested that the price might be $149. Either at $149 or $199 a decent 7-inch Google tablet is likely to be highly successful.

The Kindle Fire is actually quite a mediocre tablet compared to the iPad. It's well integrated with Amazon content but that's about it. Email and web surfing are quite painful on the device. Google almost certainly would make a more functional tablet for general purposes. It would also have the benefit of Google's voice actions. 

Google also has nearly the content ecosystem that Amazon does (i.e., Google Play). It can also afford to subsidize the device because it will make money on search and mobile display advertising. 

A $149 Google tablet would undermine Kindle Fire, compelling Amazon to lower its prices. Pricing here is a key variable. Regardless of whether it comes in at $199 or less, a cheap 7-inch Google tablet will be successful. The outlook for a larger tablet and direct iPad competitior would be more murky. 

However I would predict that Google will sell millions of these smaller, highly subsidized devices.