With the Fire, Amazon changed the Android interface and removed ties to Google services, replacing them with Android services. "I believe Google wants to prove that a pure Android experience can be a good one," Mainelli said.
The key to success will not only be robust hardware but also software -- and plenty of apps, some analysts said.
"The hardware is only part of the recipe, so Google better be coming up with exciting news for developers so that the number of dedicated tablet apps grows and grows fast," Milanesi said. "Apps, an intuitive user interface and sleek hardware make a winner. Android so far has had very limited apps, and okay user interface and some good hardware."
Ken Dulaney, an analyst at Gartner, noted that Android tablets didn't do well competing with the iPad mainly "because many people thought the software was more difficult to use than on the iPad."
Dulaney said that part of the problem with Android software was a familiar one for the tablet OS: a lack of upgrades. "Many Android tablets were using 3.0 and there were no upgrades or [the] new Ice Cream Sandwich-version, Android 4.0 tablets to be found."
The Nexus 7 will reportedly run Jelly Bean, the next generation of Android that may be version 4.1. More will be known at Google I/O, which opens on Wednesday in San Francisco.
With Microsoft coming into the market with Surface -- and continued speculation about a mini-iPad from Apple -- the market could suddenly become much more crowded. If that happens, tablet-optimized applications could become a major differentiator. "This is the time when the three big players -- Microsoft, Google and Apple -- have to stake their claim for the future.... It had better be good, with lots of tablet-optimized applications."
As for what the Nexus 7 would cost Google in subsidies and other costs, analysts were not too concerned, given Google's cash reserves. "Google can afford any subsidy it wants," Gold said.
"I do think Google is willing to lose money on tablets, at least in the near term, to try to build marketshare," Mainelli added. "It's going to be an uphill battle though."
Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at Twitter @matthamblen or subscribe to Matt's RSS feed. His email address is firstname.lastname@example.org.