I think that Patrick’s analysis of the schism between Apple’s iOS tablets and Android tablets was spot on. While Apple encouraged their developers to create apps that were optimized for the larger 10 inch tablet form factor, Android eschewed optimization and encouraged a one-size-fits-all approach. The resulting “stretched” Android phone apps worked poorly on the larger tablet form factor. However, “stretched” phone apps seem to work well, or at least adequately, on the slightly smaller 7 inch screens.
This divide in approach between iOS and Android tablets has at least two major implications. First, Apple’s iOS tablets will most likely continue to dominate the 10 inch tablet form factor. In fact, Android has all but ceded the 10 inch form factor to Apple.
Second, because both Apple’s 10 inch iPad and their 7.9 inch iPad Mini run optimized tablet apps, the iPad will most likely become the “go to” tablet for high end users. This means that professionals, businesses, government entities and educators will gravitate towards the iPad. And as the virtuous cycle of developer/app/consumer continues the spiral upwards, the high-end iOS applications will make iOS optimized tablets even more appealing to high-end consumers and even less approachable to Apple’s competitors.
Trifurcation
It seems to me that the tablet market is trifurcating. Apple’s iOS is taking the larger 10 inch form factor and the up-scale markets. Google’s Android may command market share in the mid-level markets. And forked or non-Google Android tablets will take the low end of the market. All can survive, but only Apple has proven that it can profitably thrive in such a setting.
It’s an article of faith in the Church of Market Share that Android is nearing a tipping point where its market share lead will inevitably turn into a developer share lead, too. ~ John Gruber
For those who say market share doesn’t matter, that Apple still commands most of the industry’s tablet profits, they clearly haven’t been paying attention to the smartphone market. Profit share follows market share…
Only, here’s the thing. I HAVE been paying attention to the smartphone market. Perhaps more importantly, Horace Dediu has been too. And as his chart, above, demonstrates, the facts belie the argument that profit share follows market share. Even as Android’s market share has grown by leaps and bounds, Apple’s iPhone profit share has grown too. How can this be?
What’s Really Happening
Here’s what the facts are telling us. First, Android’s growth has not hurt Apple’s profit share. Instead, Android gobbled up all of the profits from the other smart phone manufacturers. Second, Samsung subsequently gobbled up all of the profits from the other Android manufacturers. Samsung now makes as much profit share as the entire mobile industry did five years ago. Third, the iPhone has not only survived the growth of Android’s market share, it has thrived, growing its profit share from 21% in 2008, to 50% in 2010, to 57% at the start of 2011, 73% at the start of 2012, and 72% at the end of 2012. And since the pool of profits has grown dramatically over the past five years, Apple’s profits have too.
What will it take to get Apple’s critics to acknowledge that Apple’s iPhone strategy is actually a raging success rather than the raging failure they constantly portray it to be? Does Apple need to take in 100% of the profits in perpetuity for them to be convinced?
Faulty Analysis
The problem with our obsession with market share is that it rests on two faulty foundations. First, it assumes that every product sold within a category is always just as valuable as another. Second, it assumes that every customer who buys a product is of equal value. These two premises are laughably wrong.
It’s A Mistake To “Pool” all sales together
Are all smartphones or all tablets of equal quality or used in the same way? Hardly. No knowledgable person would argue that they were. Yet when we use market share as our metric, we assume exactly that.
Kiddie pools and above-ground pools and in-ground pools are all considered to be “pools”. But does the sale of one necessarily impact on the sale of another? Sandals and dress shoes and winter boots are all considered to be “shoes”. But does the sale of one necessarily impact the sale of another? Similarly, when we lump all types and makes of phones or tablets together, we create a false basis of comparison. Is the iPhone or the iPad really competing with the gray market phones and tablets being sold in China anymore than in-ground pools are competing with kiddie pools or dress shoes are competing with sandals? Just because two products fall within the same category, does not necessarily mean that they are in competition with one another.
Not All Customers Are Equal
“(T)he fundamental flaw in the Church of Market Share doctrine is the assumption that users are users. That one platform with, say, 40 percent market share, must be in a stronger position than another platform with, say, 20 percent market share, simply because a larger number of users is better, period. What Apple has shown with the Mac, and now with the iPhone and iPad, is that all users are not equivalent. Counting only the Mac, Apple is not the biggest PC maker by unit share. But it is by far the most profitable, quarter after quarter, year after year. What’s more important than a company’s share of the overall market is the company’s share of the profitable side of the overall market.” ~ John Gruber
The fact that customers are not of equal value is so fundamental that I shouldn’t even have to say it. There are whole industries and entire fields of learning devoted to the art of finding the right customer for the right company or product. Not only do companies target preferred customers, but they actively shun customers who are counter-productive too. Yet when we use market share as our metric, we assume that a customer is a customer is a customer. Nothing could be further from the truth.
For example, I might be an ideal customer for Krispy Kreme Donuts. But I might be a lousy customer for Victoria’s Secret. (This is because I stopped wearing frilly lady’s underwear years and years ago. You can confirm this with my parole officer who will totally back me up on this.)
Being a bad customer is not the same thing as being a bad person. Good people can be bad customers. But being a customer is not the same thing as being a good customer either.
Does Market Share Matter To Apple?
Absolutely. Take a gander at this critique of Apple from Steve Jobs:
“At the critical juncture […], when (Apple) should have gone for market share, they went for profits.” ~ Steve Jobs
Steve Jobs wanted, and Apple wants, market share. But they want the RIGHT market share. Apple wants customers who are willing to pay for their products. And Apple wants customers who are good for their platform. In other words, Apple wants market share in their target demographic. Based on the fact that Apple is taking in 72% of the mobile phone profits with only 8% or 9% of the market share, it sure sounds like they’ve aquired the right market share to me.
Does the rise of Android’s market share mean the end of Apple’s profits? Hardly. You can argue as loudly as you like that developers and profit share must necessarily follow market share. But the facts will shout you down.
I mentioned in an earlier column that I had finally figured out why iOS is the mobile operating system of choice for me. I take the time to objectively look at all the flagship devices on the market. I don’t just use these products for a day or two and then form an opinion but rather I use them as my primary phones, tablets, PCs, etc., for at least a few weeks and sometimes more. However, for me, all roads lead back to iOS. I always go back to my iPhone or iPad. None of the flagship devices I use can keep me from going back to the iPhone or iPad. I think I finally understand why.
Simplicity
Sophisticated simplicity is the term I think of when I think of iOS. This is true also of OS X in my opinion but for today I am focusing on iOS. This is perhaps why so many non-tech savvy consumers appreciate and choose the iPhone. Believe it or not there are billions of people on the planet who are not in search of the next big thing in technology. Rarely are the masses looking for the pinnacle of innovation in a product; more often they want things that just work and make their lives easier. To put it succinctly the mass market favors convenience over cool. If that product happens to be incredibly innovative then so be it. But it is not the fact of innovation by itself for which they buy it but rather the problem it solves for them. The mass market hires technology products for reasons that are largely based on convenience not specs. They will favor the technology that helps them get their tasks done in the most convenient, efficient, and simple way possible. Sometimes that task is entertainment, sometimes it is productivity, sometimes it is communication, but the point remains that for many, convenience is what is valuable.
The simplicity of iOS translates into convenience for me and my many mission critical tasks. Yet its simplicity provides a feeling of sophistication that allows me to get very complex things done in an efficient manner. Simple solutions require sophisticated technology. In my opinion, iOS is both.
Sophistication
I spend as much time away from a desk as I do at a desk. For me, it is critical that I stay as productive and efficient as possible while I am mobile. No platform that I have used in recent years has come close to iOS in this regard. It is important to point out that this was not always the case for iOS. In the early days of using the iPhone, I still carried a Windows Mobile device for my more work/productive tasks. Apple caught on and evolved iOS in a way that it is now invading the workforce at unprecedented rates. iOS is not just simple to use it is also extremely sophisticated.
Some thoughts from Steve Jobs at the launch of the iPhone bring clarity to the sophistication of iOS. When Steve Jobs announced the first iPhone, he explained how iOS was based on OS X and because of that it ran desktop class applications. This would explain why time and time again we hear from developers that they are overwhelmingly happy with the quality of applications they can write for iOS. More importantly these applications are extremely sophisticated. They are not simply dumbed down mobile versions of desktop software, but an entirely new class of software all together.
Because I am rarely at my desk doing real “work” it is essential for me that I am able to fulfill my job role any place, any time, and with any device I have with me. The bottom line is I don’t always have my notebook, and I don’t always have my iPad with me. However, I always have my smartphone with me. With every single device and mobile OS I have evaluated, I have never felt as productive or efficient on the go with regards to my specific job functions as I do with iOS. As much as I enjoy and appreciate evaluating other other platforms and as much as other platforms have some things that I truly like, at the end of they day I will choose the device that makes my life and my job easier. For the kind of work I do and the manner in which I get things done, other platforms I’ve tried require more work and more time than it takes to do the same thing on iOS. That alone makes the choice easy for me. I don’t want to work for my smart devices, I want them to work for me.
For Me and Maybe Not You
Now I’m sure at this point many passionate fans of other platforms want to point out all the reasons why their platform of choice is better than mine—but let’s remember one thing. Just because your favorite color is green doesn’t mean mine has to be also. Just because you like BMWs doesn’t mean I have to as well. Insert any analogy you like here. The best device is the one you chose for specific reasons unique to your wants. The best device for me is the one that meets my individual needs, wants, and desires. Yours may be different and that is ok. We don’t live in a black and white world and I hope we never do. I fully acknowledge and appreciate the benefits of other products. I also know no device is perfect. But for me, time after time, device after device in which I put through the the paces of my personal life and workflow, all roads lead back to iOS.
Yesterday, Canaccord Genuity, came out with a report on the profits taken in by the mobile phone sector and Canalys came out with a report on the market share in the tabet, notebook and desktop sectors – and all anyone could talk about was whether Apple and Samsung could take in more than 100% of a sectors’ profits or whether the tablet was truly a PC or not.
Please. These are accounting and verbal semantics that are as meaningless as asking how many angels can stand on the head of a pin. Let’s focus on the implications of these reports and ignore the bickering over irrelevant rhetorical flourishes.
Handset Profits
According to Canaccord Genuity, Apple took in 69% of the handset (all mobile phones, not just smartphones) profits in 2012. Samsung took in 34%, HTC accounted for 1%, BlackBerry and LG broke even, Motorola and Sony Ericsson both acounted for minus 1 percent and Nokia brought up the rear with a negative 2 percent of the industry profits.
No one not named Apple or Samsung is making any meaningful profits from the handset sector. Considering that both Microsoft and Google’s Android are based on a licensing model, this is more than a little shocking. Licensing is supposed to encourage variety among hardware manufacturers. Clearly, that is not happening.
Many industry observers have the handset market all wrong. They opinie that Andoid is destroying iOS. What is actually happening is:
1) With 69% of the profits, iOS is doing just fine. More than fine, actually.
2) Android destroyed every phone manufacturer not named Apple (BlackBerry, Nokia, Palm, etc.).
3) Samsung destroyed every Android phone manufacturer not named Samsung (HTC, Motorola, Sony Erricson, etc.).
Pundits like to predict the imminent demise of iOS, but those profit numbers say just the opposite. And even as Android’s market share has increased, iOS’s profit share has increased too. Market share is no guarantor of profits. This should be self-evident. But apparently, it’s not.
The big losers here are Palm, Nokia, BlackBerry and Microsoft. Palm is gone and Nokia and Blackberry’s market shares and profits have fallen off a cliff. And Microsoft? After three years of flailing, Microsoft’s Windows 7 is dead and Windows 8 phone manufacturers are all in the red.
Tablet, Notebook and Desktop Market Share
Worldwide PC shipments increased 12% year-on-year in Q4 2012 to reach 134.0 million units, with pads accounting for over a third. ~ Canalys
There are two things that we can take from this statement. First, personal computing sales are growing at a respectable rate, however all of that growth is coming from tablets, not from notebooks and desktops.
Second, tablets now make up one-third of the mix of tablets, notebooks and desktops. In fact, several groups are now predicting that tablets will outsell notebooks and desktops by the end of 2013. This is a monumental shift in form factors and not everyone is making the changes necessary to stay abreast.
Companies like HP, Lenovo and Dell missed the shift to smartphones and now they’re missing out on tablets too. But of all the companies being hurt by the rise of smartphones and tablets, I think that Microsoft has been hurt the most:
…only 3% of pads shipped in Q4 2012 used a Microsoft operating system. The software giant’s entry into the PC hardware market was something of a non-event. High pricing, poor channel strategy and a lack of clarity regarding its RT operating system led to shipments of just over 720,000 units. ‘The outlook for Windows RT appears bleak. ~ Canalys
Who Is Selling All Of The Tablets?
According to Canalys, Apple – despite being supply constrained – sold 22.9 million tablets for 49% share, Samsung shipped 7.6 million tablets, Amazon shipped 4.6 million tablets for 18% share, and Google’s Nexus 7 and 10, combined, shipped 2.6 million tablets.
Again, companies like HP, Lenovo and Dell are almost non-existant in the 10 inch tablet space and Windows 8 tablets aren’t even competing in the rapidly growing 7 inch tablet space.
As an aside, Canalys seemed impressed with the Google Nexus numbers but I’m not. If you’re selling your hardware at cost and making it up in content and advertising sales, then your sales numbers should be much, much higher. And it has to be an embarrassment to Google that the Amazon tablets – which have the same business model as Google – are far outselling Google’s tablets.
Who Will Be Selling The Tablets Of Tomorrow?
‘Those who control ecosystems, such as Amazon and Google, can obtain revenue from content sales, but pure hardware OEMs must accept decreasing margins or exit.’
Samsung made impressive growth in tablets this year, but their tablet future seems uncertain. With Amazon, Google and Apple all able to supplement their tablet incomes with App and content sales, Samsung is left out in the cold.
It’s still early days for Windows 8 tablets, but it’s not looking good. I expected there to be an explosion of Windows 8 tablet sales last quarter due to pent up demand and holiday buying. The question in my mind was whether Microsoft would be able to sustain its large initial sales momentum.
That initial sales explosion didn’t happen. Windows 8 tablet sales were more than disappointing. An ill omen if ever there was one. And as I’ve stated before, regardless of how well the Surface Pro sells, it is a notebook, not a tablet, competitor. In a world where tablets are clearly the next big thing, Microsoft is still insisting that what people really want are hybrids, not pure tablets.
Conclusion
Smartphones and tablets are growing and notebooks and desktops are stagnant or declining. Only Samsung and Apple are competing in phones. Only Amazon, Google, Samsung and Apple are effectively competing in tablets. The mobile “train” has left the station and companies like HP, Lenovo, Dell and Microsoft are standing on the Windows 8 platform, watching it pull away.
Yesterday Apple released their earnings for the fourth quarter of 2012. It is important to note that Apple had 14 weeks, as compared to the normal 13 weeks, in their year ago fourth quarter. In order to equalize results, all comparisons will be done on a week to week, rather than on a quarter to quarter basis.
Apple sold 4.1 million Macs compared to 5.2 million in the year ago quarter. That’s a decline of 16% on a week to week basis. My initial reaction to this news was that Macs were suffering from the same malaise that is plaguing all notebook and desktop computers. I’m sure that this is somewhat true, but Apple laid the blame squarely on supply constraints. In other words, they couldn’t make their Macs fast enough to meet demand.
…we were significantly constrained with respect to the new iMacs and we’re only able to ship them for the final month of the December quarter. We believe our Mac sales would have been much higher absent those constraints. ~ Peter Oppenheimer
Further, it does not appear that Apple is confident that they will be able to make enough Macs for the upcoming quarter either.
On iMac we’re confident that we’re going to significantly increase the supply, but the demand tier is very strong and we’re not certain that we will achieve a supply/demand balance during the quarter. Peter Oppenheimer
iPad
Apple sold 22.9 iPads compared to 15.4 million in the year ago quarter. That is an increase of 60% on a week to week basis.
Clearly the iPad Mini was a big seller, although Apple didn’t break out the specific numbers. Again, Apple couldn’t make enough iPad Mini’s to satisfy demand and they’re still struggling to make enough, even now.
…the iPad mini was very constrained.
We believe that we can achieve supply-demand balance on iPad mini later this quarter.
One interesting note is that the popularity of the lower priced iPad Mini brought the average sales price (ASP) of all iPads down by $101 on a year-over-year basis.
iPhone
Apple sold 47.8 million iPhones compared to 37 million in the year ago quarter. That’s an increase of 39% on a week to week basis.
Again, for much of the quarter, Apple simply couldn’t make enough iPhone 5’s to satisfy demand. More surprisingly, Apple was unable to make enough iPhone 4’s to satisfy demand and they are still struggling to do so.
If you look at the iPhone sales across the quarter, we were very constrained for much of the quarter on iPhone 5.
iPhone 4 was actually in constraint for the entire quarter…
…supply of iPhone 5 was short to demand until late in the quarter and iPhone 4 was short for the entire quarter.
We believe that we can achieve supply/demand balance … on iPhone 4 during this quarter.
This information, along with reports from Verizon, would seem to suggest iPhone 4 sales were growing in caparison with the iPhone 5. However, we have two statements in the earnings call that seem to counter this conclusion.
…the ASP for iPhone was essentially the same year-over-year in the quarter that we just finished.
If the mix of iPhones was drifting towards the older models, one would expect the average sales price to go down, not remain the same.
…if you looked at the mix of iPhone 5 to total iPhone and then in the previous year you look at 4S to total iPhones towards the top iPhone those mixes are similar.
That’s about as plain as it gets (although I still wish it were plainer).
iOS
All told, Apple sold over 75 million new iOS devices this quarter bringing their total to over half a billion. Kantar estimates that Apple gained 6.3% market share in the U.S. and maintained market share in Europe with growth of only 0.2%
Revenue, Income & Cash
Apple’s revenue for the quarter was 54.5 billion compared to 46.3 billion in the year ago quarter. That’s an increase on a week to week basis of 27%. To put that into perspective:
— Apple generated more revenue in one quarter than Google did in all of 2012.
— Apple is getting close to generating as much revenue in one quarter as Microsoft does in one year.
Apple’s net income (profit) was 13.1 billion. That’s an increase on a week to week basis of 8%. To put that into perspective:
— Apple made over a billion dollars in profit a week.
— Apple made more in profit (13.1 billion) than Google made in revenue (11.34 billion). Further, Apple generated as much profit in three weeks as Google did in three months ($2.89 billion).
— Apple’s 13.1 billion in earnings this quarter was the fourth largest of all time.
Apple’s cash totaled $137 billion compared to $121 billion at the end of the September quarter. That’s a sequential increase of almost $16 billion.
The Future Of Computing In Two Parts
I have a pet theory that mobile computing is breaking into a premium iOS operating system and a commodity Android operating system. Please pardon the following very long quotes from Apple’s earning call, but it appears that Apple is thinking along the same lines:
While other mobile devices and operating systems faced increasing security risks and fragmented inconsistent user experiences iPhone and iOS continue to deliver an exceptional experience that people love. They also provide a secure and trusted ecosystem that IT departments require. iPhone continues to be embraced by government agencies and businesses across the globe.
Many U.S. government agencies are issuing iPhones by the thousands as part of their new mobile strategies. Some examples include NASA and National Oceanic Atmospheric Association, Immigration and Customs Enforcement, and the Transportation Security Administration.
We’re also seeing continued growth iPhone growth in business across the board from companies replacing existing smartphone deployments to businesses adding first-time smartphone users. Companies around the world like Neiman Marcus, Skanska and Volvo are issuing iPhone to their employees to improve interactions with customers and give workers access to essential corporate data.
In addition to the tremendous response from consumers, iPad continues to be the tablet of choice for businesses and government agencies, transforming the way their employees work. Financial institutions like Barclays, Nomura Securities, and Bank of Beijing are deploying iPad to enable employees to better service customers and work securely with financial portfolios and products. In particular, Barclays’ rollout of over 8,000 iPads has generated tremendous employee engagement and feedback, making it the most successful IT deployment in Barclays’ history.
State and local governments in the United States are also rapidly adopting iPad. Court systems, accounting inspectors, and law enforcement agencies use iPad to streamline processes and replace huge amounts of paper. And state legislatures in Virginia, Texas, and West Virginia are all using the iPad to give lawmakers instant access to government documents and information.
Outside the U.S., 10,000 iPads are being deployed as part of broad adoption of the local government workflow solution in Sweden and over 5,000 iPads have been purchased by the government in the Netherlands for the Dutch tax authority and the Dutch court system.
Note the adoption of iOS devices in business, government and education. These were areas where Microsoft ruled supreme but now their dominance seems to be waning. And these are areas where Android is struggling despite its massive mobile market share.
Conclusion
Apple is engaged in a battle for control over the future of personal computing. Microsoft and Intel won the last battle but, in terms of unit sales and potential profits, that battle seems almost trivial. While Microsoft and Intel controlled the desktop and notebook markets, it appears that the combination of the smartphones and tablets is going to eclipse the PC’s numbers and profits by far.
There are many companies vying to become the king of personal computing. Each company has its strengths and each has its weaknesses. Apple has the hardware and software in place, but the future of computing is the cloud acting as the digital hub for all of that hardware and software and Apple has not yet proven its competency in that realm. Google has the most popular mobile operating system in the world but they haven’t figured out how to monetize it…yet. Microsoft is the king of the notebook and the desktop but that market is diminishing and Microsoft can’t seem to get any traction in mobile (smartphones and tablets). Samsung is making money – though not as much money as Apple – but they are not in control of their operating system or their ecosystem. Amazon? Geez, how does one evaluate Amazon? The less profit they make the more successful people think they become.
Tech is involved in its own personal game of thrones. And there are many new contestants waiting for their chance to steal the crown. It’s difficult to predict the future of personal computing but it’s easy to see that it’s going to be fascinating to watch.
Tablet PC shipments are expected to reach more than 240 million units worldwide in 2013, easily exceeding the 207 million notebook PCs that are projected to ship, according to NPD
Amazing.
The only thing greater than the resistance to tablet adoption has been how quickly tablets have overcome that resistance.
SPEED OF ADOPTION
The modern tablet was reinvented in April 2010 with the introduction of the iPad. It’s now two years and 8 months old. No personal computing technology has been adopted faster than the tablet. And that’s saying something. The tablet is being adopted at almost twice the rate that the smartphone was.
TOUCH USER INPUT VS. PIXEL USER INPUT
The key to understanding why the tablet has taken off is touch. Prior to the iPad, tablets used desktop interfaces. The genius of the iPad was that it used the finger – not the mouse or a stylus – as the primary user input.
TABLETS VS. HYBRIDS
Despite the unprecedented success of the tablet, many people think that the tablet is flawed – that the tablet would be perfect if only it were…a notebook.
It is my belief that the tablet and the notebook are inherently separate computing tools because their primary user inputs are incompatible. The tablet and the notebook use two disparate user inputs that cannot be successfully integrated into a single user interface.
This is highly controversial. If I’m right, then hybrids will always be niche products, struggling to serve two masters. But I could be wrong. Times change and technology changes. Perhaps a unified user input is possible. But it’s certainly not available in today’s market place.
PERSONAL AND INTIMATE
That which we touch, we love. The tablet is a personal, intimate device. It’s revolutionizing every aspect of our computing lives, but I think the tablet is going to have a particularly strong impact in education. We’re about to move from a computer for each classroom to a computer for each student. And that’s going to change everything.
Today we can’t imagine leaving our homes without our phones. Tomorrow, we’ll feel the same way about our tablets. I can, in fact, imagine a day where we wear our phones on our wrists, like watches, and our tablets take care of most of our other computing needs. But that’s a discussion for another day.
CONTENT CONSUMPTION VS. CONTENT CREATION VS. PRODUCTIVITY
Many artificial barriers have been constructed in an attempt to understand and/or dismiss the importance of the tablet. For example, arguing whether the tablet is a content consumption or a content creation device is about as helpful as debating how many angels can stand on the head of a pin. It’s a false dichotomy. There is no mythical line of demarcation between content creation and content consumption. The question should be, which tool is right for the job. And when you put the question that way, silly distinctions like content creation and content consumption simply fall away.
Similarly, questions of “productivity” suffer from two flawed ways of thinking. The first is to assume that the term “productivity” should be defined by comparing the tablet to the PC. You don’t compare a tool to a tool, you compare the tool to the job it is being asked to do. A screwdriver makes for a lousy hammer, but it’s pretty useful when you want to use a screw instead of a nail. Similarly, a tablet makes for a lousy notebook computer – but tablets aren’t trying to be notebook computers.
A second flaw is the myopic manner in which we define “productivity”. Most people define productive as “the things I do” and unproductive as “the things that other people do”. Don’t make the mistake of defining the productivity of others using your standards. Tens of millions of people are being productive on their tablets, even if their definition of productivity dramatically differs from your own.
BIG PHONES VS. TABLETS
Even though every flat computing device bigger than a phone is being defined as a tablet, there are very big differences between tablets that run big phone apps and tablets that run apps optimized for larger screens. Anyone who has used an iPad can vouch for this. The difference between an iPad specific app and a double sized iPhone App is night and day.
Further, most everyone is lumping all 7 inch tablets together. The truth is that there is a big difference in screen size between most 7.0 inch tablets and Apple’s 7.9 inch iPad Mini. (I’m sure that Apple would love to say that the iPad Mini was an 8 inch tablet in order to highlight the difference.) Most 7 inch tablets run big phone apps. The iPad Mini runs tablet apps. That’s a big differentiator that’s going unnoticed by pundits but seems to be taken into account by tablet buyers.
WHERE DO WE GO FROM HERE?
We live in a world of multiple screens: phone, tablet, notebook, desktop, TV. We start a task on one screen and finish it on another. We consume content on one screen while simultaneously initiating queries on another screen. The television is the screen in our living room. The phone is the screen that fits in our skinny jeans. The notebook and the desktop are the screen that we use when we have to engage in multiple screen, processor intensive or pixel specific tasks.
The tablet? The tablet is the default screen – the screen that we turn to when we have a choice between it and a phone or a notebook. And that makes the tablet the future of computing.
Prediction is very difficult, especially about the future. ~ Niels Bohr, Danish physicist (1885 – 1962)
Trend #1: Two Seperate And Incompatible Types Of User Interfaces
Personal computing will be divided into two types of user interfaces:
1) Touch; and
2) Pixel-specific (surface-required)
Touch will require the use of only a finger for user input and will work best on the go. Pixel-specific will require the use of a mouse or trackpad which, in turn, will require the use of a flat surface. These two user inputs are inherently incompatible with one another – and that has consequences.
Prediction #1: There Is Little Room For A Category Between The Tablet And The Notebook
I do not think that there is room between the touch-only tablet and the mouse/trackpad-only notebook for the new category of computer that Microsoft is trying to create with Windows 8 tablets. Tablets are becoming more capable. Notebooks are becoming ever thinner and lighter. There is little room for the hybrid. Hybrids will survive as a niche – but they will not thrive as a category.
Many disagree with this opinion, including some who write for Tech.Pinions and everyone who works for Microsoft. That’s the beauty of free speech and free markets. Time – and sales numbers – will tell the tale.
Prediction #2: Tablets Are Going To Be Even Bigger Than We Thought
Tablets are the future and in a much bigger way than even I had imagined.
They are not just becoming an equal to the pixel-input, surface-only devices, they will soon be the default, go-to device of choice. We’ll use our tablets whenever we can, our phones whenever we’re traveling and our surface bound devices only when we absolutely have to.
Pixel input personal computing devices will become like land line phones. They will persevere but with an ever shrinking base and and ever decreasing significance to our lives.
Prediction #3: Apple Will Create A New iPad Mini In The Spring
This is really a sub-set of prediction number two, above.
I believe that tablets are going to be huge in education. Last year, many school districts tested the waters with tablets. This year, many are going to move from trial programs to initiating programs designed to eventually put a tablet in the hands of every single student. This is a profound computing shift which will have a profound effect on education. By 2014 and beyond, the flood gates will have opened and tablets in schools and colleges will be accepted as the new norm.
Apple knows that they currently have an in with the education market. Educational institutions make most of their buying decisions in the Spring. In my opinion, Apple is not going to let the Spring go by without refreshing the iPad Mini.
Trend #2: Two Phone Operating Systems
In the Ninties, there were only two personal computer operating systems that mattered – Windows and whatever Apple was running on the Mac. Windows dominated, but the Mac survived and, in terms of profits, thrived.
Simiarly, there are going to be two operating systems that matter to smartphones. But this will be a duopoly with a difference. Google is not a strong and domineering operating system shepard the way Microsoft was. iOS has 500 million users and is self-sustaining. This time, iOS will be the premium operating system while Android will be the majority operating system.
Prediction #4: iOS will become the premium model, Android will take the rest
iOS will appeal most to businesses, government and education. (The irony of predicting Apple as the preferred operating system for business is not lost on me.) Android will take the rest.
Both operating systems will unhappily co-exist with developers flocking to iOS and cost-concious buyers flocking to Android. The dollars will continue to flow to Apple and the market share will continute to flow to Android and both sides will continue to insist that the other side doomed.
In the meantime, RIM and Nokia will continue to fade and Microsoft’s Windows Phone 8 will stubbornly cling to third place. But a licensed operating system does not fare well as a minority player.
Trend #3: Freemium v. Premium
The chief divide between tablets will not be their size, but their business models. Amazon and Google follow the freemium model. Samsung and Apple follow the premium model. The Freemium’s give away their hardware at or near cost and seek to make money on the sale of content and services. Apple’s premium model seeks to sell their hardware at a profit and encourage those sales through the use of both content and services.
Prediction #5: Samsung Will Be Forced To Create Their Own Ecosystem
In a world where your operating system provider (Google) is undercutting you by selling hardware at cost and taking in all the content and service dollars, there is simply no other choice — Samsung needs to create their own content and services ecosystem. Samsung has been preparing for this moment for quite some time. And we’ll see the fruits of their labor in 2013.
Trend #4: Multiple Screens
I think the biggest trend that is receiving the least attention is that of multiple screens. In 2001, we had one computer screen and it sat on our desktop. In 2006, we had, at best, two computer screens – our desktop and our notebook. In 2013, we have 4 computer screens – our phones, tablets, notebooks/desktops and TVs. And the when and why we use those screens is going to help to shape the future of computing.
I’m going to cop out here and not make any predictions other than to predict that this trend is going to change everything. People are already using two screens – a television and a phone or tablet – to watch TV. And the way we rapidly switch from phone to tablet to notebook and back again is already baffling that way pundits think about categorizing and pigeonholing our computing buying and using habits. Multiple screens deserve not just a simple prediction on our part but ongoing examination and analysis. It is not an emerging trend but an existing trend. It is the consequences that we haven’t yet fully fathomed. Expect to see us talk a lot more about the effects of multiple screen computing in 2013 and beyond.
On December 16, 2012, Morgan Stanley issued the results of a consumer survey.
We surveyed 1,010 US adults between November 26 and December 3 2012. The sample is representative of US individuals (18+) by gender, age, income and geographic regions. Conclusions based on total sample have a maximum margin of error of +/- 2.5% at 90% confidence level.
(NOTE: All quotations are sourced from the Morgan Stanley report.)
1) TABLETS
The first and most obvious result of the survey was that tablets, as a whole, were going to be clear winners of the 2012 holiday quarter.
One-third of respondents own tablets today, compared to only 8% a year ago.
While this can come as no a surprise to anyone following the tech industry, it is important to note that, in terms of gift giving for this holiday quarter, the growth of the tablet has come at the expense of notebooks, desktops and especially e-readers.
2) E-READERS
Among consumer electronic gifts, tablets are the most popular, followed by smartphones, while e-readers experienced the largest decline.
— Tablets (50% in 2012 vs. 31% in 2011)
— Smartphones (26% in 2012 vs. 17%)
— E-readers (9% in 2012 vs. 31%)”
Tablets are the number one gift idea in consumer electronics this year, while it was a tie between tablets and e-readers last year.
iSuppli seems to concur with this sentiment, indicating that general purpose tablets are harming e-reader sales.
It appears that they e-readers may well be relegated to niche status as general purpose tablets – which also serve as e-readers – become lighter, smaller and lower-priced.
3) AMAZON KINDLE FIRE
While the Kindle Fire is not strictly an e-reader, it too seems to be suffering this holiday season.
Kindle Fire appeal seems to be waning as 16% of potential tablet buyers would pick the device vs. 21% in last year’s survey
Lower end tablets may be suffering from the effects of increased competition. While the Amazon Kindle Fire was the a hot holiday gift in the fourth quarter of 2011, it now has to compete with the Nexus 7, Windows 8 tablets and the iPad Mini. As a result, Kindle retention numbers dropped from an already low 40% to and even lower 36%.
If these numbers bear out, this has to be terribly dissapointing for Amazon. Last year, there was a burst of enthusiasm for the Kindle Fire line during the holiday quarter but that enthusiasm seemed to all but evaporate as soon as the quarter ended. This year, Amazon introduced several new lines of tablets and vastly improved the quality of their hardware offerings. Surely they anticipated increased, rather than decreased, enthusiasm for their products.
It is too early to tell for sure, but it is possible that we’re seeing a trend away from single purpose tablets and a trend towards higher quality, general purpose tablets instead.
4) SAMSUNG
Samsung phones made an impressive leap in rate of retention from 37% to 63%. (Note, however, that this still does not match the iPhone’s stellar 83% rate of retention.)
While Apple’s retention rate is by far the highest, iPhone users who plan to buy a Samsung device increased slightly from 3% to 8%, though this share came entirely from other Android vendors who saw less interest from current Apple users compared to a year ago. This reflects Samsung’s dominating position in the Android ecosystem and success in marketing itself as an iPhone alternative.
You simply have to be amazed at what Samsung has accomplished and in such a short time. But ironically, Samsung’s growth is not only coming at the expense of competitor’s like RIM and Nokia, but it is also coming at the expense of other Android manufacturer’s as well.
One of the strengths of a licensed operating system like Android is supposed to be diversity of hardware manufacturers. That simply hasn’t happened. While Microsoft distributed its software licences to thousands of hardware manufacturers, Samsung has become the one and only hardware manufacturer that matters to Android. We’ll have to save the discussion of the consequences of this unexpected development for another day.
5) MICROSOFT
The survey contains two interesting points regarding Microsoft’s recent tablet efforts.
First, Microsoft Surface is preferred by 12% of those planning to buy a tablet.
Second, while 81% of iPad users plan to stay with Apple, 8% plan to purchase Microsoft’s surface.
Additionally, a different survey indicates that Windows 8 is a very distant third, to iOS and Android, when it comes to developer’s platform preferences.
I think these results have to be terribly dissapointing to Microsoft. Some pundits were expecting a flood of defections from the iPad once Microsoft debuted its tablet offerings. That clearly is not happening.
Further, I had anticipated an initial burst of enthusiasm for Windows 8 tablets. The real question, in my mind, was whether Microsoft would maintain that initial enthusiasm. Instead, sales of Windows 8 tablets has been tepid, at best. Having 12% of consumers intending to buy your products is far better than having 0% able to buy your products, but I believe that it is far, far less than Microsoft was hoping for or expecting.
6) APPLE
It seems as though the bad press for Apple has been endless of late, but that negative view is not supported by the Morgan Stanley survey. They point to at least four reasons why Apple can be optimistic about sales this holiday quarter.
First, more survey respondents want to buy the iPhone 5 today than the iPhone 4S a year ago.
34% of consumers plan to buy an iPhone in the next 6 months, compared to 30% in last year’s survey
If I recollect, the iPhone 4S was pretty popular last year. And one would assume that even more enthusiasm for the iPhone 5 should lead to even more sales this holiday quarter.
Second, analysts keep opining that Apple needs to sell a cheaper phone but customers keep disagreeing.
More respondents plan to buy the newest iPhone model today than a year ago (86% vs, 82%), likely due to key hardware improvements in the iPhone 5: LTE, brighter screen, and lighter and thinner phone.
Third, the iPad Mini does not appear to be cannibalizing the larger iPad but it does appear to be bringing new customers into the Apple ecosystem.
We believe iPad Mini’s cannibalization risk to iPad 9.7” is manageable. 47% of iPad mini purchasers are new to Apple, according to our survey. This is only slightly lower than 56% for the larger iPad 9.7”, suggesting the smaller iPad is attracting new users to the platform in addition to some incremental or replacement purchases from the existing 9.7” iPads.
Fourth, Apple actually INCREASED its already industry leading retention rate.
Apple’s iPhone retention rate improved 10 points over the last year, and 83% of iPhone users today plan to buy another iPhone.
I find it hard to believe that Apple’s sales are going to suffer this quarter when both purchasing enthusiasm and retention rates are going up.
7) CONCLUSION
There is definitely going to be a shake-out in the mobile sector. There are just too many entrants with too little differentiation.
In phones, not only are Samsung and Apple rapidly increasing their sales numbers but their RETENTION numbers are also rapidly rising. This bodes ill for the likes of RIM and Windows 8 contenders like Nokia and HTC.
In tablets, Apple seems to be maintaining its grip on half the market while Amazon, Google, Microsoft and Samsung battle it out for the other half. Again, in the long run, retention numbers may be what matters most but it is too soon to measure retention for newly minted products like the Google Nexus 7 and the Microsoft Surface.
We’ll know far more in January when (some of) the numbers come out. But until then, the Morgan Stanley survey may give us a peek at what we should expect.
Google’s failure to understand that a tablet is something other than a really big phone is becoming one of the great mysteries of the technology world. The Android tablet business has been crippled by a lack of dedicated tablet apps, a situation that Google has done almost nothing to correct. Now Google has confirmed my worst fears with the release of the long-awaited Google maps for iOS.
Google maps for the iPhone is lovely. It’s better than the old Google-based iOS Maps app, adding vector maps and turn-by-turn directions. And it draws on slick search abilities and deep geographic data knowledge, the lack of which can make using Apple’s own Maps app an adventure. And Google maps integrates transit information (a feature sadly not available in the Washington, DC, area.)
But the iPad is a very different story. For whatever reason, Google did not bother to come up with a separate iPad-optimized version. Like any other iPhone app, Maps will run on the iPad, but like any other iPhone app, it looks ghastly. The picture above shows Google Maps on a third-generation iPad in 2X mode (the alternative would be to display an iPhone-sized image in the middle of the screen.) . Scrolling and zooming is not as smooth as on the iPhone, and notice the enormous amount of screen area that is wasted by by simply scaling up the various on-screen controls.
This is all rather hard to understand, since Google should have had no trouble developing an iPad version in parallel with the phone edition. Much smaller developers do this all the time. I can only hope that Google will realize that the iPad is something more than a larger iPhone and correct the error quickly.
I can’t help but have the feeling as of late that a close friend and I are growing more distant. These feelings are encapsulated with gratitude, sorrow, and also an understanding that it is for the better. That close friend is my notebook. Up until the last year or so my notebook as been my trusted partner in this industry and the computing device I depended on more than any other.
My relationship with my notebook peaked in 2011 with the 13” Macbook Air refresh which I dubbed at the time the perfect notebook for me. However, over the past few years, we have been growing apart and the iPad is the culprit.
I have written extensively about the profound industry impact I believe tablets will have, however there is a quote from Steve Jobs when he first launched the iPad that I believe captures every bit of why my notebook and I are growing apart.
“The iPad is more intimate than a notebook, and more capable than a smartphone” – Steve Jobs
Nail.On.The.Head. Smartphones are personal, but tablets are intimate. In light of that profound quote and perspective, we may be better off thinking about tablets as intimate computers instead of personal computers—even though they are both.
In a column a few months ago, I advanced a similar theory to that of Steve Jobs where I connected this intimate relationship I have with my iPad by making the observation that things we hold we love. This is why I believe a handheld computing device like our phones and tablets will garner a deeper connection than the desktop or notebook ever could with consumers. Desktops and notebooks are designed to be used at arms length and roughly around 24-36 inches away from our bodies. Yet tablets and smartphones are specifically designed to be used 8-12 inches from our bodies. Tablets and smartphones–by nature–are more intimate and thus will yield fundamentally different emotional connections with those who use them.
This observation, of not only the intimate nature of these products but also the proximity in which we hold and use them to our bodies, is in my opinion, the root of why my notebook and I have grown apart. When you use a device like an iPad or iPad Mini and are used to holding it closer to your body, and your eyes in particular, you simply get used to consuming information on a screen much closer to your face and eyes.
This observation was cemented in my mind most recently when I and my family were traveling to New York for both fun and some business. During this trip we spent a lot of time out and about in the city and I took my iPad Mini with LTE modem everywhere we went. I spent quite a bit of time using that device to take photos, search for points of interest, browse the web, etc, and didn’t end up touching my notebook for three days. When I did finally get my notebook out and open it up, it felt distant, it felt like I was too far from the screen and I needed to hunch over and get close to it. Now this is not because I have bad eyes, I have perfect vision, it was simply because I was used to computing in this intimate fashion and using my iPad at a distance less than 12 inches from my eyes. Simply put, because the notebook screen is used at a farther distance, it seems smaller and seems harder to see after you have been using a screen much closer to your person. Use an iPad only for three days then go back to a notebook where the screen is 24-36 inches away and you will know exactly what I mean. The fact is the more I use the iPad the farther away my notebook feels every time I use it—and I mean that in a number of ways.
Now, it is not that my notebook is going away, however, because of this change in dimension of computing, I have found that my ideal use case for my notebook is when it is docked with my larger screen. The iPad and using it in such close proximity to my face makes it feel like its a larger screen than it actually is thus conditioning me to prefer this kind of feeling. I find myself more and more leaving my notebook stationary and connected to my bigger screen. That way when I need to use it, it doesn’t feel so far away or that the screen is harder to see. In this scenario a desktop would suffice but I am using my notebook as a desktop in this case.
Now I know this experience may not be the same for everyone since what I am sharing is my personal experience and preference. I do, however, think the intimate element of computing that tablets subconsciously garner with consumers may have a more profound impact on the market than we assumed before.
One last thing needs to be shared. My experience with the iPad Mini being used as my exclusive iPad over the past few weeks has drove my notebook and me further from each other and quicker than my iPad ever did. There is something about the pure ultra-portability and ultra-intimate experience with the iPad Mini that I will be the cause of many consumers re-evaluating their relationship with their notebook.
Oscar Wilde once said that cynics know the price of everything and the value of nothing. Similarly, tech pundits are often obsessed with price to the detriment of value. Despite all evidence to the contrary, pundits think that price is the number one consideration of consumers. In fact, some pundits seem to think that price is the ONLY consideration of consumers. But for most consumers, value is what matters most and price is only one component of that value.
There are three types of consumers: Tightwads, Value Buyers and Spendthrifts. There are two things you should know about these three types of consumers.
First, there are far more value buyers than there are of any other type.
Second, you not only want to ignore the tightwad customers, you want to actively avoid them. They’re a plague on your house.
Pundits seem to think that all consumers are tightwads and all of their analysis reflects that conviction. Smart companies know better.
Reality matters
Remember, reality matters. It doesn’t matter what the pundits think. It doesn’t matter what I think. It doesn’t matter what you think. What matters is what the market thinks. If our thoughts don’t reflect market realities, then we, not the market, are in the wrong.
Naysayers v. Reality
For the past month I’ve read and listened to every imaginable reason why Apple is going to fail. Well, Apple may fail eventually, but not this holiday quarter they won’t. Not by a long shot.
Here are a couple of miscellaneous reasons why I think Apple is just going to crush it this upcoming quarter
1) Mac Sales Continue to Grow
Sales of Mac hardware to U.S. businesses grew by 49.4 percent year over year in the September quarter, posting continued growth while PC sales shrank.
Charlie Wolf of Needham & Company highlighted Apple’s success in the enterprise as the “big story” regarding Mac sales in the September quarter. With PC sales to U.S. businesses declining 13.3 percent year over year, Apple had a 62.7 percentage point difference.
Yeah, yeah, yeah, I know. No one thinks that Macs are important because they’re still such a minority player. But they’re not so niche as you think.
Overall, the Mac’s unit share of the U.S. business market was 9.3 percent in the September quarter. That was up from 5.9 percent of total sales in June, and 5.4 percent in September of 2011.
Apple had an even bigger share of revenue of PC sales to U.S. businesses, accounting for 17.4 percent. That was also up from an 11.5 percent share in June, and 10.7 percent share a year prior. ~ AppleInsider
Overall Mac sales may even shrink this quarter, but their overall importance in the Enterprise will grow. Remember, phones are already outselling Windows machines and tablets are rapidly headed that way too. (EDIT: NPD: Tablets to Outsell Laptops in Q4, Beyond.) Windows is not nearly as monolithic as people think. And Macs are not so nearly as unimportant or niche as people think either.
People forget that over 60% of Apple’s sales come from overseas and that Apple’s overseas sales numbers are rapidly growing. Yes, it will be a big holiday quarter for Apple in the Western world. But it will be a big quarter for Apple in the rest of the world too.
3) Nielson’s Most Wanted Gift Survey
Have you seen the Nielson most-wanted gifts survey? I mean seriously, it is out of sight. What do American kids aged 6 to 12 want this holiday season? Four out of the top five items on the list are made by Apple.
Let’s take a quick look at the top six items on the list:
Now there’s a couple of observations that I take from that list.
First, Apple continues to maintain high consumer mindshare. People think Apple first.
Second, Apple’s popularity is growing. Despite a plethora of competing tablet, smartphone and gaming devices, kid’s attraction to the Apple brand in general and iOS in particular has grown steadily over the past three years.
Third, the iPad Mini is fourth on the list. Yet I strongly suspect that an awful lot of parents are going to walk into an Apple store looking for iPads and iPod Touches and they’re going to end up walking out of that store with an iPad Mini.
Fourth, as an aside, that list ain’t good for Microsoft. Microsoft has lost an entire generation of users – kids who will be growing up using Apple products, not Microsoft products.
It’s Going To Be A Long Harsh Winter For Some Of Apple’s Competitors
Why PC manufacturers Should Fear Apple
The tipping point for tablets has come and gone.
It seems like just yesterday that I was writing articles arguing that tablets were the next big thing. It seems like just yesterday because it WAS just yesterday.
But suddenly, it feels like that battle is over and and done with. If you look through the Nielson survey for whatever age, you see that tablets dominate. Not only are Apple tablets popular, non-Apple devices are on the rise too. Yesterday I was arguing with people who insisted that the tablet was a toy or a fad. As is usual with new ideas, we’ve suddenly moved from the “that will never happen” phase to the “of course that happened and I knew it would all along” phase. True, not everyone is convinced but for the most part the naysayers have learned to remain silent lest they be thought of as quaint, at best, or out-of-touch with reality, at worst.
The age of the tablets is upon us – (just as we all knew it would be, all along.)
Why Microsoft Should Fear Apple
Yesterday, Ben Bajarin wrote an excellent article entitled: “Why Competitors Should Fear the iPad Mini“. A couple of his key takeaways were that families expected to own more than one iPad Mini, that with an iPad Mini consumers feel they pay more but they get more and that “the tablet is taking the place in the hearts of many consumers as the new personal computer.” He couldn’t be more right.
The final word on Microsoft’s tablet efforts has not yet been written, but the preliminary reports do not look good. Not only has Microsoft missed a generation of phone users but now they are missing a generation of tablet users too.
PC sales continue to decline and there are reports that a staggering 42% of Windows users say that they plan to buy an Apple product – either a Mac or an iPad – rather than a Window’s 8 device. I take such claims with a huge grain of salt, but as I said in my article: “Windows 8′s Greatest Sin“, consumer’s now have choices that they didn’t have before. Microsoft is making their long-standing customers choose between Windows 8 and other options. And many are choosing to opt out.
Why Google and Amazon Should Fear Apple
Apple may dominate tablet sales, but there are going to be a ton of Google Nexus 7’s, Amazon Kindle Fire’s and even Barnes & Noble Nook tablets sold this holiday quarter. But the people buying those tablets are buying media tablets that run stretched phone apps. The people who are buying the iPad and the iPad Mini are buying a tablet that runs tablet apps and that can also act as a Media tablet. That’s my opinion. But I think that’s also the opinion of the market and I think we’re going to see that opinion expressed in hard sales numbers come this January.
Remember, there are three types of consumers: tightwads, value buyers and spendthrifts. Tightwads are going to be drawn to the Amazon Kindle and the Nexus 7 because of their subsidized prices. The Nook, at least, is trying to make money on the sale of its hardware. Kindle Fire’s and Nexus 7’s sales are empty sales. Neither Amazon nor Google makes a penny of profit until they sell additional goods, services or advertising. And their chances of doing that when selling to tightwads is not good. Not good at all.
You Can Hang Your Hat On It
I actually think Apple’s margins may be lower this quarter. They’ve introduced, re-newed or refreshed almost their entire line and some of their products – the iPad Mini in particular – will make them less than normal margins. But Apple’s margins are absurdly high to begin with. And since many of Apple’s products are supply constrained, the high margins truly reflect the high value that consumer’s place in Apple’s products.
The last time I paid attention to such things, Apple – a hardware seller – had higher margins than Microsoft – a software seller. That just shouldn’t happen. And in any case, I can guarantee you that Apple’s less than usual hardware margins are going to be far, far, greater than the virtually non-existant hardware margins of either Google or Amazon.
The future is uncertain and predictions are always perilous. But if Apple doesn’t have a banner quarter, I’ll eat my hat. Then I’ll go out, buy another hat, and eat that one too.
It’s going to be a very Apple-y holiday quarter. You can hang your hat on it.
We have been conducting tiers of research trying to gauge consumer sentiment around tablets and in particular of late, the iPad Mini. Part of my interest with this research is designed to get deeper insight into the 7″ form factor in terms of perceived value and core uses cases for consumers versus the larger tablet form factors.
Bear in mind, when we do research it is rooted in ethnography and observational methods not surveys. We interview consumers and strive to understand things from their perspective. I like to explain it by saying we strive let consumers perspectives help shape our own rather than the other way around. That’s how Creative Strategies has done it for over 30 years and its never let us down.
Another thing worth mentioning for those not familiar with our work is that we target consumers in our interviews on specific parts of the adoption curve. Most of our focus is on the mass market consumer and late adopters not the tech elite and early adopters.
Our research on this matter will get packaged in a more formal way in the future but I wanted to share a few highlights.
Shifting Mindset
One thing I found interesting was that nearly everyone we spoke to who expressed interest in the iPad Mini, simply assumed the next version would include a Retina display. More interestingly this did not seem to be a deterrent to their intended purchase this holiday season. When I dug into why there was no interest to wait, the overwhelming consensus was that over time their intention was not just to own one but to own many. Ideally one for every person in the house. So the logic goes, when the new one comes out the older gets handed down. This used to be the logic for notebooks.
Price was certainly a driving factor for the interest of the iPad Mini over the iPad. But to many the price premium did not seem to be a deterrent. One of my key takeaways is that the perception with the iPad and the iPad Mini, relative to tablets, is that even though you pay more, you get more. This in terms of hardware and software quality as well as ecosystem and perhaps more importantly the experience.
The vast majority we interviewed had not owned a tablet yet and were on all parts of the economic scale. Those in the lower income brackets were also intending to research a few other tablets in the 7″ form factor. The leading three were the Nexus 7, Kindle Fire HD and Nook HD. Even with that bit of feedback over 60% said they were still leaning toward the Mini.
When we discussed the intended use cases for the iPad Mini, every single person with kids mentioned it as a part of their child’s educational process as a key use case. This did not surprise me. What did surprise me was that over half of those who brought up using it as a part of their kids educational process made the point that they believed the iPad would be used in schools in the future and making sure their kids were proficient with it was important and that they wanted their kids to use the same technology at home they will be using in schools.
This bit of feedback is very interesting. Here again we have a thought process that was used for notebooks and PC literacy skills being used for tablets. I truly believe we are moving into a touch literate world.
Some concluding thoughts. I firmly believe, now more than ever, that the tablet is taking the place in the hearts of many consumers as the new personal computer. This again cements in my mind the fact that this market will be much larger than the notebook and desktop market ever was and I believe even closer in size to the smartphone market than people realize.
Our research is continually bringing to light that consumers are thinking about tablets the way they used to think about notebooks. Validating again our conviction of a PC Cliff.
Continually we hear that although price is a consideration they don’t simply want cheap. Consumers are smart and they will pay for value. I believe way to many believe that price is the ultimate decision factor and our research continually validates that is not true. If the mindset around tablets continues to have emotional and personal appeal then there will always be a market for more premium experiences.
What I would be worried about if I am an Apple competitor is that the iPad, and perhaps specifically the iPad Mini, becomes the tablet that large portions of the market cut their teeth on thus becoming the standard. The iPad family, in my opinion, is the only no compromise general purpose tablet on the market. The bottom line is price not as big of a deal as we believe and consumers will pit the iPad against the competition (all which I have had extensive time with). That comparison, with the reality that price is not the ultimate driver, is what competitors should be most concerned about.
[dc]A[/dc]pple announced today that they sold 3 million iPad Mini (Wi-Fi version) and fourth generation iPads in three days. Through some smart discussions with some folks who track supply chain shipments, I estimate that around 1.7 to 2 million of those were iPad Mini’s. Call it an educated guess. Any sane person who saw the product in person and understands the value of tablets to the end consumer, would not be surprised with the Mini’s success. I have a hunch the iPad mini will be one of the hottest sellers this holiday season.
I have had the iPad Mini since Friday and I have observed some interesting things.
An iPad For Everyone
I am drawn to big screens. As impractical as it absolutely would be, I would own the biggest possible HDTV imaginable. However, there are many who are much more practical in these matters than myself – like my wife. This is why the diversification of the tablet form factor, and in this case the iPad, is an important move. The market favors options, and this includes the portfolio from single brands.
We have already heard quite a bit about the iPad Mini in education, particularly k-12, and I do believe it has a great deal of upside in that market but there are a few other segments that I think are particularly interesting for the iPad Mini. Specifically women and China (Asia).
My wife and kids already prefer the iPad Mini over its larger brother. I still use the iPad heavily but I have integrated it into my life in ways most have not and depend on it for a large percentage of my computing tasks. What makes the mini such a delight to use is how easy it is to hold. This, in my mind, has always been the attractive feature of the smaller form factor tablets. This may be the practical feature that many, particularly women, may appreciate about the iPad Mini.
Asia is a market that loves miniaturization. Through the decade plus I have been and industry analyst and have studied the global consumer market, I have been shocked at the ultra-small gadgets and PCs that are particularly popular with Asian consumers. This is why, in my opinion, the iPad Mini is so strategic for Apple in China. Its unique form factor, rich ecosystem of apps, and specific software innovations for the Asian market, give it one of the strongest tablet strategies for Asia. Of course the lower price helps as well.
The iPad Mini represents an option as a part of a portfolio of computing devices from Apple. For many it will be the perfect iPad.
Let’s Go Outside
One of my working hypothesis with tablets, is that their more mobile form factor, allows us to take computing to locations where notebooks can’t or are not suited for. As we have studied tablet usage from a variety of different vantage points we continually come across use cases where tablets are being used in much more mobile context than notebooks. Particularly because one can stand up, walk around, be truly mobile and still use the device.
This is the usage model that I thought would lead the iPad out into the world more often. I have seen people using their iPads at the beach, park, walking in the city, etc., but now having used the Mini, I think this product has a shot at being the iPad we see being used out in public regularly.
The case for this ultra-mobile iPad may be made even stronger with the WAN connected Minis and could spur entirely new usage models for pervasively connected mobile computers.
Going back to the appeal of the Mini for women for a moment. Women are uniquely positioned to embrace this ultra-mobile personal computer because most of them regularly carry a bag or purse in which to store it. The Mini fits into few of my pants back pockets but realistically I would never carry it in my pockets.
To be entirely honest, it was this big screen, connected mobile experience that I genuinely liked about the Galaxy Note 5.3 inch phone. That device was just too clunky as a phone to fit the bill in my opinion. The Mini could lead us into some interesting areas if it not only leaves the house, but gets used in places currently only smartphones get used.
Let’s Play Some Games
Another area that stood out to me with the iPad Mini was gaming. And not just casual gaming, full on immersive, hard core gaming experiences.
I grew up in the Nintendo and beyond era. Even as I got older and had a family, I still enjoy a long gaming session from time to time. I was surprised over the past few years to see so many non-casual and more hardcore immersive games (particularly first person shooters) showing up on the iPad. I tried many of these games and just couldn’t take to them. At first I thought it was the virtual D-pad but now I think it was simply the size of the iPad. Although not impossible, it is awkward, to hold the iPad two handed and still easily use a virtual D-pad and soft buttons on the screen. All that goes out the window with the Mini.
I was pleasantly surprised how great of an experience gaming is on the iPad Mini. I have any number of dedicated mobile gaming consoles and I have to say the Mini is on par with all of them.
We all know games are particularly compelling on tablets, and although there are a number of hardcore and immersive games for the iPad, I am not sure how well they are doing. All of that may change if developers catch wind of the iPad Mini as a gaming platform. The iPad Mini could very well be the device that brings Apple into an entirely new level as a gaming platform.
I am excited to see where Apple, developers, and the market take the iPad Mini. This is a fresh new form factor, and one that absolutely has a different appeal and experience than the iPad. I expect some evolving will happen with both platforms as the consumers try and evaluate both to see which ones meet their needs exactly. This is why it is important to have choice. Not all consumers prefer the same solution, and for Apple’s key growth products–which the iPad is in–making sure there are options for all types of consumers and market needs is essential.
Let me start this column out with some context on Windows 8. My mind has changed to a degree about Windows 8 and in particular touch based notebooks and UltraBooks. Several of the Windows 8 PCs I have been using are pure notebook form factors with solid touch-screens. I was never as negative on the addition of touch screens on notebooks as others in the industry, primarily because for over a year now, I have been using my iPad heavily in many work contexts with a keyboard accessory. So the idea of having a keyboard in front of me and touching a screen rather than using a mouse is an everyday way of life. I genuinely believe that many will welcome and enjoy the addition of touch in Windows 8 on many notebook form factors.
I’ll also add this point, Windows 8 may be one of the better Windows releases, if not the best I have seen in some time. I’ll write more on that later and I realize I may be in the minority with that statement.
But now I want to turn my attention to Surface, and more than just Surface, Windows 8 on devices that look and feel more like a tablet.
Just Because You Touch a Screen Doesn’t Make it a Tablet
Simply because a piece of hardware has the ability to touch it, does not make it a tablet. The traditional metaphor of a PC is the desktop / notebook mode. In this mode the screen sits on a desk, or a lap, and is used at arms length. Tablets on the other hand blow that paradigm wide open because they are built to be used while being held—mostly one handed— and operated solely by touch. Tablets are designed, and their experience is designed, to be more intimate and more personal. This does not mean the addition of a keyboard to a tablet is not useful, only that it is not required for most common tasks.
Steve Ballmer made a specific statement about Surface that I want to point out. He said:
Windows 8 is the greatest example of the PC meets the tablet – Steve Ballmer
This quote is a prime example of the way Microsoft thinks about Windows and computing. It highlights that they are still using the old school PC metaphor of computing being done on a desk or lap, at arms length, while stationary. And the Windows 8 platform, as well as the Surface, and many other tablet centric Windows 8 PCs fully conform to this metaphor.
Just look at how Surface was designed and where its value is being positioned. With a kickstand (to prop it up), and a keyboard, AND in landscape mode. All the same features of a notebook. In reality the Surface is a unique new form factor, but it is still largely dependent on the traditional PC computing paradigm. It is designed to converge these two experiences rather than innovate on their differences.
It is important to add here that I am a mature tablet user. I have been using the iPad since the beginning and have it fully melded into all areas of my life in key ways. I also heavily used many tablet PC devices well before Surface. Many writing about Surface rightly point out that it should not be compared to the iPad. I agree, for many of the reasons I point out above, and more to the point that I am not convinced Windows 8 is actually a tablet OS—yet. But to the extend comparing is necessary, it is because the iPad is the gold standard of a tablet experience on the market today.
Ballmer said that Windows 8 is the PC meets a tablet. My response to him is that the iPad is the re-invention of the PC.
That Tablets Advantage is Portrait Mode
I firmly say, and stand on my conviction that the iPad has not only re-invented the PC but changed the computing paradigm for a few reasons — Portrait mode and touch computing (accomplishing complex computing tasks that once required a mouse and keyboard via touch).
I wrote a long analysis on computing in Portrait mode, where I highlight the many advantages of this mode of computing for things like writing, reading, browsing the web, etc. I use portrait mode primarily on my iPad. Only some things like games and a few other apps use landscape exclusively. The iPad, and nearly all of the 275,000 tablet apps and growing not only support both portrait and landscape but they are built uniquely to take advantage of both modes.
Conversely, Windows 8 and Surface, appear to be built primarily for one mode—landscape. Given that Windows 8 is built for a 16:9 format this is not surprising. The software was architected for landscape. Although, the screen can be used in portrait mode, doing so presents a far less enjoyable experience than in landscape. For some this may not be a problem but for me it was a fundamentally counter experience to what I consider a pure tablet experience. Many popular apps, including MSFTs own app store, are built only for landscape mode. A mode that while leaning back in bed, or a couch, etc., is just not comfortable to hold for long periods of time.
I’ve been adamant that browsing the web in portrait mode if far better than in landscape. As is reading books, magazines, etc,. Take a look at the side by side screen shot of the NY Times on Surface and on iPad. Both in portrait mode.
Click for larger image
What happens when you orient Surface to portrait mode, due to the 16:9 aspect ratio, is that everything gets smaller. Where when you flip the iPad, and even Android tablets, the text size stays the same in some cases, or shrinks slightly in others. What you get in portrait mode is more text on a screen, that even when smaller is not crunched or impossible to read. You are able to see more of the web page on the Surface because of 16:9, only the text was much harder to read. Of course you could zoom in or tap in, but that required some time to get the web page consumable. Not a deal breaker, but also not ideal.
Oddly enough two experiences I had were not horrible in portrait mode and you will be baffled by one of them. The first was the Kindle app, which just as I described about the iPad never changed the text size when flipping from portrait to landscape. Which being able to view significantly more text on the screen than the iPad in portrait was a welcome addition. The other experience was with the desktop version of Internet explorer on the Surface. I pointed out a few weeks ago the odd solution of having two different versions of Internet Explorer. In that article I complained that the desktop version of Internet Explorer was not as touch friendly as its Windows 8 app brother. However, it turns out that desktop Internet Explorer is more portrait mode friendly than its Windows 8 app brother. When using Internet Explorer on the desktop, the web operates more like the iPad. When you flip the screen between portrait and landscape the text stays the same size and you simply see more on the screen. Go figure.
Landscape obviously has its advantages in many scenarios like movies, some games, etc. But, in a broad set of tablet use cases portrait is equally and sometimes more important. A true tablet in my opinion provides an excellent experience in both landscape and portrait modes.
All of that to say that there may some hope for Windows 8 from a pure tablet standpoint. Some apps gave me hope while others caused me to shake my head. Portrait mode in Windows 8 will require some specific software approaches from companies and developers who understand portrait and landscape mode and the key tablet use cases for both. It is simply not there yet holistically.
Conclusions
There are more things I like about Surface, and Windows 8, as PCs but not as tablets. I believe that those consumers in the market for a tablet, are not in the market for a PC. Therefore for the tablet market, I am not convinced Surface, or either flavor of Windows 8 is a solution. We will see if this changes or not.
I know many happy Surface customers and many of them have never really used an iPad and are fully in Microsoft’s ecosystem. This may be the recipe of success for Windows 8 PCs.
For Apple, it means they still have no true tablet competition, particularly with the iPad.
Don’t consider this column a review of Surface. That is coming, as their are many things I like about it as a touch based PC, gestures in particular. The main point I am trying to get across is that we need to think about PCs and tablets differently.
When it comes to the tablet discussion, we will need to dive deeper into the 7” form factor role. A form factor Microsoft is avoiding. If Microsoft wants to be serious about tablets, they will need to think long and hard about how to approach the 7” form factor.
I’m sure there is a market for these type of converged devices, but the question is how big? I can see people buying the best pure breed tablet and a very low cost notebook as an equally compelling solution. A solution which actually may be the best of both worlds not a compromise of both worlds.
There is still more to be said in this discussion. Things like how does the iPad stack up to the Surface as a PC? Especially if one does not care about Office. Some may say you can’t compare the Surface to the iPad in terms of a tablet and I may not totally agree but I see their point. However, some may also say you can’t compare the iPad to the Surface in terms of a PC. For that I say we will see.
For the past 2 1/2 years, iPad as has ruled the world of tablets. Except for Amazon’s Kindle Fire and the Barnes & Noble NOOK Tablet, both special-purpose devices dedicated to consumption, there has been no competition worth mentioning. But with the entry of Microsoft into the fray, both with the Surface and an assortment of third-party Windows 8 and Windows RT tablets, the business is about to get a lot more interesting.
I start from the premise that only competition keeps the tech business driving forward and that in the absence of effective competition products stultify. This definitely happened in PCs. After Apple failed to respond to the introduction of Windows 95, the Mac market share fell to the low single digits and without effective competition, Microsoft innovation faded. It has only been Apple’s across-the-board success in recent years that lit a fire under Microsoft.
The iPhone never had iPad’s grace period. It entered a crowded market, where it had to displace the entrenched market leaders: BlackBerry, Windows Mobile, Palm, and Symbian. That proved to be surprisingly easy, helped by lunkheaded competition, but Android soon came along as a serious challenger. I don’t think there is any doubt that the iPhone and Android have made each other better and I expect this process to continue, especially if Google can build and app and services ecosystem that rivals Apple’s. And I think the entry of Windows Phone 8 can only improve things, pushing both Apple and Android, though its commercial success is an open question.
The fact that iPad has improved quite a bit since its 2010 introduction seems largely the spillover of iPhone features into the tablet space: better apps, better services, faster processors, and the retina display. The first notable effect that tablet competition has had on the iPad is the introduction of the iPad mini, which is clearly a response to smaller tablets finding at least some success in the market.
Android tablets, especially the larger ones, have suffered from many problems. but the overwhelming issue is the lack of decent software. The success of iOS devices and even, to some extent, of Android phones has proven that consumers want native apps. But Google has had a very hard time seeing beyond the browser. The Android app situation remains calamitous, with most of the available choices being blown-up phone apps that are terrible on a 7″ tablet and unspeakable on a 10″.
Microsoft is not making this mistake. The selection of Windows RT apps is still quite limited, but Microsoft understands the care and feeding of developers. The RT apps that are available are designed for the Surface’s display (and those of Windows 8 laptops and tablets) and consistently speak the Metro (for lack of a better name) design language common to Windows 8/RT and Windows Phone. Many of the apps are quite good (a notable exception being the built-in Windows 8/RT Mail app, whose awfulness is both inexplicable and inexcusable.)
Equally important, Surface is being launched into a mature Microsoft ecosystem. Microsoft has spent years seemingly pouring money down the holes of Xbox and what used to be called the Windows Live collection of online services. But now, those investments may be about to pay off, as the company pulls together the entertainment content of Xbox and cloud services such as SkyDrive, Outlook.com, and Office 360–not to mention the deep understanding of cloud services it has gained from its enterprise back office offerings. iOS devices sold a lot of Macs because of the way they work so well together in the Apple ecosystem. The same dynamic could work for Microsoft in reverse: the vast installed base of Windows PCs could sell Surfaces and Windows Phones to gain the advantages of the Microsoft environment.Surface is being launched into a mature Microsoft ecosystem..
Surface is not designed as a head-on competitor for the iPad. In many ways, from its ability to work with USB peripherals to its all-but-mandatory keyboard, it is far more PC-like. Like the iPad itself, it represents a new device class in what is turning out to be a surprisingly big space between smartphones and traditional PCs.
It’s going to take a while before we can judge the success of the Surface strategy. Microsoft, however, is a patient company that is smart enough not to expect an instant payoff from its very big bet. But by offering tablet-hungry consumers a worthy alternative to the iPad, Microsoft has put pressure on Apple to keep its game up. That can only be good for all of us.
I have long been a skeptic about the role of personal computing in education, especially for K-12 schools. Yes, the internet has made a wealth of information accessible to students. But the instructional revolution promised by technology optimists seems to hover forever on the horizon. The tablet—and for now, at least, that really means the iPad for reasons I will get to—could be the tool that finally makes the difference. And the new iPad mini could greatly accelerate the trend.
There are many reasons why technology has been an educational disappointment for three decades. Probably the most significant is that the computer has never become students’ constant companion but remains instead an occasional tool.
There have been experiments that equip large groups of students with laptops, but they have been far from a roaring success. Laptops are expensive to buy and even more expensive to maintain—both hardware and software. They are heavy for kids to carry and often lack the battery power to get through a school day of steady use. While many textbooks and other instructional materials are available for Windows and Macs, reading on a laptop screen is a mediocre to terrible experience. In theory, laptops opened the door to new educational experiences, from rich media to a wide-range of custom generated instructional content. In practice, the device itself got in the way.
Tablets are fundamentally different. They are intensely personal and no more obtrusive than a textbook. Reading on them is a delight. While they can break if abused, they are far more rugged than laptops. Perhaps more important, their software is secure by design, making them all but immune to the malware and corruption that plague conventional PCs.
Apple is best equipped to take advantage of the K-12 tablet market. It has quietly worked with schools to develop tools for successful classroom use and to improve the manageability and delivery of custom content and applications. (A case study of a large-scale iPad school pilot in the Australian state of Victoria gives a lot of information on how this can be done.) Apple offers extensive training and support for educators. And the iPad Mobile Learning Lab is a charging cart designed for classroom sets of tablets.Apple is best equipped to take advantage of the K-12 tablet market..
There’s nothing like this in the fragmented Android world and Google does not appear to be taking on a leadership role in education. (It is promoting Chromebooks for educational use, but not Android.) Microsoft might have a shot with its new tablets, but an obscure technical decision will limit their appeal. One of the big attractions of Windows, at least to school system IT departments, is the ability to manage devices centrally, including deploying software and locking down systems. But Windows RT devices, including the Surface and other tablets based on ARM processors, are not able to join Windows Active Directory domains.
What seems like a really geeky move by Apple could greatly enhance the ability of educators to create custom instructional content for the iPad, especially in math and the sciences. Mathematical typesetting for ebooks of all types has been a source of enormous pain for as long as ebooks have been around. Apple has just made it easy. The just-released update to the iBooks authoring app allows text to be created in three forms widely used for mathematical typesetting, LaTeX, MathML, and MathType. This is a simple example of text including LaTeX that I entered into iBooks Author in about a minute:
This attention to the needs of education is likely to pay big dividends for Apple. And the iPad mini should prove particularly attractive to educators. Educational volume discounts could take the unit price well under $300. And the lighter weight and smaller size makes it better suited for younger students, who are likely to find the larger iPad heavy and bulky.
A lot has to happen in education before tablets can reach their potential. Most important, the people who run schools have to overcome their deep-seated fear of students in possession of connected devices. Yes, they can facilitate cheating and distractions, but teachers have always had to deal with cheating and distraction in classrooms and this is a terrible reason to deny students the advantages to students of everything from a library at their fingertips to instructional materials enabled by the tablet. The upfront cost of the tablets will be an issue, though savings on textbooks and other educational materials that will no longer be needed in physical form could allow a rapid recovery of the investment.
Schools, particularly K-12 education, is a sector that has lagged badly in the adoption and use of computer technology. The explosion of tablets may finally be about to change that.
Today’s Apple event was perhaps one of the more interesting to me for a variety of reasons. Apple made a number of announcements that in my opinion give them a strong lineup for this holiday season. Apple has made advances in almost every one of their products in just the last few months. But all eyes today were on the newest member of the iPad family–The iPad Mini.
It took me a long time to come to grips with the reality that Apple was making a smaller iPad. If you have read much of what I have written over the past few months, I explain my belief that the iPad has not yet reached its full potential, and I was concerned that releasing a smaller iPad may deter or delay the iPad reaching its full potential. I was also very keen on some specific and unique positioning for the iPad mini as I stated in a column last Friday. I still believe specific features for families and communities are important going forward but after soaking in the breadth and depth of the Apple announcements from today’s event, my thinking has altered slightly.
It Fits in the Palm of Your Hand
For me the moment of clarity, was when they showed a slide of the new iPad, the iPad Mini, being held comfortably in the palm of a hand. This slide was articulated with the key point that this iPad, the iPad Mini, can do something the iPad can not–fit in the palm of your hand.
This has clearly been a benefit of the 7″ tablet experience if you have ever used one. There was something to being able to hold it easily in one hand. In fact in many of my columns on the 7-8″ tablet form factor, many of our smart commenters remarked on their excitement, or anticipation, of the 7″ tablet form factor because of it being lighter but also easy to hold with one hand.
This is certainly the draw back of the iPad in some but not all use cases. For example, reading on the iPad while laying in bed, reclined, or any position where you are holding the tablet with one hand can be uncomfortable if done for long periods of time. I was thinking about this the other day as I was reflecting on how much I like reading with the Kindle Paperwhite. The primary reason being because it is very light and holding it up for long periods of time during reading requires almost no effort. Paper books are light, and easy to hold. Smaller tablets and e-readers mimic a very natural book like feeling because they are light. This is one of several clear advantages of the smaller tablet form factor.
The first thing that struck me with some of the time I spent handling the iPad Mini was how light it was. By contrast the Kindle Paperwhite with 6″ screen size is .47 pounds and .36 inches thick. The iPad mini is .68 lbs and .28 inches think. I brought my Kindle Paperwhite to the event and held them simultaneously. It was tough to tell the difference in weight.
By taking on the task of delivering a smaller iPad to the market, Apple has in turn designed one of their best iPads yet. But the smaller form factor and cutting edge design is not the only part of the story.
How is it Different than Competing Smaller Tablets?
The answer–as is the case with many platforms–is apps. I was wrong (at least for now) in my initial assumption that the smaller screen size would require custom made apps for the small screen. Apple, by making the screen 7.9 inches, was able to keep the identical resolution as the iPad, so all apps run and look exactly the same. Although slightly scaled down, the apps function and look exactly the same on both the iPad and the Mini. The iPad Mini is literally a full iPad experience in the palm of your hand.
As I reflected on this, I realized I have never personally experienced scaled down tablet apps on a smaller tablet. This is because 7″ Android tablets run scaled up apps built for the smartphone. This means you are running a small screen app and user interface on a larger screen. Apps built for the small screen, were built for just that, a smaller screen.
Yelp on Nexus 7 vs. iPad MiniApple showed side by side comparisons of the same smartphone app running on the Nexus 7 and the same iPad app running on the iPad mini. This image is the only one you would need to see to grasp the full value of Apple’s approach with the iPad Mini. The difference in the software experience between a smaller tablet running smartphone apps and a smaller tablet running tablet apps is night and day. The bottom line is that there are only a few hundred tablet apps for Android and several hundred thousand for iPad. This alone gives the iPad Mini a clear and distinct advantage in my opinion. Whether that experience is worth the extra money for consumers will be up to them, but I know it would be worth it to me.
This experience is so new, that it will take time to form a more lengthy analysis of its potential impact. However, what Apple has done with the industrial design is more than impressive. At .68 lbs, 7.2 mm thin, with a 7.9″ screen, running all the over 250,000 iPad apps, Apple has brought the full iPad experience to the palm of a hand. And with an entry price of $329 my guess is it will get into more palm’s than ever before.
Just two years ago, Apple’s late co-founder and CEO Steve Jobs mocked small-screened tablets as “tweeners” that were too little to compete with the larger iPad but too big to compete with smartphones.
But after the success that Amazon and Google have had with small-screen tablets…
Whoa, whoa, whoa! Stop right there.
Success? What success?
Success is defined as: “the accomplishment of an aim or purpose.”
— Research in Motion, Samsung and other manufacturers introduced tablets with seven inch screens that flopped.
— It’s been estimated that Amazon sold 4.7 million seven inch tablets over a 9 month span.
— It’s been estimated that Google sold 3 million Nexus 7, seven inch tablets over the last quarter.
That’s not a “success”. That’s anything but a “success”.
Notice that the numbers for Amazon and Google are estimates. Their respective companies have not released sales figures. There’s a reason for that.
Also note that the Amazon and Google products are subsidized, which means that they are being sold at cost. What product wouldn’t sell well if it was sold at cost? Apparently, 7 inch tablets.
By way of comparison, Apple sells more that 5 million 9.7 inch tablets every month – at full price – and Apple is conservatively expected to sell 25 million iPads this upcoming holiday quarter. Again, at full price.
I have no doubt that the 7 inch tablet category is viable and I’m guessing that – starting on October 23rd – Apple is going to prove that in a big way. However, we need to stop talking about “the success that Amazon and Google have had with small-screen tablets” or we need to get a new definition for the word “success”. I’m leaning towards the former.
Let me start this column off explaining why I was skeptical of a smaller iPad in Apple’s offering. I have been bullish on tablets from the beginning. From my first experience with the iPad I knew Apple was on to something. In my opinion the iPad in its current form has not reached its full potential as a personal mobile computer. Because I am convinced this is true, the scenario of a smaller iPad that would inevitably cannibalize and potentially delay the potential of the iPad in its current form seemed like a poor long term strategy. However, something I have been thinking about lately may be the key for these products to co-exist and fulfill fundamentally different needs of consumers.
I’ve convinced myself that for Apple to have two different sized iPads, they need to be positioned differently and poised to tackle different market needs. Unlike notebooks, where screen size is partially a matter of preference, but also a matter of primary tasks, tablets play a different role in the lives of consumers. I am a big believer that the iPad in its current form can suffice for many mass market consumers as a notebook replacement. I do not believe the same is true of of a smaller iPad. These two different sized iPads will also offer different software experiences. I do not believe that we will simply see scaled up iPhone apps or scaled down versions of current iPad apps on an iPad mini. This product will shine with custom applications and experiences built for the new screen size.
From Mine to Ours
The BIG opportunity I see for the iPad Mini is to cater to how families or communities use these devices as shared screens in a communal environment. I’ve articulated this before, the concept of a shared screen versus a personal screen, and I think the 7-8″ tablet may represent the perfect form factor for a shared device. Take for example what both Amazon and Barnes and Noble have done in this space.
The Amazon Kindle Fire HD tablet with its FreeTime feature is a solid step in the right direction toward family tablet computing. This solution offers parents the ability to set parental controls for their kids so as they enter FreeTime mode, children are presented with a kid-friendly user interface and access to only approved applications and abilities. Parents can also set limits on how many hours per day kids can play games or watch videos.
Barnes & Noble took Amazon’s important FreeTime concept even further by introducing profiles to the Nook HD. This allows consumers to set up a number of different profiles for each family member. This way, when a particular user logs in, they see only the books, magazines and applications that are of interest to them. Another well thought out part of profiles is that if two people are reading the same book in different profiles, the Nook HD will keep each person’s last read point for them so that they’re not constantly trying to find where they left off. User profiles deliver powerful features and are the best example to date of how a tablet can deliver on a shared family computing experience.
These are experiences that I think shine on a communal or shared screen. These experiences can exist of course on larger tablets but I have a hunch that the smaller tablet form factor will encourage the shift away from the sentiment that the device is mine to the device is ours.
This shift in sentiment from mine to ours could pave the way for entire new software experiences. Just looking at the previous examples I gave from Amazon and Barnes and Noble, show how they are thinking uniquely about this from a software standpoint. I would argue that Apple’s ecosystem is even stronger across the board when you incorporate others screens as well as iCloud to foster and embrace the shift of some devices being ours rather than mine.
What encourages me about this thinking is that it genuinely appeals to the way consumers are using these devices. Some products fit well as a personal product. My smartphone for example is mine and is tied to me in unique ways. The smartphone will also be mine and never ours. A notebook also follows very personal use cases and highly personalized to the individual. The tablet however may be owned by one person but still shared by many in family environments. It is something unique to the tablet form factor that it can comfortably be mine and ours simultaneously. But to my point above, I believe that the smaller tablets those in the 7-8 inch range fit this new paradigm nicely.
Now, I have no idea if the iPad Mini will launch catering to anything I’ve proposed in this column. My point is that whether or not Apple believes it, I believe this is the big opportunity for a smaller iPad. It would be uniquely positioned and create a strong loyalty and stickiness to Apple’s ecosystem for not just the individual but the family as a whole.
The Good, the Bad and the Ugly is a 1966 Italian epic Spaghetti western film directed by Sergio Leone, starring Clint Eastwood, Lee Van Cleef, and Eli Wallach in the title roles. ~ paraphrased from Wikipedia
Apple, Microsoft and Google are engaged in an epic tablet war starring the iPad, the Surface and the Nexus 7 in the title roles.
In the Good, the Bad and the Ugly, the plot revolves around three gunslingers competing to find a fortune in hidden Confederate gold.
In the tablet wars, the plot revolves around three tablet gunslingers competing to find a fortune in hidden tablet profits.
Clint Eastwood as “Blondie”: The Good. A subdued, cocksure, bounty hunter who both works with and works against Angel Eyes, and Tuco in shifting alliances to find the hidden gold.
Apple as “iPad”: The Goliath. An implacable, cocksure, bounty hunter who both works with and works against Microsoft and Google in shifting alliances to find the hidden profits.
Lee Van Cleef as “Angel Eyes”: The Bad. A ruthless, unfeeling and sociopathic mercenary who always finishes the job.
Microsoft as “Surface”: The Bad (ass). A ruthlessly efficient, relentlessly effective, money making machine who knows how to close.
Eli Wallach as “Tuco”: The Ugly. A comical, oafish fast talking bandit who proves to be a crafty and surprisingly dangerous opponent.
Google as “Nexus 7”: The Geeky. A nerdy, engineering and advertising company whose “don’t be evil” exterior masks a surprisingly powerful and unexpectedly ominous corporate bandit.
The Truel
In the movie’s climatic final scene, Blondie, Angel Eyes and Tuco face off against one another in a Truel.
In the climatic autumn of 2012, Apple, Microsoft and Google face off against one another in a truel.
A truel is: “a neologism for a duel among three opponents, in which players can fire at one another in an attempt to eliminate them while surviving themselves. ~ via Wikipedia
Each party jockeys for position, each itching to fire first, each wary of what the other two fighters will choose to do.
In tech, Apple, Microsoft and Google are involved in a great tablet truel. Each party jockeys for position, each itching to eliminate the other, each wary of what the other two competitors will choose to do.
The three stare each other down in the circular center of the cemetery, calculating alliances and dangers in a Mexican standoff.
The Apple iPad stands alone at the center of the tablet world. Then the Google Nexus 7 joins in the fray. And finally, on October 26, 2012, the Microsoft Surface steps into the ring. The three stare each other down, calculating alliances and dangers in a Mexican standoff.
The parties position themselves, the tension grows, the Ennio Morricone film score swells until suddenly, they draw and…
The Treasure
Remember the pundits who laughed off the tablet form factor and called them toys? No? Neither does anyone else. They were as wrong as wrong could be.
Tablets are the second coming of the personal computer. Apple knows it. Microsoft knew it long ago but they were unable to successfully seize the moment and capture the treasure for themselves. Google is only just now realizing the importance of tablets. The company or companies that win the tablet wars win the future of computing. The fight is only just begun but like a gunfight, the battle may soon – and very suddenly – be over.
The Gunfighters
Apple iPad
Apple is like Blondie. Confident. Cock-sure. Perhaps a bit too cock-sure. Apple insists on doing things their own way. Google is counting on Apple’s insistance on having a closed shop to be their undoing. Microsoft is counting on Apple’s unwavering insistance on seperating their touch and desktop devices to be their undoing.
However, Apple has an advantage. Like Blondie, they know where the gold (profits) is hidden. The key to unlocking the tablet treasure is tablet optimized Apps. And using our gunfight analogy, when it comes to tablet apps, if Google and Microsoft have six shooters, Apple has an Uzi. Or a bazooka. Or a tank…
Microsoft Surface
If Apple is the cocky newcomer – the up and coming gunslinger – Microsoft, like Angel Eyes, is the consummate professional – the grizzled vertern who has the experience, knows all the tricks in the book and is extremely confident in their ability to win in a shootout.
If Apple is cocky because they think they’re good, Microsoft is confident because they know they’re good. Microsoft has not only been through the wars, they’ve won the wars and they’ve won them convincingly.
However, Microsoft’s secret weapon in the PC wars was compatibility and familiarity. In gunfighter terms, it would be like shooting with the sun at your back. And getting in five shots before your opponent even drew their weapon. And shooting from behind a wall. It was that devastating an advantage.
When it comes to a gunfight – or a platform war – Microsoft is the best there ever was. But this isn’t yesterday and this is a whole new fight. In mobile, Microsoft’s monopoly advantage is no where to be found. If Microsoft is going to win this gunfight, they’re going to have to do it on merit.
Google, like Tuco, is in good position. Microsoft and Apple know that each is the greatest danger to the other. They will almost certainly fire all their weapons at one another leaving Google (Tuco) free to gain from the exchange.
Only Google, like Tuco, has a problem.
It was just last week that Google initiated a program to encourage the creation of tablet optimized apps for Android.
Last week.
Tuco doesn’t know it, but he doesn’t have any bullets. Google didn’t know it was important, so they don’t have many tablet optimized apps. And in a truel, being unarmed is a big, big problem to have.
The gunfighters move into place. The eyes narrow, the hands twitch, the music swells, the tension mounts, the guns are drawn and then…
…a single shot is fired…
…Blondie shoots Angel Eyes. Tuco also tries to shoot, but discovers that his gun is unloaded.
The mobile wars are a fascinating watch. Apple dominates tablets. Microsoft dominates desktops. Google dominates smartphones. Each knows that the future – the elusive treasure – is in mobile. They can’t all win this truel. One, perhaps two, will be left for dead. Which will it be? Which will it be?
“You see, in this world there’s two kinds of people, my friend: Those with loaded guns and those who dig. You dig.” ~ Blondie (Clint Eastwood)
Unlike The Good, the Bad and the Ugly, no one has seen how this movie ends. Microsoft hopes that this will be a sequel: How Microsoft Won The PC Wars, Part II. Google thinks that this is an entirely new genre of film, the kind where open always outguns closed. Apple thinks that there are two kinds of personal computing companies: Those with platforms loaded with apps.. and those who don’t much matter.
Me? I think it’s advantage Apple. You don’t grow from nothing in tablets to a world shaker in two and a half years unless you got it right. The essence of tablets is touch. Not keyboards. Touch.
Microsoft is desperately hoping that Apple got it wrong. Microsoft NEEDS tablets to simultaneously run both touch and desktop operating systems and Microsoft needs both to run well together.
Google? When it comes to tablets, they’re still digging.
It’s clear to me that Apple’s iPad is going to remain on top. The rumored iPad mini only makes this more likely.
Normally, I’d say that – as in phones – Microsoft would have little chance of having their tablets jump past Google and into second place. But circumstances are far from normal. Despite Google’s overwhelming success in phones, they’ve done next to nothing in tablets. And I have little respect for their newly minted subsidized tablet business model and their ever shifting business strategies. And Microsoft has powerful advantages in their ability to leverage a large desktop customer base and utilize their extensive business connections. Microsoft could quite quickly vault Google in tablets and land in second place…
…and wouldn’t that be interesting. In phones it would be Google-Apple-Microsoft. In desktops it would be Microsoft-Apple-Google. In tablets it would be Apple-Microsoft-Google.
That can’t possibly last. This is about to get very real, very fast.
The world of personal computing is in flux. It’s a “truel” world and for some tablet maker – and possibly for several tablet makers – it’s about to go bad and get ugly.
We at Creative Strategies, as a part of our study of consumer markets, frequently interview consumers in order to get a pulse of the market needs, wants, and desires. To do this we have conversations with groups of consumers in a specific part of the adoption curve. I was having a conversation with some folks who would not fall into the early adopter or the early majority but more toward the late majority of consumers. This group, unlike the early majority, represents the largest part of the consumer buying segment and one of the more interesting and diverse. Early adopters are predictable; the early and late majority are not. Their needs wants and desires are often more realistic, practical and nuanced, or one may say more down to earth.
During a recent interview I had an interviewee say something that got me thinking. When I asked a woman how strongly she would consider competing tablets, she said she was willing to consider other tablets but she would need to be convinced not to buy an iPad.
Why Should I Buy This Over That?
What many companies making personal technology products struggle with is address why this over that question. Often times they assume that a single feature can sway a consumer their way. Or some believe price is the ultimate factor. But the reality is that most consumers do not walk into a retail store genuinely unconvinced of what they want or are interested in when walking in the door. Generally speaking, when a consumer walks into a tech retailer to buy a tablet, they don’t walk in uneducated and hope to use retail to make a decision. Right now, since the iPad is the market leader, consumers are walking into retail thinking “I’m very interested in an iPad.” They have their mind mostly made up. For a competitor to have any shot at swaying these consumers, they need to convince them to not buy an iPad.
From our study of the early and late majority and the things they value and find desirable, I am convinced it is still an uphill battle for iPad competitors. This doesn’t mean this will always be true; just that it is right now. Take the iPhone for example. It took just over six years for a single product from a competitor to outsell the iPhone for just one quarter. And with the iPad no single tablet is even close.
The bar the iPad has set is so high that tablet competitors have resolved to try and change the conversation rather than go head to head with the iPad. This is a wise move but the tradeoff is that you focus more on a segment of the market rather than the mass market as a whole. Apple is having success targeting the larger mass market but competitors are having trouble making ground in this market. Again, I’m not saying this will always be true; just that its the current market sentiment.
All Things Being Equal
The challenge for companies trying to gain the attention of consumers is to avoid trying to just make all things equal. The key for competitors is to focus on differentiators that matter to the early and late majority, the biggest part of the market. We can debate all day what those features are, but I remain convinced that software, and specifically apps, are key in appealing to the desires of the market. And it is not just quantity but quality. Consumers want to know they are getting a tablet that will help them make the most of this new form factor.
When it comes to both Android and Windows 8 tablets, their keys to success will reside in the ability to have showcase apps that can not be found elsewhere. The example I like to use is the original XBOX and the game Halo. Halo for Microsoft’s original XBOX was a platform driver. This game alone paired with XBOX Live for online multiplayer play was one of, if not the, primary reason for many who bought the first XBOX. Microsoft was then able to keep many of these consumers loyal but Halo was the gateway to Microsoft’s gaming ecosystem.
Both Android and Microsoft tablets need software that would be considered platform drivers. This would be a step in the right direction to address the why buy this over that question. Perhaps for Microsoft Office will play this role although I am not convinced at least a point.
Ultimately consumers make trade offs in their own personal preference value chain. If they value price, they must evaluate the tradeoffs in things like design quality and cutting edge features or specs for example. Understanding the tradeoffs and having key differentiators are fundamentals to product strategy.
Tablets are tricky and because we are in the maturing cycle where consumers are still figuring out their needs, wants, and desires with them. Because of that, I remain convinced competing with the iPad will be a challenge. The next year will define much of the tablet category. Those companies who have clear and distinct differentiators that clearly make the case for consumer to buy this product over that have a shot. This applies to hardware, software, and services.
Consumers are buying iPad in droves. And if Apple releases a smaller less expensive version of the iPad they will make it even more difficult for competitors. Many millions of consumers are not being convinced to buy other tablets over iPads and they are researching their options more than many assume.
So the key to tablet success? Convince consumers not to buy iPads. Seems simple, but its not.
We’ve been looking at the tablet business models of Apple, Amazon, Google, Samsung and Microsoft. Today we wrap up the series by seeing what lessons we have learned and by asking ourselves what the various business models can tell us about the future of tablet computing.
Lessons Learned
Lesson #1: Subsidized tablet business models are a niche
The subsidized business models of the Amazon Kindle Fire and the Google Nexus 7 are very limiting. They can only be sold where their content is sold, they can only be sold to consumers who readily pay for content or consume relevant advertising and they will have little appeal to business, government or education. Even if they are fantastically successful within their confined market space, their markets will have little overlap with the tablets that focus primarily on the importance of apps.
Lesson #2: Subsidized tablet business models need to be measured differently and judged appropriately
We tend to judge all things tech by the number of units sold or by overall market share. We should, of course, be focusing on profit instead. Profit is the goal and profit is the standard by which tablet business models should be measured.
The subsidized tablets of the Amazon Kindle Fire and the Google Nexus 7 need to be judged, not by sales, not by market share, but by the profits generated by the sale of content and advertising. In a subsidized business model, nothing else matters.
Lesson #3: Conflicting business models are a sign of weakness
With the Nexus 7 and the Surface tablet, both Google and Microsoft have reversed their licensing models and embraced an integrated approach. There is nothing wrong with adjusting one’s business model to fit the times. There’s a lot wrong with having two conflicting business models.
Lesson #4: Platform Matters
Apple has the strongest tablet platform, by far, and it shows in their sales and in their profits.
Amazon seems to understand platform. However, subsidized business models seem geared more toward content than apps. The Kindle Fire is only a year old. We will have to wait and see how the Amazon platform develops.
Google doesn’t seem to get platform, even now. Their weak platform has not hurt them in phone sales (yet) but it’s crippled their tablet efforts. And with the introduction of the Google Nexus 7, Google has made it clear that they think that content, not apps, is what matters most.
Samsung almost certainly understands platform, but they have no control over the Android operating system nor do they control the way Android content and apps are sold. Their only choice is to suffer or get out.
Microsoft gets platform all too well but they are so very late to the game. The Windows Phone 7 platform went nowhere and Microsoft has to be terribly concerned that the Windows RT and Windows 8 tablets may share the same fate.
Lesson #5: Skate to where the puck is going to be
When the market is underserved, products move toward integration. When the market is over served, products move towards modularization. It seems to me that part of the problem with most of the current tablet business models is that their respective companies have misidentified where the market is over served and where it is underserved.
Apple: In my opinion, Apple is on the right path. Tablet hardware, software, and content distribution are becoming “good enough” and are in danger of being commoditized. Apps and ecosystem are still under serving the market and have a lot of room for growth. Apple is adding value and differentiating itself from its competitors by integrating hardware, software, content and apps into a single, cohesive ecosystem.
Apple’s problem is that they have traditionally not been very good at internet services. Look at MobileMe, Ping, Siri, Maps, etc. And internet services are the key to the future of mobile computing ecosystems.
Jonathan Ive is a genius who can design Apple’s hardware but he can’t design a database system that will work with iCloud. Tim Cook’s supply chain prowess turned Apple from a very good company into a great company. What Apple may need to thrive in the future is a Tim Cook for internet services.
Amazon and Google: I think that both the Amazon and Google subsidized strategies are fundamentally flawed. They are creating an integrated hardware and software product designed to add value via the sale of content. But content distribution has already been commoditized. It makes no sense to subsidize hardware sales in order to enhance content sales if the margins on content are de minimis.
Samsung: The problem with the current Samsung tablet model is two-fold. First, their hardware is only one part of the value chain. They do not control the software, content, apps or overall ecosystem. Second, the area where they add value – hardware – is rapidly moving towards “good enough” and commoditization.
Microsoft: In my opinion, Microsoft’s business model is focused on the wrong part of the value chain or stack. Windows RT and Windows 8 is all about creating a superior operating system. But the operating systems currently available from Google’s Android and Apple’s iOS are already more than good enough for most consumers. Microsoft is pouring all of its efforts into an area where consumers are already satisfied or over served. Windows 8 may or may not be a better mobile operating system than either Android or iOS but it is not so much better that it will compel the bulk of consumers to switch to it.
The Future
We obsess over tiny diferences between the hardware and operating systems of the various competitors but it is business models that dictate success or failure. Until those business models change, Apple has, and will retain, the lead in tablets. Both Amazon and Google have chosen to ghettoize their tablets. Their inability to generate substantial profits will be obscured by irrelevant sales numbers. Samsung tablets are nowhere and they have nowhere to go.
Microsoft is trickier. It first has to overcome the hurdle of creating a virtuous platform cycle. If developers can’t attract customers – if customers can’t attract developers – then nothing else matters because the platform will go nowhere. However, if Microsoft can overcome this initial, all-important hurdle, then they have a chance to be relevant. We should be able to gauge just how relevant they’ll be by this time next year.
Conclusion
The future of tablets will be determined by their respective business models. Yet most of the current business models are not even directed towards that future.
Today there are 5 titans battling to win the tablet wars: Apple, Amazon, Google, Samsung and Microsoft. When it comes to evaluating tablets, we often focus on the differences between the competing companies’ various tablet offerings in the hope that we will detect the little things that make a big difference. However, sometimes it’s best to step back and look at the big things that seemingly make all the difference. A company’s business model is one of those big things.
A tablet business model can be quite intricate but, in essence, it can be broken down into three parts:
— Where does the tablet make its money?
— Where does the tablet provide value to its potential customers? (Why is the customer willing, even anxious, to pay for a company’s particular tablet product or services? What makes a tablet unique? Why does a potential customer choose one company’s tablet over that of another?)
— How well does a company’s business model work overall? How well does it work in comparison to the competition’s business models?
With the above in mind, over the next few days let’s take a look at the tablet business models for Apple, Amazon, Google, Samsung and Microsoft in order to see if we can find the patterns that will help us predict which tablet business models are going to be the winners and which tablet business models are destined to be the losers in the upcoming tablet wars.
1.0 Apple iPad
1.1 WHERE DOES THE APPLE IPAD MAKE ITS MONEY?
When introducing the new Amazon tablets, Jeff Bezos said:
“We want to make money when people use our devices, not when they buy our devices.”
Bezos was purposely contrasting Amazon’s tablet business model to that of Apple’s. But was his characterization of Apple’s tablet business model accurate?
Pretty much. But Bezos’ description of Apple’s tablet business model, while accurate, doesn’t quite tell the whole tale.
Apple makes their money when people buy their iPads. Many think that Apple also makes a great deal of money from the sale of content and by taking commissions from the sales of apps, but this is a misnomer. True, Apple makes literally billions from those sales but that still only represents a tiny fraction of the revenues made from the sale of the iPad itself.
Apple facilitates the sale of content and apps in order to make their iPads even more valuable and even more attractive in order to sell even more iPads in order to make even more money. Content and App sales are crucial to Apple but Apple makes its money from the sale of the iPad, not from the sale of content and apps.
1.2 WHERE DOES THE APPLE IPAD PROVIDE VALUE?
The Apple iPad provides good value in both its hardware and its software. Apple’s store is also excellent but it cannot match the prowess of the Amazon store which has far more content selection at equal or better prices.
The iPad’s real strength lies in its apps and its app ecosystem. No competitor can touch the iPad there. The iPad has more than 250,000 (and counting) tablet optimized apps. More importantly, the iPad has a thriving app platform. Developers develop for the iPad first, developers are well paid for their services and customers see more value in the available iPad apps and readily buy more apps and pay more for them.
However, in my opinion, an even greater strength of the iPad is how Apple makes all of the various elements — hardware, software, content, apps,iCloud, retail support, etc. — work together as one. Customers get (and are willing pay for) value from the seamless experience rather than from any one particular aspect of the iPad.
1.3 APPLE IPAD BUSINESS MODEL ADVANTAGES AND DISADVANTAGES
The Apple tablet business model is coherent and aligned. (Which is not the same as saying that their tablet business model is the only available business model or that it is always perfectly executed.) Their tablet hardware is the “ticket” that their customer’s buy in order to gain access to “Apple World”. Once customers enter Apple’s walled garden, they seldom want to leave.
Apple’s primary mission is not to provide their customers with the best of any one thing but, instead, to provide them with the best overall user experience. This gives Apple a tremendous advantage. They don’t always have to be number one in hardware, software, content, apps, etc. So long as their overall user experience is excellent, that is enough, and more than enough, to keep their customer’s satisfied.
This often baffles industry watchers, pundits and analysts alike. They look at the individual parts of Apple’s tablet offering, find them wanting, then wonder how Apple can continue to compete so very well against other devices that seem to offer more and better features.
What they fail to understand is that Apple shouldn’t even be trying to add a hardware or software feature to their tablets unless those features perfectly integrate with, and add to, the whole. In a seeming paradox, Apple is not trying to make the best iPad, the best operating system or the best content and app store. Instead, Apple is trying to integrate all the pieces into one coherent whole and provide their customers with the best overall user experience. In this – as reflected by the iPad’s superb customer satisfaction numbers – they have been entirely successful.
Summation
Apple’s tablet business model is a very good. The results speak for themselves. However, it’s not the perfect tablet business model and it’s not the only tablet business model. It is now being assaulted from all sides by the entirely different business models of Amazon, Google, Samsung and Microsoft. How does the Apple tablet business model compare and contrast with those competing business models? We’ll see as the week progresses.
Tomorrow we look at Amazon and the Kindle Fire business model.
His main thesis is so important that I’m re-stating it here in the hope that it will draw even more attention to his article and even more attention to this vital issue.
“(Apps) are specifically designed for the current … screen size. (E)verything is placed where it is for a reason.” ~ Ben Bajarin
There is a FUNDAMENTAL DIFFERENCE between an app designed for a smaller (3.5 to 7 inch) screen and an app designed for a 9.7 inch or larger tablet. The pundits don’t get this. Google doesn’t get this. Amazon may not get this. And Microsoft may be ignoring this fundamental truth because they simply have to. Let me explain.
The Pundits Don’t Get It
“And this size (7 inches) is useless unless you include sandpaper so users can sand their fingers down to a quarter of their size.” ~ Steve Jobs
This Steve Jobs quote baffles many tech observers. There are literally hundreds of thousands of useful apps availabe for our phones and our phones are much smaller than a 7 inch tablet. Why then would Steve Jobs say that apps on a 7 inch tablet are useless when apps on the much smaller phone are perfectly usable?
Steve Jobs wasn’t talking about EXPANDING 3.5 inch phone applications up to fit on a 7 inch screen. He was talking about SHRINKING 9.7 inch tablet applications down to fit on a 7 inch screen.
You can blow up a phone app and make it run adequately on a 7 inch screen but if you take an iPad app running on a 9.7 inch screen and shrink it down to run on a 7 inch screen (which is only 45% the area of a 9.7 inch screen) it will be virtually unusable. As Steve Jobs said, you would need to sandpaper your fingers down in order to make them thin enough to interact with the app’s interface.
Google Doesn’t Get It
“Nonsense,” the critics cry. “Phone apps work perfectly well on tablets. Even Google’s Andy Rubin says so.”
It’s true that he does say that. When the Nexus 7 was introduced, Andy Rubin made a point of saying that he was sticking with Google’s strategy of encouraging developers to write a single app for both phones and tablets. This same philosophy was reflected in one of his earlier quotes on the subject:
“I don’t think there should be apps specific to a tablet…if someone makes an ICS app it’s going to run on phones and it’s going to run on tablets.” ~ Andy Rubin
And there, ladies and gentlemen, is the exact reason why Android’s 10 inch tablet strategy lies in tatters and its partners tablet sales lie moribund. Google doesn’t get it.
Optimized apps matter.
iPad Developers Get It
There are 700,000 apps in the iOS App Store. 250,000 of them – one quarter of a million – are specifically tailored to run on the iPad.
Developers don’t develop tablet apps for their health and consumers don’t buy tablet apps for no reason. Some phone apps run adequately when blown up to fit on the iPad’s increased screen real estate. However, most phone apps are less than optimal. Some are virtually unusable.
If you want an optimal phone or tablet experience, you have to tailor the app to the device’s specific screen size.
Where Does This Leave Android?
Until Google changes its philosophy on tablet apps, its tablets will merely run oversized phone apps and they will never have any success with the larger screen sizes and they will never seriously compete with any platform that has tablet optimized apps.
Where Does This Leave Amazon?
Amazon just introduced larger sized tablets. As smart as Jeff Bezos is, I think that he’s about to find out that there is a huge difference between a 7 inch tablet that can run stretched out phone apps and a larger tablet that demands apps optimized for the increased screen size(s). Without knowing a thing about the new, larger, Kindle Fire devices, I will predict that the larger form sizes will fall flat because they don’t add much in the way of content viewing over that of a 7 inch tablet and their lack of apps devoted to their form factor means that apps won’t add much to their value either.
Where Does This Leave Microsoft?
“In essence (developers) are not simply shrinking or expanding their apps to work on smaller or larger screens, they are in essence creating new app experiences for those screen sizes.
…..
Windows 8 touch based hardware will be so fragmented in screen size that we will see touch based Windows 8 hardware ranging from 10” all the way up to 27. If developers feel the need to optimize their software for a screen that is anywhere from a half-inch and even a 2” difference, what will they do when they have 4, 5, or 6 different screen sizes to target in the Windows 8 touch hardware ecosystem?” ~ Ben Bajarin
Do you want to know the future of Microsoft’s tablet efforts? Then ask yourself: “How many apps are optimized for each of the various Windows RT and Windows 8 tablet form factors? If the answer is “a few” or “not many”, then that form factor is going to struggle.
And while Windows 8 tablets run both Metro and desktop apps, what is the point of owning a tablet if the tablet apps are missing in action and it only ends up only serving as a lessor substitute for a notebook? You’d be better off buying a notebook instead.
Conclusion
Apple’s iOS has 250,000 9.7 inch optimized apps.
— How many apps are optimized for the various Android large screen tablets?
— How many apps are optimized for the large screen Amazon Kindle Fire tablets?
— How many apps are optimized for the various Windows RT and 8 large screen tablets?
Do you want to know the future of tablets? One of the keys is optimized apps. If you don’t got ’em, you don’t got no future.
Read Ben’s article and enjoy. Understanding his article is essential if you want to fathom the future of tablets.
On June 18, 2012, I wrote about the changeover from PCs (desktop and notebooks personal computers) to tablets in an article entitled “The Terrible Tablet Tsunami and the Future of Computing“. Today the trend toward tablets continues — only more so. OnlineClasses.org, has been kind enough to consolidate several tablet bullet points, with sources, into an infographic that can be viewed here. Let’s take a look at a few of their key findings.
In The Beginning
In April 2010, the tablet category was reborn with the launch of Apple’s iPad. People who compare the iPad to previous iterations of the tablet are comparing apples to oranges (all puns intended). The iPad had many features that made it successful but its true genius lay in the twin combination of an entirely touch user input combined with an entirely new, built-from-the-ground-up, operating system designed to take advantage of that touch input. As successful as the iPad has already been, we still don’t seem to fully grasp how quickly it has changed the face of computing and how rapidly the pace of that change is accelerating.
Within 18 months, tablet penetration among U.S. households hit 11%. No other technology – not electricity, telephones, computers, mobile phones, internet or smartphones – has penetrated society so quickly.
Fastest adopted technology EVER. Step back, take a moment and think about that for a second.
Tsunami.
Tablet sales are expected to edge out PC sales by 2016.
The personal computer was introduced in the mid-seventies – some 35 years ago. The iPad was introduced in April 2010 – some 30 months ago. It will only take the tablet 6 to 7 years in order to match the annual sales of the 35 year old PC.
Tsunami.
77% of tablet users report that their desktop and laptop usage decreased after getting a tablet.
In my article: “The iPad Put A Fork In Personal Computing“, I compared the PC to a knife and the tablet to a fork. I attempted to point out that the fork does not replace the knife – but it does decrease one’s use of, and reliance upon, the knife. The exact same thing is now happening with tablets and computers. The evidence is indisputable – but it’s being disputed anyway. (See “Beneath Contempt”, below).
1 in 4 owners say their tablet is now their primary computer.
One. In. Four.
How many times have we heard – and will we have to hear – naysayers declare that the tablet cannot replace the PC as one’s primary computer? Here’s a clue for the naysayers: Not only CAN the tablet replace the PC for some computer users, it’s happening and it’s happening right now.
And not only is it happening, it’s happening FAST. In my article: “The PC is the Titanic and the Tablet is the Iceberg.“, I focused on the the fact that the bulk of the tasks that the tablet excels at lies beneath the PC’s areas of expertise and competence. The tablet isn’t becoming the primary computer for many DESPITE its less sophisticated, simpler nature – it’s becoming the primary computer for many BECAUSE of its less complex and simpler nature.
3 in 4 American enterprises have adopted the tablet in some way.
The Enterprise is notoriously conservative and slow to adopt new technologies. You can always count on the Enterprise to adopt the newest technology – after they’ve tried everything else. The fact that three-quarters of American enterprises have already moved to adopt the tablet in its first two and a half years of existence is truly astonishing.
Tsunami.
Beneath Contempt
“The next big thing is always beneath contempt.” ~Clayton Christensen
Many of us are in denial about the rapid ascendency of tablets. Even as the shadow of the onrushing Tidal Wave blots out our sun, we insist that the PC will always be the center of the computing world.
Analysis isn’t about proving who is right, it is about discovering what is right. It is not our job to have the facts on our side. It is our job to be on side with the facts.
Most importantly, we need to stop the insults and the contempt for others. We should not assume that others are ignorant just because we don’t understand them. When we don’t understand others, we should assume that is is we who lack understanding.
The Tablet Tsunami
The tablet tsunami isn’t coming, it’s here. We can ride the wave…or we can wave goodbye any chance of understanding the future of computing.
Yesterday, Tech.pinions columnist, Patrick Moorhead, discussed the implications of the growing popularity of the 7 inch tablet form factor.
Today’s Apple event was perhaps one of the more interesting to me for a variety of reasons. Apple made a number of announcements that in my opinion give them a strong lineup for this holiday season. Apple has made advances in almost every one of their products in just the last few months. But all eyes today were on the newest member of the iPad family–The iPad Mini. 
