This has been one crazy week, with the HP TouchPad being offered on a firesale for only $99, when the tablet is worth at least $400 considering its specs. In fact, the cost of the Touchpad components is already around the $300 ballpark, and that's without counting the workers' salaries, the distribution, the shelf space fees, and HP's profit, because every company has to make a profit on the products they make.
The HP TouchPad must've been selling very poorly at the initial $500 price, and even later at the $400 price, for HP to want to do a firesale not at $300, not at $200, but at $99. It's no wonder that people couldn't get one fast enough, and that websites and stores were quickly selling out. It was incredible value for the price.
What Android tablet makers can learn from this is that while people may not be willing to spend as much for an "iPad alternative" but without the Apple logo on it, and without the 100,000 or so apps, they are certainly willing to spend a few hundred dollars less on a "good enough" tablet.
I think there are a lot of people out there, who no matter how good an iPad could be and how many apps it would have, they wouldn't be willing to spend $500 on a tablet, when to them a tablet is "just one extra computer to check e-mail on". But there's a much higher chance these people would pay somewhere between $99 and $249 for a tablet, and this is where Android manufacturers and Google themselves should focus, if they want to gain a lot more market share than they are able to get right now, and also to attract developers with sheer numbers of units sold.
Right now there's a catch-22 problem with Android developers building apps for Android tablets – there aren't enough of tablets for them to be worth upgrading their apps to the tablet form factor. If manufacturers can't sell as many tablets as the iPad (at least for now), they should at least try to dominate the market with lower-end tablets that will sell in millions, and outpace even the iPad in sales. This will make developers interested, not only to port their apps from the phone version, but it will also make those who aren't on Android yet, to port their iPad apps to Android tablets.
The Nook Color was pretty successful last year, selling as a $250 Android-based reader, which many bought to convert into a full-fledged Android tablet with custom ROMs. If a book seller can make a tablet that good for $250, I'm sure some giant manufacturers like Samsung could build a very nice $199 tablet, too, which would easily sell in millions of units, not just to tech geeks, but also to a lot of mainstream users.
That would give Android a huge jump-start in the tablet market, and it would quickly catch-up with iPad in number of units. If Google wants to dominate this market, too, before Windows 8 appears as well, they should hurry up and push manufacturers to build such cheap tablets as well. In the mean time, they can still build $500 tablets to compete directly with the iPad, and it will be much easier for developers to upgrade their already tablet-ready apps to these higher-end tablets.