So What To Expect of the Apple iPad? A fish or a bird?

I promised to get to the iPad and it is obviously both a media device and a convergence device so its a very relevant topic to our blog. It is definitely hot news in the digital gadget space and it will launch shortly. I wanted to post my thoughts before it hits the stores. (By the way, in Finnish we sometimes may askl is something "Lintu vai kala?" - literally "is it a bird or a fish?" That is why the strange title, haha)

What is it? This iPad by the kind folks who brought you the Mac, the iPod and the iPhone. Is it a high-flying bird or a deep-swimming fish. Or perhaps is it a slow-moving turtle? So this is Apple's version of the tablet PC. Its more than a Kindle ebook reader, its like a giant iPhone or iPod Touch. Or its like a netbook without the folding structure with the separate keyboard.

So clearly it sits in what may seem like a 'sweet spot' of convergence, between the smartphone, the netbook and the media player. Like Apple's iPhone and iPod Touch, it has the iPhone operating system so it will be able to run most of the iPhone apps including its games. It has a 10 inch screen but is ultra-slim just like a 'big brother' for the iPhone. It has the touch screen technology of course but not a traditional QWERTY keyboard like netbooks and notebook PCs. There are several models (like iPods) with several storage capacities from 16GB to 64GB (but no memory card slot). It has a built in battery with excellent 10 hours of time of use which will be of interest to some who travel heavily and carry some electronic gadgets for the long-haul flights. There is a basic WiFi version and a more expensive version that adds 3G/cellular. 

The cheapest model starts at 499 dollars, and adds 100 dollars more per higher data storage model up to 699 dollars. The 3G wireless cellular versions add 130 dollars to those, so the 3G version starts at 629 dollars and the top 3G model costs 829 dollars. That does not include AT&T's data access - an unlimited data plan (only data, no voice) adds 30 dollars per month / 360 dollars per year to your total cost of ownership. Its not cheap.

WILL REVOLUTIONIZE TABLETS

So first, we've had tablet PCs for ages and they have never succeeded in any meaningful way in the market. The best-ever tablet format device is the Kindle ebook reader which has managed a cumulative sales of 3 million since its introduction. Compare that with over 10 million that Apple sold their iPhones in their first year. So yeah, this tablet PC type of market is totally in its infancy.

But Apple is the master of making things easy to use. And there is certainly a market for truly easy-to-use simple computers. We've seen a gradual trend to ever more user-friendly personal computers (that was dramatically accelerated in 1984 with the original Mac), now illustrated by the latest netbooks.

For those who might still 'fear' a computer, the iPad is a blessing. It will certainly be by far the easiest-to-use small computer. In that way, the iPad takes on the shrinking PC market, most obviously the netbooks (usually cheaper than the iPad) but also with its price - it will fight in the notebook segment as well. Will it capture that market (netbooks, notebooks) - no. I don't think there is much chance of that. Yes, Apple will certainly sell into occasional market opportunities of the notebook/netbook but no, most who feel they need a 'real' computer - including most business users and most students who'd want one for school (and gaming and social networking) - will not sacrifice the 'real' computer for the iPad. And its far too expensive for most people to have as a parallel device with both a netbook/notebook and an iPad. It could be, however, the 'portable' PC for those who are happy with an older desktop PC as the family PC, and were considering a laptop recently but didn't yet make the commitment. It could easily be the first portable PC for many families as their second PC, alongside an older but relatively robust and complete PC installation, printers, keyboard and mouse, big screen etc, sitting at some desk in the home..

Desktop replacement. No. The viable option for a desktop is a notebook/laptop or 'real' netbook. What of notebook rival? Not really I think. But netbooks, ultraportables, why not. It won't take their market, but the iPad and its clones will probably dent the netbook market somewhat. We are looking at a market measured in total only in the couple of dozen million units sold per year, so this is also not a 'big pond' as a market opporutunity. The vast majority of the 280 million annual sales level of hte PC market - desktops and notebooks - will not feel the iPad in their sales numbers.

Kindle? - I think the Kindle and other ebook readers will suffer severely from the introduciton of the iPad. It will eat into their market. I am pretty sure that a year from now, the iPad will be the best-selling tablet device. But that is not really saying much.

NO CHALLENGER TO SMARTPHONES

It is not a rival to smarpthones. While the iPad certainly takes advantage of McGuire's Law (the utility of any activity increases with its mobility) being more portable than larger PCs and being a one unit non-folding device, it does not answer the need served by a phone. Like any non-pocketable digital devices of similar size (Kindle, netbooks, iPad, gaming console etc), it does not fulfill the 'ringing in the pocket test' so it cannot replace our phone.

If the user appreciates applications or other smartphone features and abilities, then the user will buy a smartphone, not an iPad. There is no option there. Ringing in the pocket tells us what we must have, all other digital devices are optional extras, like our iPod, our digital camera, our PSP etc. And then, if we already have a smartphone, the iPad becomes a tremendous luxury to consider an iPad costing from 500 to 830 dollars. So in many cases, if the user would like to do things we now expect iPad users to do - read ebooks, surf the web, play games, watch video etc - then the user would typically do that on their smartphone, whatever brand that might be. Here I do not see a significant market canniibalization at all. (remember my metaphor of 30 minute tasks vs 30 second tasks. The iPad is clearly a "30 minute tasks" type of device like netbooks, so it may compete with other 30 minute task devices, but cannot compete with 30 second task devices)

But for some who have an iPod Touch as a media player (distinct from the iPhone as a mobile phone) - the iPad can be an attractive option. So I would expect this to be seen as a kind of 'big brother' for the iPod Touch, and perhaps cannibalize a little bit of those sales. And there should be an 'upgrade' replacement market, for existing iPod owners to get the big screen variant. Not as a rival to the iPhone, but as a 'luxury end' device in the iPod portfolio..

NEW MARKET SPACE - COUCH POTATO

The one interesting aspect to me is how will the iPad do with non-users of computers. Our parents, our grandparents, those who really resist using a PC. I think this could easily be the easiest-computer ever, and as such, become a popular Christmas gift to the older loved family members, where the younger (adult-age) generations are all online, and they give the iPad to their parents to bring them online - share pictures, videos, etc with the grandkids etc.

Where it also then becomes a device we will see here and there. And I think we'll find a new use-case for the tablets overall, not just the iPad. I didn't invent this idea, we had this discussion at Forum Oxford on a thread started by our friend Jouko Ahvenainen - but yes, it feels like the iPad is an ideal 'couch potato device'. Where it will be in (initially wealthier) families, it will easily become the preferred connected screen to view, while watching TV. So where we all know some geeks who actually have a PC on broadband connection right at the home TV set (ahem, I might be occaisionally doing that haha), this kind of behavior - surfing the web while watching TV - would become quite mainstream acceptable, on such tablet devices. It needs to be really easy and comfortable, and no doubt Apple's tablet will be by far the most user-friendly. However, I do think 500 dollars is way too much for that 'couch potato' use haha. The price would need to come down to the 200 dollar level perhaps - initially by rivals, and later by Apple as well.

HOW WILL IT DO?

There are many analysts who talk of 8 to 10 million unit sales of the iPad during 2010. I seriously doubt those numbers (remember Kindle level). Remember the iPhone barely passed 10 million sales in its first full year. That was after the biggest tech launch of all time, with the biggest tech buzz related to any launch - of all time. And it was a hotly desired product - for years iPod owners had been begging Apple for an 'iPod phone' as we used to call the iPhone before it had its name. Now we have a somewhat confused device that certainly was not eagerly begged for by the Apple fan base. Where the iPhone was driven by customer demand - demand indeed - insisting on the device; this time we have somewhat a typical tech industry phenomenon, a 'tech push' where the engineering company has built a 'cool new device' for which there is not an obvious demand, and the hope is that if they build it, the customers will come. The history of technology is full of market failures based on this attitude - including many times by Apple itself (Lisa, anyone? Newton? etc)

I think the App Store will be a strong 'crutch' for the iPad, helping it achieve sales. Usually a new computing platform suffers in the early stages where there is no application environment (or with gaming platforms, no games, haha). But 8 - 10 million unit sales is hopelessly over-optimistic. Half that, perhaps. But if Apple achieves half that in one year, that is a good launch for a device which is a new form factor for Apple and is not an established market yet (differing for example from the launch of Macbooks, which when launched, the laptop/notebook computer market was well established by Toshiba, Compaq, Dell, IBM and the other notebook makers)

Realistically I'd say if they do 3 - 5 million unit sales in the first year, the iPad is a success and can do well into 2011. They might sell below that number.. Remember that even now, three years after launch, the iPhone sold only 11 million units in the USA - and that when the retail price was between 99 dollars and 199 dollars after the carrier subsidy by AT&T. And while Apple is an iconic luxury brand all around the world, the price becomes even more of an issue the further away we move from the level of the wealth of the USA. Europe won't be buying at similar levels as the USA, etc. Apple's best market for all its devices, Macs, iPads and iPhones - has always been the USA. I am sure so too will be with the iPad. Even more so where it is priced so high compared to equivalent performance devices (netbooks, notebooks)

But we'll see. I do like the idea of the couch potato device. It will be interesting to see how much Apple can re-energize this lethargic tablet market and how big that overall will become over the next few years. We'll be here to cheer them on. But don't bet your farm on Apple achieving ten million iPad sales this year. That is very unlikely to happen this year. (and any Apple fan-boys, please do remember, I was one of the minority who said right after the iPhone was announced, before anyone had touched the device, that yes, it would reach 10 million sales in its first year - but would do that 'barely'. I was also one of the very few who could explain why it would reach 10 million but not for example sell 20 million in the first year, as some Apple fanatics had hoped for. And as I have repeatedly said, the iPhone, for any misgivings in the first edition, was still the most important phone of all time, the only transformational phone our industry has seen. I am a fan. But I am also a realist. And I see cautious optimisim for the iPad not a runaway success story. Not this year at least, at these price levels)

Comments

[Michael Scharf]

Tomi: I agree with your analysis. I predict the iPad will impact two products only:
1. Netbooks/Smartbooks - This will be where the iPad and similar devices have the most impact. These devices were purchased as second computers and media consumption devices.
2. Desktops versus Notebooks - It's POSSIBLE that iPads and other tablets will slightly change the mix. More people may buy desktop computers as their primary device and then a tablet/pad as their travel/meeting device.

[alex]

Spot on analysis, in my view.
Little cannibalization into established device categories.
Good chance to take the lead in the "tablet" category, whose potential size is unknown but, as all new categories, anyway needs time to built up (user acceptance & lower price points).

[Alexander Gödde]

When a friend who hadn't read any of the countless blog posts on the announcement of the iPad asked me to summarize what I thought, the one-sentence summary was: 'It is a computer for old people.'
It is not a machine to do serious work on (no multitasking for now, no keyboard, no mouse/pointer even when using the keyboard dock, no user-accessible filesystem), or generally be very productive with. While many people see it as a perfect PDF reader, the resolution is somewhat low for a lot of documents.
It is there to consume media, browse the web, and write the occasional text message or mail. It can lie about unobtrusively, does not need to be recharged to often with light use, is instant on. It is perfect for a living room where no computer is wanted, but occasionally needed.
As such it will undoubtedly see some adoption, and I think your Christmas scenario is a very likely one. In the long term it does announce a new class of devices, the 'lying around where you may need it' computer. But those will only become ubiquitous once the price goes down - a lot. Think $ 100 impulse buy, not $ 499 and up.
At the moment the fact that polls in the US about whether people are going to buy an iPad have such high rates of affirmative answers tells us more about how skewed the samples for the polls must have been and how susceptible to hype US Americans generally are than about any real world-wide market.

[Romain Criton]

Hi Tomi,
Great analysis, couldn't agree more with you ! It's good to read a balanced view on the iPad in this pre-launch media craze.
One more thing about your comment "Europe won't be buying at similar levels as USA": another reason for this is the hefty rumored price of the iPad in Europe.
Rumor has it that it will start at 549 euros...
At current euro/dollar rates, it would be almost 50% more than the US price !!

[Richard Law]

Here's a diagram that helps in the iPad purchase decision making process:
http://www.padshock.com/2010/03/25/apple-ipad-decision-flowchart/

[Refurbished Computers]

It is there to consume media, browse the web, and write the occasional text message or mail. It can lie about unobtrusively, does not need to be recharged to often with light use, is instant on. It is perfect for a living room where no computer is wanted, but occasionally needed.

[Jonas Feiring]

7,2 million by september 30th.
How many will the christmas season add?

6m?

[cheap handbags]

Me and my friend were arguing about an issue similar to this! Now I know that I was right. lol! Thanks for the information you post.

[cheap desktop computers]

I would like to appreciate the work of blog author that the person provided us with an extremely excellent information regarding the topic. Ireally learned something from this blog and started to contribute my ideas via commenting on this blog. Keep it up

[angle]

I hope you will keep updating your content constantly as you have one dedicated reader here.

[white iphone 4]

Me and my friend were arguing about an issue similar to this! Now I know that I was right. lol! Thanks for the information you post.

[white iphone 4]

iphone 4 white available now. It is the best news today.

[Henry Peise]

The modern and delicate makes iphone 4 white so charming that even me, want to own one. But what i can do now, is to wait the price to decline.

[Eva]

The ipad does give eBook readers a run for their money, but then again, when you take an ebook reader with you on your travels, you don't have to worry about having an internet connect to read what's on the device. The iPad can read books without connecting also, but you may get distracted by all it's other options. Which could be good, or bad. . .

[Christian Louboutin Classic Black]

Generally I do not post on blogs, but I would like to say that this post really forced me to do so, Excellent post!

[gn netcom wireless headset]

Good read and great write. This information is impeccable with the understanding of the future.

[plantronics headset]

I usually don't post on blog but this article is an exception. God writeup.

[Yves Saint Laurent]

Just thought I’d leave a comment to say just how much I liked this read. Quality blog!

[cheap jewelry]

Thanks for your share,thanks a lot.Good luck!

[cheap ugg]

Hello dude Good night.I am agree with your blog article about that but i found something strange that i felt you didnt know the main problem before you posting this so i want to ask