The Nexus 7 is a product sold at cost, but companies don't sell products at cost, unless they can make money in other ways. With the Nexus 7, with the Kindle (family), with the Nook, they all sell these products at, near or less than cost. Yet, Amazon and Google (not sure about B&N<grin>) are profitable companies, so why would they sell these products so cheaply?
The initial price of the product isn't the price you pay (in the long run) - these products are built and sold for one reason: to be a conduit for other products and services they sell (mostly to the buyer of the original product). It's a fallacy to think these products are so cheap, sort of like thinking that free television is in fact free to the viewer.