Will Google join the race to the bottom of tablet pricing?

Google has had limited success with their Nexus-branded smartphones to date but that isn’t stopping them from moving the brand over to the tablet market. Now, rumors are circulating that they’re going to throw their name in the hat with prices starting at $149, joining the trend of reduced tablet pricing that even Apple is doing (even though only with their older iPad 2 as the New iPad rolls out).

Amazon’s success with the properly-priced Kindle Fire over the holiday season and beyond has sparked more tablet makers to shoot for affordable rather than feature-rich. Ironically, this trend really started with a failed product, the HP TouchPad, which didn’t pick up steam until the desperation move of lowering the base price to $99. It wasn’t the first cheap tablet but it was the first to see a sales spike as a result of a dramatic reduction.

If Google does indeed offer their first branded tablet through Asus at a price that undercuts the Kindle Fire, its success will help determine the direction of Android and Windows OS tablets going forward. It’s a clear signal that nobody wants to take on the iPad north of $500 (or even $400, which is possibly close enough to the iPad pricing), leaving the growth market at lower-cost, lower-quality tablets.

This isn’t necessarily a bad thing for anyone involved. Apple has nothing to worry about now and will flourish even more as the lone major high-end tablet provider, while the race to the bottom will open up the tablet market to a broader range of consumers just as cheap smartphones started doing in 2010.

Google’s role in this is more as a litmus test rather than a major player in the market. They have never demonstrated an ability to succeed in the hardware realm and this isn’t going to change that. It will, however, reaffirm to hardware makers that Amazon’s model is repeatable and that the competition level at the bottom may still be lower than the demand.