"It's Christmas in June," someone told me as we waited in the gadget line at the Google I/O conference on Wednesday. Every year at the conference, Google "gives" attendees hardware that runs Google software and services. This giveaway program isn't cheap for Google. But it is worth it.
Let's look at the numbers.
This year, the haul for attendees includes four pieces of Google hardware, with a total retail value of $1,176:
|The goods||Retail price|
|Nexus 7 tablet||$199|
|Galaxy Nexus phone||$349|
Google charges most attendees, its developers, $900 for a Google I/O ticket; academics get in for $300 and journalists (plus other invited guests, we presume) for free. If you're paying full price for your own ticket, the net retail bonus is under $200. For attendees whose tickets are paid for by their employers, though, it's much more. That may be one reason Google sold out its I/O tickets in 20 minutes.
It also partly explains the thousand-person deep line to pick up the gear at the conference that formed an hour before the giveaway booth opened up.
The benefit to Google of giving away this gear, of course, is that developers get excited by new toys they might not otherwise buy, or even be able to buy: The Nexus 7 and Nexus Q are brand-new products, back-ordered two weeks on Google's online store. Google's new products are also quite hackable, which makes them great toys for geeks; even the media streamer the Nexus Q has USB ports "to encourage general hackability," as was said during its launch announcement.
Google also opens up the giveaway program to the press. Getting the hardware out to writers is in keeping with Google's general policy of sowing its products to the widest possible audience and hoping good comes from it, in stark contrast to Apple, which doles out early review units of hardware products to writers it has either good relationships with (or perhaps compromising pictures of).
And the payoff, from both developers and press? Immeasurable. Google's most ardent developers now have early access to the company's latest hardware and software platforms, and hundreds of jaded journalists are experimenting with products they might not otherwise touch.
Google's monetary cost of providing this bounty is significant. You might think that the wholesale cost to Google of this hardware is much lower than the retail value, but these products, especially the new ones, can't make much money for the company. The new Nexus 7, Google says, is being sold "at cost."
Like the Kindle Fire, the Nexus 7 is a media consumption portal. It's a front-end to Google's renewed and revised Play content library. Google doesn't have to make money from Nexus 7 hardware sales for the product to drive revenues into Google.
The Q? The list price is way too high to sell well in retail, but that doesn't mean Google is selling it at a high margin. It's made in the USA, which Google admits costs more than building the device in China.
The Nexus phone is, literally, last year's model, just with the new build of the Android OS. This product might actually cost less than the list price. But the Chromebox, a low-end computer, is likely being sold for not much more than it costs to produce; the hardware is comparable to other low-margin, low-end computers from other vendors.
So let's say Google makes only a small retail profit on these four devices when it does sell them. Let's call it 15%. That puts Google's cost per giveaway at $1,000. With 5,500 attendees at the show, that's a $5.5 million expense in hardware. The $900 attendance fee doesn't really offset this; Google I/O is an expensive conference to produce even without the giveaways. Renting Moscone Center in San Francisco is a significant expense, and it can't be cheap to coordinate two days of never-done-before wingsuit dives from an airship hovering over the heart of San Francisco.
But a few million dollars for hardware is not much of a hit for a company sitting on just under $50 billion in cash and equivalents.
The goodwill and general knowledge about Google the program generates? Priceless.