Tag: tablets

Why the iPad Needs a File System

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Over at Monday Note, the always perceptive Jean-Louis Gassée writes about how the lack of a true user-accessible file system is holding back more intensive use of the iPad as a creation tool. Jean-Louis has been on this kick for a while, and I couldn’t agree with him more.

My creative process, and I expect many of your workflows too, consists of creating documents by writing original text combined with bits and pieces from a variety of sources, including web pages, image files, Word documents, PDF files, email messages, tweets, and who knows what else. On a Mac or a Windows PC, this is very easy to do, by openeing multiple windows and cutting and pasting between them. The lack of multiple windows can’t easily be overcome on a tablet; at best, you could manage two small windows on the limited display real estate.

But Apple makes this much harder than it has to be by imposing tight restrictions on communications between iOS apps and by denying users access to any sort of listing of files available on the system. There are lots of ways around this, using third-party apps such as SugarSync and Documents to Go, but like all workarounds, the are clumsy, halfway solutions. I love traveling without a laptop, but even writing a simple blog post on an iPad is a lot more challenging that it ought to be.

I like Gassée’s suggestion of a two-tier user interface for the iPad, with the advanced version exposing features such as the file system while the standard mode keeps them hidden. I don’t think Apple would ever offer this–it violates the canon of iOS simplicity–but it sure would be a big help to some of us.

 

Should Apple Make A Larger iPhone?

iphone_bigThere has been chatter of late around Apple’s plans for the iPhone. Some suggest they need to make a more affordable version of the iPhone. Notice I didn’t say cheap. The logic for a more affordable iPhone is that it will open the door to new customers, especially in emerging markets, who can’t afford the high price of an unsubsidized iPhone. There is a lot of merit to this argument and if done right it can be a healthy addition to the iPhone product line.

The other speculation as of late is that Apple could make an even larger iPhone than the current 4” iPhone 5. This would fall into the larger phone category (some call it Phablets) and would give Apple a competitive iPhone for those who desire larger screens in the 4.7-5.5” range. Apple making a larger iPhone is a newer element to the discussion but one that is worth some thought for those of us who analyze competitive trends.

No matter how you slice it, I believe the time has come for Apple to expand the current iPhone line. This would mean releasing two or three current generation devices in the same year each targeted at different audiences. Apple does this now with the Mac line where they have 11”, 13”, and 15” products in their lineup. Arguably they also do this with the iPad line offering both the 4th generation larger screen iPad and the iPad Mini. I believe it is time this same thinking comes to the iPhone.

Although I think the idea of a more affordable iPhone is compelling, if I had to choose the strategy for either the more affordable iPhone or a larger screen size version for the first product to expand the lineup, I would choose the larger iPhone.

My reason for this logic is the ecosystem. As we have learned from Android phones, focusing on the low-end lowers engagement and ecosystem investment. Those who have cost constraints simply don’t spend as much in an ecosystem. A large question looms as to whether iOS would lead those in the cost conscious category to higher engagement or ecosystem investment. But the evidence we have so far is that the lower end of the market uses these devices very different than the tiers above them. And not in ways that lead to loyalty or deeper ecosystem investment.

Ecosystem investment is important to Apple. Horace Deidu and analyst at Asymco tweeted out the following data yesterday:

Also in a tweet earlier than that one Horace estimated that gross margin for iTunes is now 15%-17%. This is why for the current growth trend and competitive strategy for Apple, focusing the iPhone lines on segments who can and will invest in the ecosystem is important.

An expanded current generation iPhone line not only gives more customers a path to Apple’s door, it gives more customers an opportunity to invest in Apple’s ecosystem.

Now turning our attention to the topic of Apple making a larger iPhone. I wrote on Friday about my experience thus far with the Galaxy Note II. I made many conclusions in that article and the primary being that larger phones, those above 5” are actually more tablet like than phone like. Yet the value of a pocketable phone/tablet is apparent. The question that needs answering is whether or not the market for larger phones (Phablets) is big enough for a company looking for mass market products—like Apple— to care about. I believe the answer to that question is yes.

Is The Market Large Enough for Large Phones?

The Galaxy Note I sold about 10 million devices world wide in 2012. They will most likely sell at least 20 million this year and most well reasoned analysis I have seen project a steady growth trend for these larger size smart phones. The reasons are simple.

For many markets people can’t afford a smart phone and a tablet. For many markets, especially emerging ones, a product that can merge the benefits of a phone and a tablet is a compelling value proposition. We all know that the phone capabilities of any device is simply just an app, but the portability or pocket-ability is important for a device that is with us 24/7. This is what makes the larger phones a legitimate category. Just how big a percentage of the overall smartphone market large phones are, is a project I am still undergoing. I believe it is larger than 10% but how much larger I am not yet sure. Even if it is only 10% of the overall growing smartphone base of the next few years, it would be in the hundreds of millions.

For more analysis on the value this form factor brings to market read my column on the Galaxy Note II.

Room to Innovate For Larger Devices

Using the Note II, and for that matter the iPad Mini, has led me to think about those form factors as unique sizes to solve challenges for one-handed operation. 5-7” devices, whether phone or tablet, are still manageable to hold and do some operation with one hand. Samsung included some software around the keyboard and keypad to make one-handed operation easy but the device is still to large for full ease of one-handed operation. I genuinely believe this form factor presents some unique opportunities for innovation.

One way could be by using voice, and in Apple’s case Siri. Our research has continually returned many of the primary use cases for Siri not just being search but also automation. Set reminder, add a calendar event, post to Facebook, send a tweet, set an alarm, etc., are all examples of common automation tasks from heavy Siri users. One simple way to address some of the issues with one-handed operation on larger screen devices will be around voice.

Another is sensors. As sensor technology evolves we will be able to embed these sensors into the bezel of the larger devices. The Galaxy Note II was almost impossible for me to reach the back button with just one hand. The back button is a key function of Android and is needed throughout much of its UI. A sensor solution could allow me to have a back button function by simply taping the side of the device. Scrolling was feasible but not ideal on the Note II. This is also a use case I found was capable with the iPad Mini but not as much with the iPad. Sensors could be embed into the sides of the device and allow a slide of the finger down the side to act as the scroll function. There are many more opportunities for sensor control than I can get into here, but I believe this is an area for innovation and improvement. By Apple innovating to solve some one-handed operation problems for a larger iPhone, they can leverage those innovations for iPad as well.

In a market the size of smartphones, staying competitive will mean offering a range of devices. The smartphone market is mature enough that it has begun to segment. An iPhone designed to serve the market that wants a larger screen, which can add to more productive and more media rich experiences in a pocketable form factor, is a good move in my opinion. One that Apple could do right and again put them years ahead of the competition.

Would I Buy A Phablet?

img_img01One of the more unique smartphone designs in the market are ones that sport a 5.3″ to 6.1″ screen and are called Phablets by some in the industry. We call them tweeners as they are a cross between a large smartphone and a small tablet but in a single package. Samsung popularized this form factor with its 5.3″ Galaxy Note that was released last winter and they sold about 10 million in 2012. Some analysts believe that Samsung is on track to sell around 20 million Galaxy Note 2’s in 2013. Up to now, the market for these Phablet’s has mainly been in Korea and other parts of Asia and while available in the US, the market for it over here is quite small compared to its demand in Asia. 

At CES, Huawei upped the ante in phablets with the introduction of their Ascend Phablet that sports a 6.1 inch screen, the largest screen used in products in this category. It seems that Huawei is trotting this out to see what the market response will be to it and once they determine if a smartphone this large might fit in the market. Depending on the market response, they could either back it big time or adjust the screen size downward if the sweet spot for Phablets is with screens more in the 5.3″ to 5.7′ range. Like Samsung, Huawei believes there is a market for Phablets and seems committed to building smartphones in this larger size going forward. 

To date, most smartphones have screens under 5 inches and we don’t see that changing anytime soon. Smartphones with smaller screen sizes will have the lions share of the market for many years to come. What is interesting to me is that when I actually held Huawei’s 6.1 inch smartphone in my hand at the Huawei booth at CES, I could actually see myself using it, but not as Huawei might expect. To me this was a small tablet that just happened to have a cell phone radio in it. I would never hold this up to my ear as a phone and if I had one, I would only use it with a Bluetooth headset (this is how I primarily use the iPhone now, paired with a BT headset).   

Since getting the iPad Mini, with its 7.9″ screen, it has become my go to tablet. While I still use my original iPad, it is with a Bluetooth keyboard and I use it more as a mini-laptop in this configuration. What I have learned though is that the iPad mini, or a smaller tablet, is ideal for content consumption but not as ideal for content creation or productivity. While I do appreciate the 7.9″ screen in my iPad Mini, I was just as comfortable with Huawei’s 6.1 Ascend if I used it mainly as a small tablet. 

Markets Driving Phablet Demand

There are two market dynamics emerging that could actually make these phablets important products in various markets. The first one is emerging markets. We in the west would be fooling ourselves if we think that masses of people in emerging markets could afford both a smartphone and a tablet. Even with grey market tablets going for cheap prices, the issue of carrying two devices with them all of the time is just not reasonable. Apparently, Samsung saw this trend early on and has taken aim at the emerging market with their phablets, hoping that the desire for a single device that serves as a smartphone and tablet resonates with them. Indeed, the reason for a forecast of 20 million Galaxy’s Note II’s in 2013 is that most of them will start finding their way into emerging markets and filling a real need, especially if Samsung gets the prices of this product into price ranges acceptable to this market. In these markets, one is better than two.

The second market developing has broader implications for us in the west. If you sit back and try and visualize our digital future, it is pretty easy to see that most of us will have many screens in our digital lifestyles. We will have a screen in our smartphone, tablets, PC’s, TV’s, Car, appliances, etc. If they are all connected to our digital stuff in the cloud, then the screen that is closest to us at our time of need is the one we will most likely use.

In most cases, the closest screen is our smartphones. However, when desiring to access our digital “stuff” or the Web, many of us who have tablets often to go to our tablets for one major reason, it has a bigger screen and is easier to use especially when surfing the Web or reading docs and email and getting other forms of content.

However, this implies that we now carry with us two devices at the very least, a smarpthone and a tablet. What if we could get both in a single device that is highly portable? It that were the case, perhaps a smartphone even with a 5.3-inch screen would be too small; but one with perhaps a very pocketable one at 6.1″ might be just right. I was easily able to put the Ascend 6.1 in my back pocket as I do now with any spare smartphone I happen to be testing at any given time.

One Size Doesn’t Fit All

One other thing we are learning from our research is that one size does not fit all. Based on individuals needs, they may actually need a larger screen on their smartphone because they would be easier to read due to age, eyesight problems, individual choice, etc. As a small tablet, this larger screen size also works well for the same reasons, along with its ultraportablity. We believe it will start to be pretty clear to all device makers that one size does not fit all and that they may need a range of screen sizes in the smartphone and tablets to meet new user demands in the next 12-18 months.

If both of these market trends play out as I suggest here, and the concept of a two-in-one device catches on in emerging markets and demands increase in mature markets, all smartphone vendors may have to seriously consider doing phablets of their own. As strange as this may seem to us western thinkers, there is a real possibility that a market for phablets could actually emerge and become quite important in multiple markets around the world. Yet if we take a step back and look at the vast array of sizes and forms of our current automobile market, then we understand the role personal preference and they need to have a lineup of products to cover a wide range of uses. So in fact vast variance in smartphones and tablets actually makes sense due to mature market characteristics.

Putting Together The Pieces of the Personal Computing Puzzle

images-34As I read other’s thoughts on personal computing, I am sometimes struck by the fact that we tend to view the world the way it was rather than the way it is. Not only are we not good at seeing the future of personal computing, we’re not even very good at seeing its present.

With that in mind, I thought I’d take a look at some of the new pieces of the personal computing puzzle – smartphones, tablets, hybrids and phablets – in order to speculate on how those pieces might be fitting together in new and changing configurations.

Zero Computers

Hard as it may be for us to believe, most of the world – residents of third world countries, children, seniors and those who simply have no interest in computing – still don’t own even a single computing device. (Believe it or not, my thirty-something next-door neighbors do not own a computer.) But this is all rapidly changing.

The smartphone is allowing millions upon millions of former non-users to put the power of the computer in their pocket. The smartphone is small, relatively inexpensive and more powerful than the computers that were used to land men on the moon. Further, the introduction of the touch user interface has made computing more accessible to the young, the old, the computer illiterate and the computer phobic.

“In the fourth quarter of 2012, mobile PC shipments decreased 11 percent while desktop PC shipments declined 6 percent year-on-year,” said Isabelle Durand, principal research analyst at Gartner.

We are inundated with stories of how computer sales are declining. But those are desktop and laptop sales. Sales of personal computing devices – phones and tablets – are booming.

Takeaway #1: Personal computing is growing and growing rapidly.

One Computer

Yesterday, if you only had one computer, that computer was likely to be a desktop. Or possibly a laptop.

Today, if you only have one computer, that computer is likely to be a smartphone. The power of the internet, email, texting, phoning, etc. – all in your pocket, all for a relatively reasonable price. People from the remotest portions of the globe are using smartphones to conduct business and enhance their personal lives.

Tomorrow, if you only have one computer, that computer may be a tablet. A tablet with a dumb phone (data free, no monthly payment) is a powerful combination. The tablet is less portable than the phone but its added battery life and screen size makes it a formidable stand-alone computer.

Takeaway #2: The first computer that most people will own is likely going to be a phone or a tablet, not a laptop or desktop.

Two Computers

In the past, many of us used to own both a desktop and a laptop computer. As laptops came down in price and increased in power and portability, most moved away from desktops and toward laptops as their one and only computing device.

Today, the laptop and smartphone combination is extremely popular – the laptop for our heavy duty computing and the smartphone for computing on the go.

In the future, the two-computer combination of choice will be the smartphone and the tablet. Both the phone and the tablet have the same touch operating system so the learning curve is almost nonexistent and data transfer is a breeze.

Hard as this may be for geeks like us to fathom, the tablet is all the high-end computer that most people need. Spreadsheets like Excel and heavy-duty word processing programs like Word might be de ri·gueur in the Enterprise, but they are anathema to the average computer user. Asking most computer users to buy a laptop or desktop is like asking a gardener to buy a backhoe in order to do their gardening. A backhoe is indispensable for professional construction workers – but most of us aren’t professional construction workers and most of us aren’t professional accountants, programmers or page layout designers either. We don’t need professional computers to do the work we most often do. We just need what works.

As an aside, I am intrigued by the idea of a computer watch and tablet combination. The watch would serve the purpose of making and taking calls, texts, short emails, etc, notifying us of incoming and upcoming events, allowing us to see small snippets of text, graphics and videos, allow us to use voice input when voice input is appropriate and allow us to rapidly reference programs that rely on geofencing and geolocation.

No one is even proposing such a device at this time. I only mention it because I can easily see how such a watch would take care of our low end, on-the-go, computing needs while our tablets would handle the rest of our computing tasks. Whatever the computer watch turns out to be, if anything, I’m sure that it will be as different from what I envision as the long-expected iPod phone differed from the iPhone that Apple finally provided us.

Takeaway #3: The phone and the tablet may be all the computing power that many will ever need.

Three Or More Computers

For those of us capable of purchasing three or more computing devices, the most obvious solution is some combination of smartphone, tablet and laptop or desktop.

If you had told me in 2005 that people would be buying three or more computing devices, each costing $500 and up, I would have argued against it. First, it would be cost prohibitive. Second, it would be counter-intuitive. People want convenience, not complexity. Why buy several devices when one will do?

Yet today we’re moving more and more toward a multi-screen world and – I would argue – more and more away from multi-purpose hybrids. We’re moving toward several computing tools that do specific things well rather than a single tool that tries to do everything well. How can this be?

As to cost, well, we pay for what we value. Smartphones and tablets do some tasks much, much better than laptops and desktops do. It’s not a question of paying for three computing devices. It’s a question of paying for three tools that excel at performing three very differing tasks.

A gardener buys both a shovel and a trowel because they perform very different tasks. He doesn’t regret the fact that he is buying two shovels — one large and one small. He focuses on what he is trying to accomplish, not on how he can use a shovel as a trowel or a trowel as a shovel.

As for convenience, well, it’s perfectly reasonable to think that we should have one computer perform all of our computing tasks. It’s perfectly reasonable – and perfectly inaccurate.

Notebooks and laptops, like shovels and trowels, do very different things. Trying to get one computer to perform both purposes provides us with a compromise, not an acceptable solution. Swiss Army knives are very useful on a camping trip. But when we’re not camping, we use spoons, forks, knives, corkscrews, etc., not a Swiss army knife. Similarly, a hybrid is useful if we’re in a situation where we’re forced to use only one device. Only most of us are never in that situation anymore.

“Tablets have dramatically changed the device landscape for PCs, not so much by ‘cannibalizing’ PC sales, but by causing PC users to shift consumption to tablets rather than replacing older PCs,” said Mikako Kitagawa, principal analyst at Gartner. “Whereas as once we imagined a world in which individual users would have both a PC and a tablet as personal devices, we increasingly suspect that most individuals will shift consumption activity to a personal tablet, and perform creative and administrative tasks on a shared PC. There will be some individuals who retain both, but we believe they will be exception and not the norm. Therefore, we hypothesize that buyers will not replace secondary PCs in the household, instead allowing them to age out and shifting consumption to a tablet.”

This is a fascinating observation. Today, most view laptops and desktops as the one and only possible computing solution. There are even vicious fights on the internet in which commentators passionately deny that tablets are even personal computers at all.

But what about tomorrow? Tomorrow we’ll live in a world where tablets are our 1-on-1 devices and laptops and desktops are shared because of their cost and limited uses.

Takeaway #4: Our computing devices are diverging, not converging. We’re not looking for one tool to do it all, we’re looking to use the tool that best fits the task at hand.

Conclusion

None of this may seem controversial to you…or ALL of this may seem controversial to you. To me, the things I’ve stated are so obvious as to border on the trite. Yet I recognize that many – and probably most – do not share my views. Today we have many new personal computing pieces. How these pieces fit together will determine the future of computing. It’ll be fun to see what this puzzle looks like when it’s finally put together.

An Homage To The Tablet

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.

Should Apple Make a Hybrid or Convertible PC?

In a Tech.pinions piece I wrote a few weeks back, I stated that in our talks with IT directors they have been sharing with us their interested in the hybrids or convertibles that are just starting to get into the marketplace. Products like Lenovo’s Yoga or HP’s Elitebook Convertible are attractive to them for various reasons, but the main one is that instead of having to support a separate tablet and laptop, these converged products give them both in a single package.

An IT capable tablet might cost $600 or $700 and an IT grade laptop might cost upwards of $900- $1300 depending on configurations. These convertibles or hybrids are priced around $900-$1300, which is cheaper than buying a separate laptop and tablet combined. Thus, cost of support and cost of ownership is reduced and with IT budgets being stretched these days, lower priced, yet highly functional devices like these hybrids or convertibles makes a lot of sense to them.

We are also seeing some real interest in hybrids and convertibles with SMB and some consumers as well. The compactness of having a 2-in-1 device seems to be of real interest to them as well. At a personal level, I have used a Bluetooth keyboard with an iPad for over a year and in many cases, this has replaced my laptop. However, I still need my laptop to handle what we call heavy lifting tasks like managing my media, doing large spreadsheets or complex documents.

Looking to the Future

In my 2013 predictions column last week, I suggested that hybrids and convertibles could be a sleeper product next year and could catch on with business users in a big way. However, in this same column I made a bolder prediction that Apple would create something I called the AirPad or iPadAir that possibly would be ultrathin like the current MacBook Air and be more like an actual laptop but the screen would detach and become an iPad. Since I made this prediction I have had a lot of calls and emails from people who today have iPads, but tell me they would love to have an iPad/laptop combo device and they would be first in line to buy it.

There is one big problem with my prediction of an Apple hybrid though. Apple CEO Tim Cook has gone on record saying that Apple does not believe this type of device makes sense. They appear heavily opposed to this idea and seem to stand strong around the idea that a laptop is a laptop and a tablet is a tablet. At the moment, you can’t argue with their logic as they are selling a record numbers of MacBooks and iPads, and they may be right. Hybrids and convertibles from the PC crowd have only been out for a short time. Microsoft’s Surface product being the poster child for hybrids also clouds this issue since it acceptance in the market has been lukewarm at best.

Given the type of work we do at Creative Strategies, we get to see a lot of products behind the scenes before they ever hit the market. Over the last three months, we have seen about a dozen hybrid’s or convertibles that will hit the market in Q1 or Q2 of 2013 and some of them are stunning in their design and functionality. On some of them, the screens stay attached and either slide down over the keyboard to become a tablet, or they twist and fold down to also become a tablet in its own right. In our work, we define these types of products as convertibles.

We have also seen a lot of what we call hybrids, in which the screen completely detaches from the keyboard and becomes a much lighter stand-alone tablet. In both cases, some of these are ultra-thin and extremely well designed and I can’t help but believe that when these products hit the market interest by business users and consumers will be piqued. Hybrids dual functionality as a full laptop as well as a real tablet, along with lower pricing than if you bought the tablet and laptop separately, will resonate with many people.

I have also been hearing that the PC side of the house is very bullish on these two-in-one designs and since most of them fall under Intel’s ultrabook designation, they will be heavily promoted next year as part of an increased campaign to get people to buy Ultrabooks. Because of the innovative designs in hybrids and convertibles, which are really eye catching with most priced under $1000, this duality of design and functionality should get a lot of attention next year.

What if the Market for Hybrids Takes Off?

If our prognostication that hybrids and convertibles are correct, and they really take off, Apple will have to look harder at possibly creating a similar type of product for their customers. Today they just let them go out and buy a third party keyboard and force their users to piece together their own hybrid solutions. We have talked to a lot of people who have done this and just love the fact that in a very small package the iPad becomes a powerful productivity tool as well as one that they can use for consumption of media, pictures, etc.

There is strong precedent as well that a product Apple said they would never do they eventually bring to market anyway. Steve Jobs said Apple would not get into phones. And he also said he believed 7” tablets were worthless. However, market dynamics have a way of changing Apple’s position on products they dismiss as not being viable for them to do.

That is why I believe that if hybrids and convertibles really strike a chord with consumers, Apple will have to respond to this possible threat to them, especially in business markets where these types of products are garnering a lot of interest now. Imagine a MacBook Air like design with an iPad tablet that detaches. Given Jony Ives brilliant design acumen, I could imagine an Apple hybrid that would not only be competitive with the PC crowd, but one that would re-define the market for these types of products in the future.

We are in the very early stages of bringing hybrids and convertibles to business users and consumers, so it is too early in the cycle to predict with any certainty the level of adoption of hybrids. But our early research in this area continues to point to the fact that these types of products could be attractive to a large amount of users, and if they do take off and become a threat to Apple, it would not surprise me if Apple responds in kind and creates a product that could turn this market upside down.

A Deep Dive Into The Morgan Stanley Holiday Quarter Survey

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.

My Tech Industry Predictions for 2013

Each year, about this time, I put out a list of predictions for the coming year. I have been doing this for 23 years and over that time have I have had a reasonable level of success with these predictions. I have had some spectacular failed predictions too, like the year I said Microsoft would buy RIM. Because of our work and research, we get to see a lot of technologies in the works behind the scene as well as look at the data and numbers and make some educated deductions about the tech trends for the new year.

With that in mind, here are my top predictions for 2013.

1: Augmented Reality will go mainstream in 2013

Companies like Zappar and Arusmus have some great technology that adds an AR touch to published content, posters, and physical places. AR technology has been in the works for many years, but the demos I have seen from these two companies have me believing that 2013 is the year that AR becomes very important to the mobile world. More importantly, many of these AR companies have created great relationships with movie studies, game makers, publishers, and more, and their technology is already showing up in many of their products. I wrote about these two companies recently (http://www.pcmag.com/article2/0,2817,2412990,00.asp) so check out some of the examples I have at the end of this column to get a visual sense of why I think AR will be big in 2013.

2: US Power Grid hit by Hackers

Call me paranoid but the more I read about security hacking from China, Eastern Europe and the Middle East, the more I am concerned about the safety of our various networks. While IT networks of all types remain a main target, U.S. Defense Secretary Leon Panetta warned recently that successful attacks have been made on computer control systems of American electricity and water plants and transportation systems. Security experts point out that many of these water and electricity plants have old architecture that is not tied to networks but many of them do and could be a target. Those impacted by Superstorm Sandy already know how the lack of power and electricity could impact their lives. So imagine if a power grid is taken down in large metropolitan areas and the impact it would have on individuals and businesses. I applaud our security experts on their diligence in combating all security threats and really hope that if our power grid does come under attack, they can head it off. By the way, this is one prediction that I hope I am very wrong about.

3: Google’s ChromeBook gets more consumer attention-Chrome laptops will gain traction in 2013

Acer and Samsung’s Chromebooks are priced around $250 and has become an attractive alternative for consumers as price continues to be a real issue with this market segment. I know that this only works when it is connected but the proliferation of public WiFi makes this less of an issue going forward. We all know that an HTML Web browser as an OS will someday happen and the Chromebooks are a good first step. Buyers of these laptops will also serve as an important testbed for us industry watchers in 2013 and could give us important hints about how this market will develop over the next five years.

4: Hybrids and convertibles get high interest in IT

In our discussions with IT directors recently we have heard that they are quite interested in hybrids or convertibles aka laptop and tablet combo devices. Today, with tablets part of the BYOD trend, as well as their own purchases of tablets for specific internal use, these IT managers are now forced to support three devices-PC, Tablet and Smartphone. The idea of just having to support a convertible or hybrid, instead of a separate laptop and tablet, is quite attractive to them. The first generation of these products, such as Lenovo’s Yoga, HP’s Elitebook convertible and Dell’s XPS DUO are being bought in good numbers from IT types who are starting to test them inside their organizations and newer models that are even more powerful will be out by Q3. All this points to potential growth of hybrids and convertibles within IT beginning in 2013.

5: Mobile Malware will be up 100% on consumer devices

For decades, the PC was the only real target for malware, security breaches, and targeted attacks. But with mobile devices soon surpassing the amount of PCs shipped each year, these devices have become major targets for all types of malware. In fact, we believe mobile devices will become the biggest target for hacking by the end of the 2013 because all of these devices are tied much more closely to personal identities and personal information then PC’s.

6: Intel Becomes a top 3 Foundry

There have been various reports from Asia suggesting that Intel’s current fabs are not operating at full capacity due to reduced demands for computer chips in 2012. Although there are others from the semiconductor world who feel demand for chips will increase next year, they believe the biggest benefactor of this growth will be foundries that produce chips made by ARM. If it is true that Intel’s fabs are under utilized, it would not surprise me if they move to extend their fabs to the likes of Apple and others who wish to leave Samsung and may be concerned that TSMC cannot keep up with their needs in the future.

7: e-Book sales over take the amount of physical books sold in retail

The move to eBooks is in full swing. One key reason is that tablets have become the #1 eBook reader and we will sell close to 230 million tablets in 2013. Amazon’s Kindle Reader app is on just about every tablet available, this there is no lack of digital e-books readers already in the market with more coming in the future. The ease of purchasing and keeping libraries up to date on all of your digital devices is the big draw. Plus the fact that about 1000 books can fit on and average reader. This is why you can see e-Books becoming the largest growth area in book distribution next year.

8: 7″ tablets dominate tablet sales

Given the price of the 7″ tablets, which can be as low as $79 but most hover around $199, it is not a surprise that these sized tablets will dominate the market in 2013. But what is not obvious is how they will impact the PC market. The problem for consumers with 10″ tablets is that with a cheap Bluetooth keyboard, it is almost a mini-laptop. Also, since many consumers can do about 80% on a tablet that they can do on a PC, many consumers are either extending the life of their current PC, or if they buy new ones, they purchase cheaper models since they see them sitting idle most of the time. The traditional PC does not go away because they are still needed for heavier computing tasks like managing their media, creating digital movies, etc.

However, if consumers begin to adopt 7″ tablets in big numbers, they may go back to buying new laptops since 7″ tablets are mainly for consumption and are not good at all for traditional productivity tasks. Many industry execs hope this theory is right since it could actually help laptop sales grow in 2013 instead of subtract as many have suggested it will. I believe that next year consumers will sort out which tablet is best for them and in doing so will finally determine the role the PC will handle for them in the future.

9: Apple creates a Hybrid tablet/PC with iOS

I am going out on a limb with this last prediction. But one of the more interesting developments with 10″ tablets is that if you add a Bluetooth keyboard, it becomes a mini-laptop. The Android and Windows side of the tech market are moving quickly to create tablet/laptop combo devices and business and consumers alike are showing interest in these kind of products. If these types of products gain serious traction, I believe Apple may need to respond to this growth threat in the same way they have now entered the 7″ tablet market despite the fact that Steve Jobs told everyone that Apple would never do a 7″ tablet. But imagine a sleekly designed hybrid that perhaps has the design lines of the MacBook Air but the iPad screen detaches from its ultra-thin keyboard. For lack of a better term I call it the Macbook AirPad or iPadAir. I know Tim Cook has denounced this type of design suggesting it is like attaching a “toaster to a refrigerator.” But a sleek and elegant iPad/keyboard device designed by Apple would be of interest to a lot of people, me included.

Why IT buyers are Excited About Convertibles and Hybrids

[dc]W[/dc]hen Steve Jobs introduced the iPad in 2010, he went to great pains to emphasize that the iPad was mainly for content and media consumption. Interestingly, he never even suggested that it could also be used for any form of productivity. But in a subtle way, he did push its role in productivity. That came via a very short announcement handled by Apple’s Sr. VP of marketing, Phil Schiller when he stated that Apple would also create versions of Pages, Numbers and Keynote for the iPad when it launched.

From the iPad’s entry into the marketplace, consumers immediately determined that they would like to have productivity apps and business related programs, along with their music, videos and basic email. Within two months of its launch, companies like SAP, Oracle, Salesforce.com and many others started to buy iPads and began writing business related apps as a part of their pilot programs. Also, many IT managers anticipated quite correctly that the iPad would be added to the list of consumer devices they would need to support based on the BYOD trends that started with smartphones.

Of course, the key to supporting smartphones and tablets in IT is MDM (mobile device management) software. Apple was smart enough to put hooks available for most 3rd party MDM programs thus making it possible to adopt iPads within IT programs relatively quickly. Surprisingly, Google and its Android OS did not architect these hooks in early releases of this OS and consequently, it missed the early stages of IT integration of tablets into their programs. Only recently has Google addressed this issue and we should see more Android tablets being modestly accepted into IT deployments in the future.

Once the iPad got into business settings, the work-flow of a user changed. In the past, they would take a laptop to meetings and use it to access information they might need for that meeting. But once the iPad came out, the laptop stayed on the desk and instead they took the iPad with them. This is especially true for companies who wrote their own programs so all of the key data a person might need in a meeting was available now on their iPad too.

But there is one technology developed for the iPad that I don’t think Apple anticipated. Almost from the beginning, Bluetooth keyboards designed specifically for the iPad started showing up. Over time, companies like Logitech created keyboards that even look like a cover for the iPad in its design as they did with their Logitech Ultrathin keyboard cover. In fact, the addition of a keyboard to an iPad virtually assured that an iPad could now be a real productivity tool in its own right.

But there is an 80%-20% rule that is in play here that makes life for IT managers more difficult. This rule states that 80% of what you can do on a laptop can now be done on a tablet. However, that 20% is tied to what we call heavy lifting tasks, such as graphic design, large spreadsheets, data management, creating major reports or documents, etc. The bottom line is that business users still need a laptop or desktop even if they have a tablet to supplement more of their mobile computing needs during the day.
This means that they now have to support a laptop, tablet and/or smartphone, and with many of these coming in the back door via BYOD (bring your own device).

New Corporate Hardware

In our research discussions with some IT managers, they have told us that they would like to minimize the amount of products that they support and are seriously eyeing what we call hybrids or convertibles that can do heavy lifting, yet serve as a truly mobile tablet in a single device. We define convertibles as a tablet/laptop combo where the screen does not detach, such as Lenovo’s Yoga. Hybrids we define as tablet/keyboard solutions where the screen does detach and serves by itself as a pure slate tablet. At the moment the industry interchanges these definitions but that should sort it self out in the near future.

The Good News and the Bad News

The good news is that the PC OEMs also saw this demand and consumer/IT interest in these types of products and are all moving forward with innovative designs. Lenovo, HP, Dell, Acer and others all have solid offerings in place that give the IT directors an option to have a single device that works as a full PC as well as a stand alone tablet. Given IT managers desire to streamline the amount of products they have to support, we believe that hybrids and convertibles are a sleeper device that will be in great demand next year by business users of all types, including SMB. It would not surprise us if consumers who want to do more productivity on their laptops increase the demand for hybrids and convertibles as well.

The bad news for these OEMs is that this could impact demand for traditional laptops in the future. The PC market has declined this year and its growth going forward will be anemic at best. Tablets have been a major disruptor in many ways. For example, consumers tell us if they can do 80% of what they do on a laptop now on their tablet, they may just extend the life of their current PC or laptop since it mostly sits idle. Or, if they do buy a new laptop or PC, they will buy a cheap one with updated processors and memory knowing full well it will be used less and less as tablets meet most of their needs.

But for IT managers, merging the two into one has a lot of merit for them, especially if the hybrids and convertibles have enough power and battery life to handle the heavy lifting tasks that will continue to be important to a business user. The fact that these products will be serviced as a single device, instead of two, is a key reason that we believe hybrids and convertibles will become a major growth segment in IT sales. It would not surprise us if savvy consumers move in this direction too since a dual-purpose product in many ways can be attractive to them to for similar support and economic reasons.

Why The Wheels Are Falling Off Microsoft

This week, highly respected web and technolgy analyst, Mary Meeker, released her end of the year 2012 report on internet trends. The slide deck is 88 slides long and is highly recommended. You can view it here.

As I reviewed Ms. Meeker’s slides, some thoughts on Microsoft’s current prediciment and future prospects jumped out at me. I thought I would use the slides to help illustrate and examine those thoughts.

1. iPods, iPhones, iPads

Take a long hard look at the graph, above. That little green sliver you see represents the growth of the iPod. The very same iPod that powered Apple from near-bankruptcy to a genuine tech contender in less than five years.

Now take a good hard look at the much larger red portion of the graph. That represents the iPhone. The iPhone was the device that rocketed Apple from just one of many to the largest tech company, then the largest company, by market cap, in the free world. For context, that red portion of the graph, alone, is now worth more than all of Microsoft put together.

Now look at the much, much larger blue portion of the graph. Take a long, hard look. Now look at it again. That blue ramp represents the growth of the iPad. It’s growing at three times the rate of the iPhone. Three Times. If you are not awe-struck by the iPad’s rate of adoption, well, you should be.

If you want to know why Appe is rapidly expanding its influence in computing – and why Microsoft is scrambling to catch up – look no further. The above graph says it all.

2. Android And iPhone Adoption

Most people look at the above graph and conclude that the iPhone is in trouble. But you’ll notice that the iPhone is still growing in real terms.

Do you know who’s really in trouble? Anyone not named Samsung and Apple, that’s who. Apple is doing just fine, taking in most of the industry’s profits. Samsung is doing just fine. Google? Not so much. All that market share and little to no profit to show for it has to be worrisome. But this article isn’t about Google. This article is about Microsoft. And no matter how closely you scour the above graph you won’t find a Microsoft product on it anywhere.

(Chart via AllThingsD)

3. Microsoft’s Minuscule Phone Market Share

According to some reports, Microsoft’s phone market share may actually be falling. In the past six years, Microsoft has managed to take its 12% share of the mobile phone market, combine it with Nokia’s 30% share, and convertert it into Windows Phone’s current 2% market share. That’s reverse alchemy – like turning gold into lead.

Steve Ballmer recently claimed that Windows Phone was selling four times faster than it was a year ago. But four times very little is still very little. Microsoft sold 2.8 million Windows phones a year ago. In the same quarter, Apple sold 35 million phones and there were roughly 123 million Android phones sold. So yeah, Microsoft is selling more phones. But so is everyone else that matters.

4. Operating Systems

People think that Microsoft’s Windows is still a powerhouse because it runs 90% of the world’s personal computers. That’s nonsense. Take a look at the chart, above. When you combine phones and tablets and notebooks and desktops, Windows’s only runs on 35% of the world’s personal computers. Android already runs on more personal computers than Windows does and iOS is expected to pass Windows by the end of 2012.

Just as importantly, look at the direction in which Windows is trending. Windows runs almost exclusively on notebooks and desktops, which are a rapidly declining portion of the market. If Windows doesn’t escape its notebook and desktop base and spread to phones and tablets, it is rapidly headed for niche status.

5. Smartphones + Tablets > Notebooks + Desktops

I know that the above graph has a legend, but let me spell this out so that there’s no mistaking the significance of what you’re seeing. The orange portion of the graph represents desktop PCs. The blue portion of the graph represents notebook PCs. Look at how those two portions, combined, are shrinking while the green – representing smartphones – and the yellow – representing tablets – are rapidly growing.

If you look at the above chart, you can clearly see Microsoft’s dilemma. Even if Windows were to power each and every notebook (blue) and desktop (orange) computer made going forward – which they won’t – their share of the market would soon dwindle to near nothingness. Microsoft NEEDS to get their operating system onto phones and tablets and they NEED to do it now.

6. Microsoft Isn’t Even Trying

Here’s the thing. Microsoft isn’t even trying to break into the pure tablet (yellow) portion of the market. Instead, they’re trying to create a hybid device, a new category, a new color, if you will, on the chart above.

In July, I wrote an article entitled: “The PC is the Titanic and the Tablet is the Iceberg. Any Questions?” The purpose of that article was to demonstrate the multitude of tasks that could be done well by a tablet but poorly or not at all by a traditional notebook computer. Windows 8 tablets – with their 16:9 aspect ratio, their desktop mode and their reliance upon keyboards – fall far closer to the notebook than they do to the tablet. One can’t help but feel that, even now, Microsoft still doesn’t totally believe in the stand-alone tablet form factor. Windows 8 tablets are notebooks first – and tablets only in emergencies.

After failing to field a competitor to the iPad for two and a half years, Microsoft is now ceding the tablet market (yellow) to Apple and the rest of the industry – yet again.

7. Conclusion

Microsoft faces a host of problems in the the years to come. Their competitors are far ahead of them in phones and tablets. Their bastion of strength – the notebook and the desktop – is an ever shrinking island. And their strategy to compete in the tablet market is, in my opinion, fatally flawed because it doesn’t even attempt to create a true tablet competitor.

Take a look at that last graph again. The green and the yellow portions are the future of computing. And in that future, Microsoft is nowhere to be found.

My Notebook and I are Growing Apart

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.

Banking On The iPad

Barclays Bank has ordered 8,500 iPads in what is believed to be one of the largest corporate deployments of the device in the UK. ~ via TUAW

This kind of thing has got to be terrifying to Microsoft. Microsoft is losing the battle for tablet’s in the Enterprise and they know it.

And if that wasn’t bad enough, the following has to make their blood run cold:

Barclays told The Channel that they went with the iPad because of staff demand.

However, Microsoft is in it for the long run and Windows 8 tablets have barely even come to bat yet. But if this was a baseball game, It would be like Microsoft coming to bat for the very first time in the bottom of the eighth inning already down 8-0.

PCs Gone Wild

One of the most exciting things happening in the industry right now is the diverse innovation coming from Windows PC OEMs, who are making every type of form factor imaginable. Looking specifically at the traditional PC industry and traditional PC OEMs, I have never seen such a wide array of innovative products flood the market place and more are coming.

All of this is being driven by Windows 8 and Microsoft’s bold approach to build an OS that can support such a diverse range of hardware. I have been using many of these devices and I have some observations.

The first thing that strikes me is how different of an experience one can have with the same Windows 8 OS but with different hardware. Back in the old days, you could select a Windows laptop and expect basically the same experience across the board. Those days are gone, for now at least.

Some form factors perform better as a traditional notebook. Others perform better as a tablet. The touch and trackpad experience varies from device to device. The performance of certain devices is drastically different. Some have drastically better battery life than others. The key point I am making, and the observation that really struck me, is that the device landscape for Windows 8 has become one of trade-offs. To maintain the level of form factor innovation we are seeing around Windows 8, OEM and ODMs will be making key decisions of which trade-offs to make in order to bring certain devices to market with certain features at certain price points.

There has never been an environment like this before and my fear is that it is extremely confusing for interested buyers. Just as the OEMs and ODMs will need to make specific trade-offs, so will certain consumers need to be aware and comfortable with those trade-offs. Although trade-offs and compromises have always been apart of the PC shopping experience, it is severely exasperated to an entirely new level.

Consumers shopping for PCs will be forced to examine the features and functions they value (and at what price) more than ever before. I am intrigued by the kind of impact this internal reflection could cause in the marketplace. The reality is that there are a massive amount of PCs in the market that are 4 years old or older. I’ve come across a range of data on this and from all what I have seen, it appears a conservative number is in the 100 to 120 million range. If we are starting with that number as a base then we would initially think that many consumers are in the market for an upgrade, and in fact they are. However, the hardware diversity and bold transition of Windows 8 may have adverse effects as consumers truly begin shopping with a more refined set of needs, wants, and desires, than ever before.

Interestingly, I came across a story at USA Today which highlighted a survey from a Windows security software company called Avast. In this survey Avast gauged the awareness and likelihood of those in the market to upgrade to Windows 8. Of the 135,329 Windows users who responded to the survey, 33% indicated that they were probably not going to upgrade to Windows 8 in the immediate future and 41% said they were definitely not going to upgrade to Windows 8 in the immediate future. Now the nugget of data that came out of this quantitative survey that got a lot of press yesterday was this: Of those 135,329 Windows users who indicated they were in the market for a new PC, 42% said they were going to switch to an Apple product.

Now many may say, that is one survey and often we have to take data like this with a grain of salt as Ed Bott did in his breakdown of that poll. But I have seen data from a number of other research companies and vendors that all back up this concern and relative uncertainty. However, a key point remains. A large section of the market is hesitant, and a large section of the market is looking at all their options, even if it means switching platforms. Doesn’t necessarily mean they will switch, but they are considering all their options–that is a key point.

The personal computing landscape has changed drastically in the last 3-4 years in that those who bought PCs in that time frame, who are now in the market for a new one, have a much more complex landscape than ever before. The competition for those in the market for upgrades will be fierce and more importantly consumers will be more savvy to their own personal preferences with these devices.

There are a number of scenarios I can see playing out from optimistic to catastrophic for the PC industry and I will look at each briefly.

Tablets and Premium PCs

If you read my column where I shared some high level thoughts on the Surface then you understand my view that the product is not the best tablet nor is it the best notebook. Because I feel the pure tablet form factor perfectly serves the mass market needs, my gut is that consumers will shop for a no compromise tablet. However, we know that the traditional PC still plays a role. So I can see a scenario where consumers buy the best tablet and the best notebook, thus truly giving them the best of both worlds. This doesn’t necessarily mean they buy them in the same year but the point remains that I see a scenario where it could play out this way.

If this happens, and consumers take this road in large numbers, it is very good for many players in the PC ecosystem. An interesting thought on this scenario, is that generally speaking a well made premium PC will have a longer life cycle, thus extending the refresh rate perhaps even longer than it is today for traditional PCs.

Tablets and Low Cost PCs

The other scenario I can see happening and one that may be a bit more troubling for certain companies, is one where consumers buy a no compromise tablet and a very low cost PC. If you buy my logic that the traditional PC form factor over serves the needs for a large section of the mass market, then a key question remains. If consumers, as they reflect and become in line with their true PC usage, realize that the tablet can do upwards of 80% of what they primarily do on a daily basis, then why would they spend lots of money on a product that will not get used every day, week, etc. If the tablet becomes the personal computer and the traditional PC just sits in the other room and is only used for some tasks, then in my opinion the traditional PC loses its perceived value in the eyes of consumers.

In either scenario, the life cycle of the PC is extended and the refresh rate the industry used to enjoy with PCs will most likely shift to tablets. Lower cost PCs may need to be refreshed more often but in this scenario the profit opportunities are not in PCs they are in tablets.

This scenario is one that not every OEM today is poised to compete in and could be challenging for some. The reality is the industry has changed dramatically. Consumers have become way more in tune with what they want and why they want it. That shift will have profound impacts on the types of products we see and who the winners and losers in the market may be in the future.

The PCs gone wild trend of form factor innovation is not just necessary it is a necessity if companies are going to stay in the game, compete, and have sustainable business going forward. I’m excited about the innovation in PC hardware we are seeing today and I am even more excited for what is around the corner.

Why Android Is Winning The Battles But Google Is Losing The War: Part 4


A Pyrrhic victory (/ˈpɪrɪk/) is a victory with such a devastating cost that it carries the implication that another such victory will ultimately lead to defeat. The phrase “Pyrrhic Victory” is named after King Pyrrhus of Epirus, whose army suffered irreplaceable casualties in defeating the Romans at Heraclea in 280 BC and Asculum in 279 BC during the Pyrrhic War. Someone who wins a Pyrrhic victory has been victorious in some way; however, the heavy toll negates any sense of achievement or profit. The term “Pyrrhic victory” is used as an analogy in fields such as business, politics, and sports to describe struggles that end up ruining the victor. ~ via Wikipedia

Series Schedule:

  • Mon: The Battle for the PC
  • Tue: The Battle for Mobile Phones Won
  • Wed: The War for Mobile Phones Lost
  • Thu: The Battle for Tablets
  • Fri: Picking Your Battles Is As Important as Winning Them

4) The Battle For Tablets

If Android’s battle for phones is a Pyrrhic victory, Android’s battle for tablets is a flat-out ignominious defeat.

Android’s Strategic Tablet Blunder

The tablet’s larger screen size demands that developers create apps optimized just for its form factor. This makes tablets a seperate platform all its own. Google’s big mistake in tablets was that they either didn’t recognize or refused to acknowledge that fact.

Google just saw tablets as big phones and acted accordingly. Rather than focusing on the creation of tablet optimized apps, Google encouraged their developers to create one-size-fits-all apps. Developers were encouraged to focus on scalability rather than optimization.

Google made their mind set clear by refusing to even establish a separate tablet-optimized classification for their store. While their nearest competitor highlighted the fact that they had 250,000 tablet optimized apps, Google categorically denied that there was any difference at all between phone and tablet apps. The result has mostly been a lot of Android phone apps awkwardly stretched to fit the larger tablet screen. Even big name apps like Twitter and Rdio looked unwieldy on Android tablets.

As recently as June 2012, when the Nexus 7 was introduced, Google Senior Vice President Andy Rubin reaffirmed that Google was sticking with its strategy of encouraging developers to write a single app for both phones and tablets.

“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

Google’s policy was focused on the developer, not the consumer. It allowed developers to create apps that worked on more devices, but it did so at the expense of the user experience.

Andy Rubin went on to admit that he was upset that Android tablets weren’t selling. After looking into the reasons, Rubin declared that Google had discovered the reason for the lack of sales. While hardware really mattered on phones, consumers bought into content ecosystems with tablets. Rubin said that Google had lacked some of the ecosystem pieces that were necessary – such as TV shows, movies, magazines, etc. – to make people want to consume on a tablet.

“I think that was the missing piece,” Rubin said.

Do you hear what Rubin was saying? In his mind – and presumably in the mind of all of Google – the reason that Android tablets weren’t selling was because of a lack of compelling CONTENT. Tablet optimized apps never entered into the proposed “solution” to Android’s tablet woes. The Nexus 7 was all about content delivery since – in their minds – it was content, not apps, that was the missing piece.

Finally Google reversed course. On October 18, 2012, Google published a “tablet app quality checklist” on its Android Developer website and began to seriously urge developers to build tablet-optimized apps.Two and a half-years late and 250,000 iOS tablet optimized apps later, Google finally gets it – tablet optimized apps DO matter.

Or do they get it? Google STILL isn’t asking developers to make separate phone and tablet versios of their apps. And they STILL don’t separate phone apps from tablet apps in their store. And when asked why there still aren’t many tablet-sized apps for Android, Director for Android Partnerships, John Lagerling, said:

But before, I’ll be honest and say, yes, there was a lack of tablet apps that supported bigger screen real estate. But I’ll add that, I know we talked about the Cupertino guys, but obviously people who have smartphones are a huge target for us. If you look globally that’s something we worry more about, not so much about competing with other smartphones, but more about, how can we get more people onto the Internet on mobile phones? And that’s a big deal. That’s why low cost is so important.

Translation: Smartphones are more important to us than tablets and market share is more important to us than anything.

No wonder Android’s tablet efforts continue to languish.

Android Tablet Sales

So how is that one-size-fits-all, let’s-not-optimize-apps-to-the-tablet strategy working out for Android? The results speak for themselves.

At last report, tablets were just 5.38% of Android’s daily activations. And Nexus 7 sales – although constantly referred to as a “success” in the tech media – have been humble, to say the least.

Mark Mahaney, who follows Google for Citi Research … thinks Google sold about a million units of their tablet (that is made by Asus) and that accounts for about $200 million in revenue.

Ben Schachter of McQuarie Securities agrees and estimates that Nexus 7 sales accounted for probably $150 million to $200 million…in… revenue.

Piper Jaffray’s Gene Muster estimates that Google sold between 800,000 to a million units, while Doug Anmuth of JP Morgan says Google sold about 700,000 units of Nexus 7 tablets.

Asustek CFO David Chang told the WSJ that the company was selling—not just shipping—500,000 units a month initially, when the Nexus 7 launched in July. Figures bumped up to 600,000-700,000 in the following months, and in “this latest month,” Google and Asus have sold close to one million units, said Chang.

Let me put those numbers in perspective.

 

  • REVENUES

 

The Nexus 7 may have made as little as 200 million – in revenue, not profit – in an entire quarter. That’s pathetic.

 

  • PROFITS

 

And we know that Google didn’t make any profits from the sales of the Nexus 7 because they told us so.

“When it gets sold through the Play store, there’s no margin,” Rubin said. “It just basically gets (sold) through.”

 

  • UNITS

 

But revenue and profits really don’t matter in a subsidized model. The concept is to get as many units on the market as possible in order to enhance the opportunities to sell content and advertising. So let’s look at the Nexus 7’s sales numbers.

The Nexus 7’s sales are either as high as 1 million units a month or as low as 1 million, 800,000 or 700,000 units a quarter. And the reason we’re relying on estimates is because Google refuses to release actual sales numbers – which is telling all in itself.

By way of contrast, Apple sold a total of 3 million iPad Minis and iPad 4’s in their first three days of availaility. At its current pace, the Nexus 7 would take between 3 months to 3 quarters to even match, let alone exceed, the number of tablets sold by Apple’s first 3 days of sales.

 

  • SUBSIDIZED BUSINESS MODELS THRIVE ON VOLUME

 

Those sales numbers are bad enough, but for a subsidized product, they’re gawdawful. Remember, the Nexus 7 is being given away at cost. Can you imgagine how many more cars or televisions would be sold if they were being sold at cost? The Nexus 7’s should be selling like crazy, not badly trailing competitive offerings that cost $300 more.

This is a give-away-the-razor, sell-the-blade business model. (See my article entitled: “Selling The Amazon Kindle Fire and Google Nexus 7 Is As Silly As Selling Razor Blades To Men Who Love Beards“). Giving away the razor does not guarantee the sale of the blade but NOT giving away the razor DOES guarantee that the blades won’t be sold. Simiarly, volume sales of Nexus tablets do not guarantee that Google will profit from the sale of content and ads but low volume sales DO guarantee that they will not.

 

  • FUTURE SALES

 

Pundits are opining that the Nexus 7’s lower price will make it a hot selling item for the holiday quarter. And I have no doubt that sales will increase. But if Google was having trouble selling the Nexus 7 when its only competition was the 7 inch Kindle Fire and the 10 inch Apple iPad, then why does anyone seriously think it will do significantly better now that it also has to compete with the Apple iPad Mini and the Microsoft Surface?

Android Irony: Tablets Are Where The Ad Revenue Is

The irony in all of this is that tablets are where the ad revenue is. Android has fought and won the battle for phones but phones don’t produce much ad revenue. Meanwhile, Android has ignored tablets and tablets hold the prize that they were so desperately seeking all along. Like a General who is a great tactician but a poor strategist, Android has won all of the battles that they’ve fought, but they’ve fought all of their battles in the wrong places.

 

  • TABLETS ARE MORE VALUABLE

 

Studies have shown that tablet users are the more valuable consumers for advertisers to reach compared with PC and phone users. Tablet users spend 30 percent more time on sites and have 20 percent higher engagement.

“We found it interesting that tablets also had a smaller percentage of users who adopted ‘do not track’ settings compared to PC users,” Mr. Barnette said. “Mobile had the highest percentage of users who adopt do not track at 60 percent.”

 

  • APPLE IS DOMINATING TABLETS

 

And while tablets are dominating mobile revenues, Apple is dominating tablets.

The iPad accounts for between 91% and 98% of web traffic for all tablets. That only leaves 2% to 9% total web traffic for every other type of tablet combined.

And Apple dominates tablet downloads too.

“We estimate in the first half of this year the iPad saw over five times more app downloads than all Android tablets combined.”

 

  • TABLETS AD SPENDING OUTWEIGHS SMARTPHONE AD SPENDING

 

And in the absolute kicker, it is anticipated that tablet ad spending will outweigh smartphone ad spending this holiday season.

Think for a moment just how crazy that is. The ads for all the Android, iOS, Windows Phone 7 and every other smartphone combined will be outsold by the ads sold on tablets this holiday season. Wow.

Next

Google has won the battle for the desktop. Android has won the battle for the phone. But Google’s prospects are possibly worse today than they were when they embarked on their Android strategy. Tomorrow we sum it all up and look to the future in the final article of the series entitled:

“Picking Your Battles Is As Important as Winning Them”

How the iPad Mini Could Impact Future PC Sales

[dc]N[/dc]ow that the iPad Mini has been out for a while and many of us at Creative Strategies have been testing them, it is becoming clear to us that this 7.9” form factor or most 7” inch models will literally become the most important tablet for consumers in the future. There are a lot of reasons for this, but the main one is that it is light, thin, and in the iPad’s case, delivers a best in breed tablet experience. Also, these smaller tablets will always be cheaper than larger tablets because the BOM cost for a smaller version will always be less than the bigger models.

But as I have personally used the iPad mini for some time now, I have begun to see my usage patterns with tablets change significantly. Before the iPad Mini, the tablet I used the most was the original iPad. Although I also used my Kindle Fire HD often for reading and media consumption, the iPad was my real go-to device. And it became even more important to me once I added the Logitech Ultrathin keyboard to it since it now was used for content consumption as well as productivity.

However, there is an 80/20 rule with tablets that is becoming an important metric when it comes to tablets and PCs. It turns out most consumers can do about 80% of the most common tasks they do with a PC on a tablet, and any other key tasks, such as media management, large spreadsheets, music server, etc are designated to the laptop. But once I started using the iPad Mini, I found that it now became my go-to-device because of its lightweight, small size and literal duplication of everything I have on the iPad as well as the full iPad experience.

But there is an interesting twist to this. When my only tablet was my iPad, I defaulted to my laptop for heavy lifting tasks. But once I started using the iPad Mini, I found myself-defaulting to the 9.7” iPad with its keyboard as my main productivity device and found that in this case, a 90/10 rule kicked in. That means that I spent 90% of my time on these tablet solutions and only about 10% on my laptop.

Now I realize that this may not be a broad trend, but we are hearing the same type of storys in our consumer interviews. Although fresh and not fully completed research, many people who have an iPad Mini and are sharing similar stories. Almost all that we talked to told us that the role of the laptop has diminished for them significantly since they got the iPad, and were now using the iPad Mini more frequently than their larger iPads.

When I asked them if they were interested in buying a Windows 8 PC, their comments were pretty consistent. They said that if the PC were only used 10-20% of the time, they would most likely just extend the life of their PCs or laptops instead of buying new ones. And if they did buy a new PC or laptop, it would be the cheapest they could find, as they could no longer justify a more expensive and powerful version if it mostly sat at home and used for such a short time for more data or media intensive apps.

I suspect that this scenario with consumers may play out a lot more in the future, and at the very least, their tablet does handle the majority of their daily digital needs. The PC as we know it today will continue to lose its primary role in the home given its lack of use more often than not.

Even yesterday on a call with analysts Nvidia CEO Jen-Hsun Huang made a key point. He said:

consumers realize “a great tablet is better than a cheap PC.”

If this trend does play itself out as I have suggested, the impact on the traditional PC market could be dramatic within two-three years. As consumers buy lower cost and small tablets that will only get better in performance, screen clarity, and apps, it supersedes their PC use and demand for PCs and laptop will decrease significantly.

As my colleague Steve Wildstrom stated on Wed, PCs will not go away, but will soon play a different role for consumers than they have in the past. But if tablets increase their role as the dominant device for consumers to access the majority of their digital needs, than the impact on PC demand has to be impacted down the road. In fact, some key industry insiders call this the PC Cliff, suggesting that we could see a time in the not-so-distant future where demand for PCs fall by a steep amount, giving way to tablets that will take over their role as the major growth segment and primary of the PC industry.

Interestingly, there could be a silver lining for traditional PC vendors if they innovate quickly. In my comments above, I mentioned that the iPad Mini has now become my go-to tablet while the original iPad with the Logitech keyboard is now my cross over device handling consumption and productivity. And my use of my laptop has declined as a result of this. But for me, the iPad with a keyboard has become kind of a laptop replacement. It is touch based, lighter than any laptop I could ever own, and has an average 10-hour battery life and runs most of the apps I need, as well as giving me a very rich Web browsing experience.

But my iPad with keyboard is really what we call in the industry a hybrid, which has a touch based tablet tied to a detachable keyboard. Microsoft’s Surface falls into this category as does HP’s Envy X2 that they call a convertible. The nomenclature for this seems to be ever changing but we define a convertible as a tablet/keyboard combo that does not detach and a hybrid, a tablet with a detachable keyboard.

The interest in the hybrids as we define it is extremely high, although the demand for Windows RT based hybrids like the Surface is somewhat muted since it does not have backward compatibility with existing Windows apps. Instead, the hybrids we are seeing great interest in, both with consumers and business users, are Windows 8 devices that use an x86 chip and has full backwards compatibility with existing Windows software like HP’s Envy 2 Convertible. But if the scenario I suggest plays out, it will be these hybrids that drive “laptop” sales in the future, while demand for more traditional laptops will wane considerably.

I believe that the iPad mini and smaller tablets will be even more disruptive to the traditional PC market than the iPad has been to date. We can envision a time soon where a user has a 7” tablet mostly for content consumption, email and Web browsing, and a hybrid to pick up any productivity slack they may have. The bottom line is, the more consumers use tablets of either size, the more they realize that the laptop or PC in the home is overkill, and decide to either just keep the one they have longer or buy the cheapest PC they can for any extra computing needs they may have that a tablet cannot do.

I fear that a PC cliff is not far off and we are urging all PC vendors to seriously consider the ramifications of what these smaller tablets will mean to their future PC and laptop demand.

Let’s Talk About the iPad Mini and Ultra-Mobile Computing

[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.

When is a Tablet not a Tablet? When It’s a Surface

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.

The Personal Computing Land Grab

It is hard to describe what is happening right now in the personal computing industry than anything other than a massive land grab. The land grab I speak of does not apply as much to traditional “old school” computing devices like desktops and portables, but it does apply to smartphones and tablets.

The point that continues to be forgotten, is that there are still billions of people who do not have a smart phone, tablet, or other form of primary computing device. This point is understandably forgotten because so many in the mainstream media only focus on the here-and-now and that is ok. But in the here-and-now many tend to focus on the market share point as if the market is as big as its going to get. The reality is that specifically with smartphones and tablets we are in the midst of the largest global total addressable market (TAM) expansion we have ever seen.

Just a quick look at some numbers highlights this. Right now we sell around 80-90 million traditional PCs every quarter. That market is not currently expanding. If we believe, as I do, that the tablet market is larger that the traditional PC market, then the upside is still significant. Approximating up to the current quarter, there are less than 20 million tablets sold worldwide on average every quarter. Which means the opportunity is to add tens of millions of new tablet buyers each quarter with the current growth rate of 50-60 percent a year. Smartphones sell just over 100 million world wide every quarter, similarly growing at about 40-50% year over year. Which means tens of millions of new customers will be buying smart phones globally every quarter. This market expansion is being driven by new customers, first time buyers, and that is the key to the land grab.

This global expansion is being driven primarily by Post-PC devices of a highly mobile nature. The limiter with old school PC devices was and still is the form factor. Desktops and portables, due to their design, simply had limited use cases. Namely, you had to be stationary. With a desktop, you sat at a desk and couldn’t move. With a portable, you could move from one location to another but still needed to be stationary to use it. Tablets and smartphones break the computing paradigm of being stationary and bring mobile computing into new places. This is why the market opportunity for tablets and smartphones is much larger than desktops and portables—mobility.

The key to this land grab is entry points, and they key to defending your land is ecosystems.

Getting Consumers To Move Onto Your Land

Step one is get consumers on to your land. If we trace Apple’s strategy back just over 10 years, this was the iPod. The iPod, with its simple yet powerful value proposition, is the product that set the stage for Apple. The iPod could arguably be explained as the catalyst for the post-pc era.

This battle to get consumers onto your land is the single biggest reason the pace of innovation is picking up. Many were shocked that Apple refreshed as many products in their product line just before the holiday quarter. The truth is that most if not all of the refreshes, new product launches, etc, are targeting new customers or ones who have not upgraded in quite some time. Take the iPad Mini for example.

As hard as it is to believe not everyone has an iPad. Yet there is still extreme interest around the tablet form factor. Apple is convinced that once people start using iPads, they have profound and some times life changing experiences. Our own internal consumer research confirms this as well. So for Apple, primary strategy number one, is to break down the barriers to owning an iPad. Apple’s focus is to bring premium features to the market at mainstream prices. We could debate that point all day but an objective look at the pricing and features of all products in the market would validate the point. With every upgrade the brought to their holiday lineup, they stayed true to that formula. And as Tim Cook said, “we are not taking our foot off the gas.” Most Apple competitors aren’t in total control of the gas pedal, yet alone have enough money to keep their foot on the gas. Strategically, this is a key point in the land grab.

Microsoft, and their partner ecosystem, also understand the land grab. Microsoft had, and still has, most of the land of traditional desktops and portables. Key point number one for them is to maintain that land but expand into new ones. Hence their aggressiveness with new form factors across the board. Windows 8’s success hinges on its ability to move into new land during this land grab, namely post-PC devices. This is also where uncertainty still remains about the platforms ability to do so.

The Sticky Ecosystem

Hardware and software get consumers in the door, or onto the land in my analogy. The services are the part of the ecosystem that keep people loyal. iCloud, iTunes, iMessage, etc., are examples of this for Apple. XBOX Live, XBOX Music, Office related services, SkyDrive, etc., are examples of this for Microsoft. All of these services act as glue tying their hardware and software services together in relevant and useful ways for consumers.

The strategy is to get consumers onto your land and keep them there with a strong and useful ecosystem. To some degree these ecosystems are mature and to some degree they are not. The services element of this is one of the most exciting upsides and is still full of unexplored territory.

There is much land still to be grabbed. The pace of innovation is going to continue to accelerate because of it. But this competition will make each competitor better and in the end bring to us, the consumers, some of the most exciting, useful, and enjoyable technology products never before imagined.

The Windows 8 Ecosystem, For Experimental Purposes

[dc]I[/dc]n the coming weeks I will do something for experimental purposes that I have not done for over 10 years. I will be immersing myself in the Windows 8 ecosystem entirely. I converted from the Windows ecosystem to the Apple ecosystem in 2002 and I have never been happier. Apple products work the best for my computing needs and workflow, and as the saying goes, the best product is the product that works best for you.

However, I used to be fully in the Microsoft ecosystem. I started my career in this industry in IT for a semiconductor company and I could troubleshoot, diagnose, and keep Windows working with the best of them. In fact, back in those days, even after converting to Apple’s ecosystem, I was extremely loyal to Pocket PC, then Windows Mobile as my PDA and my smartphone choosing Microsoft’s mobile products over the popular Palm products. I have fond memories of those devices.

What I personally use for my computing ecosystem is irrelevant to the way I do industry analysis. To effectively understand the trends and long term market opportunities we need to understand the strengths and weaknesses of every platform and ecosystem holistically. This is why I did the 4 month test with Android by embedding myself in Google’s ecosystem as much as possible. I will be doing the same thing with Microsoft’s latest offering, Windows 8, in order to fully perform a platform analysis. And I am actually kind of excited about it.

Although, I have committed to Apple’s ecosystem, I am a fan of technology and innovation and I appreciate it no matter where it comes from. Just because I know what products work best for me does not mean I can’t appreciate innovative things about other products of ecosystems. And as mentioned before, this is key for us to assess the short and long term opportunities for those in the technology industry.

So for experimental purposes, for periods of time over the coming months, I will be using the latest HTC Windows 8 smartphone as my primary smartphone, The Acer S7 UltraBook with Touch as my notebook, Surface and the Asus Vivo Tab RT as my tablets, and a few X86 Windows 8 hybrids.

Besides my goal of an exhaustive platform analysis of pros and cons and short and long term opportunities within the Microsoft ecosystem for our clients, I hope to find specific things that I like or appreciate about Microsoft’s latest effort.

I’ve always believed that the most enjoyable computing experience will come when you commit to a platform or ecosystem and stick with it. Each platform and ecosystem looks for unique ways to make their products work better together. I believe that philosophy will yield the most valuable experiences in personal computing.

In my view Apple and Microsoft have the strongest platform and ecosystem stories to day. I say this because they have platforms that span every screen in personal computing. Apple’s is more mature in my opinion but Microsoft is not going anywhere.

Regardless of whose ecosystem you commit to, the future for personal computing is extremely bright.

Windows 8: Back To The Future

[dc]D[/dc]ue to scheduling conflicts I could not be in NYC yesterday for the Windows 8 launch but watched it intently as it was streamed around the world from Microsoft’s Web site. But what I saw was both impressive as well as confounding for many reasons.

Let me start with the confounding issue first. Once Microsoft CEO Steve Ballmer took the stage with his bubbly personality, he expressed “excitement” about Windows 8 and he was right to do that. Windows 8 will always be known as the version of Windows that ushered in the age of the touch UI to the Windows world. And just as Windows 95 solidified the GUI in PC users mind, Windows 8 will burn into people’s conscience the fact that touch should be a key addition to the Windows User Interface. And before he spoke, other Microsoft executives showed off a plethora of laptops, all-in-one touch PCs as well as tablets that are already touch enabled so they can take full advantage of Windows 8 touch features.

But as I listened to Steve Ballmer speak, I could not help but think that his message was one of “welcome to the past” instead of “welcome to the future.” We all pretty much know that we are well into the post PC era and demand for traditional PCs are stable, stalled, or even in decline in many areas of the world. In fact, while we still expect to see between 300-350 million P’s sold WW annually for a few more years, the hard fact is that traditional PC vendors are having a tough time making any money on PCs anymore and some of them may get out of the consumer PC business completely in the next 12-24 months.

Smartphones and tablets are quickly supplanting a need for a full-fledged PC. User surveys show that tablets especially can handle as much as 80% of the tasks they used to do on a PC and that consumers are spending less time on their PC than before. This is not good news for the PC vendors as well as Microsoft and Intel. As more customers are ushered into the world of tablets by cheaper models from Amazon and Google, as well as Apple’s new entry into smaller tablets with the iPad mini, tablet unit shipments will outnumber the amount of PCs sold annually WW by 2015.

We also sell 1.4 billion cell phones a year and by 2013, 65% of the cell phones sold in the US will be smartphones. And by 2015, 60% of all cell phones sold WW will be smartphones. In fact, instead of the post PC era being used to describe where we are today, a more accurate terminology could be that we are finally entering the age of truly personal mobile computing, with smartphones and tablets leading the way.

But I also viewed the Windows 8 event as impressive and important due to the demand for new traditional PCs will stay stable or decline, there are well over 700 million PCs still in use today and Windows 8 represents an important step or bridge to the future of PC UIs and the role touch will play in these devices. Also, millions of PC customers are already familiar with touch through their purchases of tablets and smartphones, Windows 8 has to be considered an important evolution of the graphical user interface for existing and new PCs and laptops.

While I view Windows 8 as important, the one area that I think it will have its greatest impact in will be with devices that are truly touch enabled. This includes new hybrids or combo laptops and tablets that can take full advantage of Windows 8’s new touch interface. However, I am less confident it will be a huge success with existing PCs where the only input is a mouse or a touchpad. Current input devices were not designed with touch in mind and therefore do a rather poor job with navigating through a rich touch based user experience. The exception to this may be when Synaptics’ new ForcePad is installed in new laptops. This is a trackpad that maps the touch UI interface and mirrors some of the touch UI features through this innovative new trackpad optimized for Windows 8. Apple does this already with their Magic Trackpad. Interestingly, Apple does not believe their laptops or desktops should be touch enabled as they view the use of the hand or finger having to move from keyboard to screen as an unnatural way to navigate these types of devices.

There is also another key issue that may keep Windows 8 from being adopted faster and that is the added cost of laptops that sport touchscreens. At the moment, putting a touch screen on a laptop adds about $150-$200 to the cost of the laptop. That is why we still see most of the laptops sold at least through 2014 having non-touch based screens as consumers are inclined to buy on price instead of features in most cases.

While I see Windows 8 working well with touch based devices and see it having a harder time being adopted by users whose laptop or desktop is not touch enabled, Still, Windows 8 will be important to the collective PC market today. And it represents the next major evolution of the user interface for PCs, even if the market for PCs will not be a major growth market in the future.

Selling The Amazon Kindle Fire and Google Nexus 7 Is As Silly As Selling Razor Blades To Men Who Love Beards

Gillette, Amazon, Google and Apple

— The Gillette business model is to give away the razor in anticipation of making profits from the sale of the blades.

— The Amazon business model is to give away the Kindle Fire for cost in anticipation of making profits from the sale of content and ads.

— The Google business model is to give away the Nexus 7 for cost in anticipation of making profits from the sale of ads and content.

— The Apple business model is to sell the iPad Mini for a profit…AND in anticipation of making additional profits from the sale of content and ads.

The razor blades business model

“(T)he razor and blades business model, is a business model wherein one item is sold at a low price (or given away for free) in order to increase sales of a complementary good, such as supplies (inkjet printers and ink cartridges, “Swiffers” and cleaning fluid, mobile phones and service contracts) or software (game consoles and games).

Though the concept and its proverbial example “Give ’em the razor; sell ’em the blades” are widely credited to King Camp Gillette, the inventor of the disposable safety razor and founder of Gillette Safety Razor Company, in fact Gillette did not originate this model.

The (razor and blades) marketing model may be threatened if the price of the high margin consumables in question falls due to competition. For the (razor and blades) market to be successful the company must have an effective monopoly on the corresponding goods.”

~ via Wikipedia

Three Flaws

There are (at least) three flaws in the Amazon Kindle Fire and the Google Nexus 7 business models:

1) No proof of sales;
2) No proof of profits;
3) No monopoly (proprietary) pricing available.

1) No proof of sales

The razor and blades business model works, in part, because when the razors are given away at cost or for free, they become ubiquitous, thus making it convenient for razor owning customers to purchase the company’s proprietary blades. There is no evidence to indicate that either the Amazon Kindle Fire or the Google Nexus 7 are selling well despite their subsidized sales prices.

It’s been estimated that the original Amazon Kindle Fire sold 4.7 million Kindle Fires over a 9 month span and that the Google Nexus 7 sold 3 million units last quarter. These numbers are estimates because neither Amazon nor Google are willing to release the actual sales numbers.

When you consider the fact that these are both subsidized products being sold at cost, those numbers are remarkably low.

2) No proof of profits

The razor and blades business model works, in part, because when the razors are given away at cost or for free, the profit is made from the blades. There is no evidence to indicate that either the Amazon Kindle Fire or the Google Nexus 7 are making substantial profits from the sale of content or ads. In fact, when you look at the company’s recent quarterly earnings reports, there is evidence suggesting that they are NOT making significant revenues or profits from tablet related content and ad sales.

3) No monopoly (proprietary) pricing available

The razor and blades business model works, in part, because the blades are proprietary and command the premium price neccessary to offset the lack of profit from the giveaway of the razors.

For the (razor and blades) market to be successful the company must have an effective monopoly on the corresponding goods.” ~ via Wikipedia

The Printer Example

Computer printer manufacturers have gone through extensive efforts to make sure that their printers are incompatible with lower cost after-market ink cartridges and refilled cartridges. This is because the printers are often sold at or below cost to generate sales of proprietary cartridges which will generate profits for the company over the life of the equipment.

The Game Console Example

(V)ideo game consoles have often been sold at a loss while software and accessory sales are highly profitable to the console manufacturer. For this reason, console manufacturers aggressively protect their profit margin against piracy by pursuing legal action against carriers of modchips and jailbreaks.

Atari had a…problem in the 1980s with Atari 2600 games. Atari was initially the only developer and publisher of games for the 2600; it sold the 2600 itself at cost and relied on the games for profit. When several programmers left to found Activision and began publishing cheaper games of comparable quality, Atari was left without a source of profit.

~ via Wikipedia

Neither the Amazon Kindle Fire nor the Google Nexus 7 have a monopoly on the content or the ads that they sell. They cannot command a premium price. In fact, if anyone can command a premium price on the sale of content, it is Apple because of their extensive distribution channels. While Apple is able to sell content in over 90 countries, the content sales channels for both Amazon and Google are extremely limited.

Cheaper is not necessarily better

There are rumors that Google may announce a $99 Nexus tablet next week. But in a subsidized model, cheaper is not necessarily better. In fact, it could be counter-productive.

The razor and blades business model works, in part, because when the blades are given away at cost or for free, they become ubiquitous, but there is no point in giving away the razors to men who love having beards. Similarly, there is no point in selling low-cost Amazon or Google tablets to customers who don’t buy their content or consume their advertising. Subsidized products attract bargain hunting customers and bargain hunters are as useless to Amazon and Google as bearded men are to Gillette.

The non-existent “Price Umbrella”

Apple is being criticized for selling the iPad Mini at $329 and leaving a “price umbrella” under which the likes of Amazon and Google tablets can grow and prosper.

There is no price umbrella. The Amazon Kindle Fire and the Google Nexus 7 are zero-margin products.

Let me say that again. Amazon and Google make zero profit from tablet sales.

No matter how much Apple lowers its sales price (and its margins) it won’t be taking any profits away from the Amazon Kindle Fire and the Google Nexus 7 because they already make no profits.

Now there is an argument to be made that lower Apple iPad Mini prices might reduce Amazon’s and Google’s tablet sales and therefore lower Amazon’s and Google’s tablet related content and ad sales. This presumes that lower iPad Mini prices would spur higher iPad Mini sales. If the iPad is supply constrained, (i.e,, Apple can’t make enough of them) this argument fails.

Further, both the Amazon and Google tablets are already selling poorly. And there is absolutely no evidence that Amazon or Google are making more than, or even as much as, Apple is in content and ad sales. Lower iPad Mini prices would have a negligible effect on Amazon’s and Google’s ethereal profits but it would have a significantly negative affect on the iPad Mini’s margins.

Giving razors to men with beards

“Never interrupt your enemy when he is making a mistake.” ~ Napoleon Bonaparte

Apple doesn’t need to lower its pricing to deliver “the tablet death blow” to its competitors. Apple’s competitors are doing a fine job of starving themselves of profits as it is.

When your competition is giving razors to men with beards and hoping to make their profits on the sale of blades, you don’t attack them – you ignore them.

The iPad Mini Could Spur an Education Revolution

Picture of iPad miniI 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:

LaTeX text

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.

Microsoft’s Surface: Less Than A Tablet, Less Than A Notebook PC, Less Than Ideal

Introduction

I hadn’t planned on writing a review of the Surface today. But after reading over a dozen reviews, a pattern has clearly emerged:

— Excellent hardware
— Not as good a tablet as the iPad
— Not as good a PC as a notebook PC

The Promise

But perhaps none of that matters. The Surface, after all, wasn’t designed to be only a tablet or only a notebook PC. It was designed to be a hybrid – the best of both worlds. Perhaps it succeeds in that role?

As Josh Topolsky of The Verge put it:

The promise of the Surface was that it could deliver a best-in-class tablet experience, but then transform into the PC you needed when heavier lifting was required. Instead of putting down my tablet and picking up my laptop, I would just snap on my keyboard and get my work done.

The Surface won’t satisfy the tablet user

The Good

It’s clear that Microsoft has really thought through the Windows RT tablet software.

It’s a new paradigm, and people are uncomforable with new, but new isn’t necessarily bad. And the Windows RT “new” appears to be very, very good indeed.

It’s not as discoverable as iOS and Android, and it will receive criticism for that but discoverability isn’t everything. Some of the gestures in Windows 8 are brilliantly implemented. Many of the reviewers found it to be more engaging, more immersive, more delightful than either iOS or Android.

In that way, I believe that Windows RT for the tablet will be like Android on the phone – it will appeal to the more advanced users who will love it for the power that it unlocks.

The Bad

There is absolutely no reason to have a desktop OS on the Surface RT tablet. The Surface RT doesn’t even run desktop applications, so why bother?

Almost all of the reviewer’s complaints stemmed from the schizoid nature of the dual operating systems. Sometimes you were in tablet mode. Then suddenly you were in desktop mode. There were two control panels and two Internet Explorers. In short, there were two too many operating systems in one device, especally when that one device didn’t even run Windows desktop software.

The Ugly

The Windows RT store is barren. Could this change? Possibly. But until it does, you’ve bought a tablet that doesn’t have any available tablet apps. And that’s going to make you very un-app-y.

The Surface won’t satisfy the notebook PC user

The only Windows desktop software that the Surface RT runs is Windows Office. That’s it.

There are over 4,000,000 applications that run on Windows. The Surface RT falls 3,999,999 applications short of being an adequate notebook PC. And that’s really short of ideal.

The Surface won’t satisfy its ideal user

Ed Bott, of ZDnet, describes the ideal Surface RT user:

On a busy Sunday evening a few weeks ago, I was sitting in Terminal 4 of the Phoenix Sky Harbor airport waiting for a connecting flight. The guy sitting next to me was clearly an experienced business traveler.

I watched out of the corner of my eye as he pulled an iPad from his briefcase, checked some football scores, and played Words with Friends for a few minutes.

Then he put the iPad away and pulled out a well-worn Dell notebook (I swear it had duct tape on one corner). He waited (more patiently than I would have) for Windows XP to load, and then he worked on an Excel spreadsheet for 30 minutes until our flight was called.

That guy. The one who has to carry around two devices because neither one by itself can do everything that needs to be done. That’s who Microsoft’s new Surface with Windows RT was designed for.

First let me say this: There aren’t as many of those guys out there as we think. There are a whole lot of people who only need a notebook. And, as I tried to explain in my article entitled: “The PC is the Titanic and the Tablet is the Iceberg. Any Questions?“, there are even more people who only need a tablet.

But even if they are only a niche, there are still a sizable minority of people who fall into the above description of the Surface’s ideal user. And the most damning thing that I can say about the Surface is that it won’t satisfy it’s own ideal user.

— He’ll go to check on some football scores and then be frustrated that he doesn’t have access to one of a dozen available alternatives to the official ESPN app.

— He’ll go to play a game and then be frustrated that he can’t play any one of the 300,000 games available on Android or the game that everyone’s been talking about and that’s been available on iOS for over a year.

— He’ll go to run a Windows application and then remember that the Office suite are the only Windows applications that run on his device.

That guy. The one who has to carry around two devices because neither one by itself can do everything that needs to be done. The ideal customer for the Windows RT. That’s the guy who will be totally unsatisfied with the Windows RT.

Less than a tablet, less than a PC, less than ideal

Microsoft calls the Windows 8 operating system and the Surface RT a “no compromise” computing solution. But this tablet is such a compromise that it will satisfy no one – not even it’s intended target audience.

Ironically, it is the software, not the hardware, that is letting Microsoft – the software company – down. And that’s too bad because it would have been much better for Microsoft if it had been the other way around. It’s possible that another hardware partner would have fixed any deficienies in the Surface’s hardware. But no matter how good the hardware, it will still be running the Windows RT operating system. And that’s far from ideal.

iPad Mini: The iPad in the Palm of Your Hand

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 Mini
Apple 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.

Windows 8: It’s Later For Microsoft Than You Think

Microsoft Needs To Hurry

Microsoft has two problems. The first is that they have no presence in mobile and mobile is where it’s at. The second, is that they’ve run out of time.

Run out of time? How is that possible? The iPhone is only 5 years old. Android is only 4 years old. The iPad only appeared on the market 2 and a half years ago. How can it possibly be that Microsoft is out of time? Three things:

1) PC sales are declining fast;
2) Smartphones, and especially tablets, are being adopted at historically unprecedented rates; and
3) Microsoft’s absence from the market has been ceding the mobile computing business to Apple.

1) PC Sales Are Declining Fast

Both Gartner and IDC concur that worldwide PC sales fell by over 8%. Ultrabook sales forcasts were slashed in half for 2012 from 22 million to 10.3 million.

But as bad as that looks, it’s actually a lot worse than that if you’re Microsoft. If you take out the Apple Mac sales, PC sales in the U.S. actually shrank by 13.8%. And, naturally, as PC sales shrink, so do Microsofts profits.

It’s not so much that PCs are in decline – it’s PCs running Microsoft windows that are in decline. And the decline is not temporary, it’s permanent. As Mike Gualtieri, principal analyst at Forrester Research, put it:

“I don’t think [Windows 8] is going to turn [the PC industry] around because nothing’s going to turn it around…”

2) Smartphones, and especially tablets, are being adopted at historically unprecedented rates

It’s not computing sales that are down, it’s only PC sales that are down. If you add tablets with PCs, overall sales of computing devices (excluding smartphones) will actually RISE by 12% this year.

Smartphone sales grew so quickly that they surpassed PC sales in late 2010. And the rise of tablets has been even faster and has been even more spectacular. No other technology has penetrated society so quickly. By the end of this year, tablet sales will jump 90 percent to 124 million units or just over 35 percent of the total PC sales for this year. Tablet sales are expected to outsell PCs by 2016, if not sooner.

Market Penetration

Within 18 months after the introduction of the iPad, tablet penetration among U.S. housholds hit 11%. 12 months later it was at 25%.

A Lost Generation

Microsoft has lost an entire generation of users. Don’t believe me?

— 40% of U.S. teens own an Apple iPhone. 62% want one.

— More than half (51 percent) of tablet users think that their tablet will be their primary computing device within the next two years.

Microsoft’s absence from the market has been ceding the mobile computing business to Apple

Business has long been a Microsoft bastion. It’s been estimated that as many as 92% of all business personal computers once ran on Windows powered machines.

Consumerization and BYOD

But Apple is riding the crest of the “consumerization of IT” trend. Truth be told, Apple isn’t riding the wave, it CREATED the wave. For most companies, BYOD doesn’t mean “bring your own device” to work, it means “bring your own iOS device” to work.

Business Adoption

94 percent of the Fortune 500 companies are either testing or deploying iPads. Some 70 percent of the Global 500 companies are testing or deploying iPads, too. 3 in 4 American enterprises have adopted the tablet in some way.

And when 500 of the UK Chief Information Officers (CIO) were polled, 37% choose the iPhone to be the dominant business smartphone in the the next few years.

“The role of the iPad cannot be overemphasized. Some observers estimate the iPad sales in the business market might represent up to half of all iPad sales,” ~ Charlie Wolf, Needham & Co.

Use In The Workplace

77% of tablet users report that their destop usage decreased after getting a tablet. 1 in 4 owners say their tablet is now their primary computer.

Indispensable

Not only has the iPad stolen a march on Microsoft in business, it’s going to be hard to dislodge. People love their iPads. In a quirky poll taken earlier this year:

— Almost half of respondents (47 percent) said they’d rather have an iPad for work than a bigger or better office or a more senior title (34 percent).

— Sixty-eight percent said they’d rather have an iPad than their own parking space at work, while almost one in four (23 percent) would prefer the tablet over an extra week of vacation each year.

— When asked what they would go without before they would give up travel with their iPad, nearly half (48 percent) say they would forego meals, 41 percent would skip drinking water, and more than 1 in 3 (35 percent) would give up bathroom breaks. More than half (55 percent) said they would rather forget deodorant than forget their iPad.

Headlines

Read these headlines and tell me that Microsoft should not be terrified. Many of the headlines have to do with the demise of RIM, but notice that the busienss is moving to Apple and Android – not Microsoft:

— More car companies link iPhone nav apps to dashboard displays

— The iPad Kiosk: Landing at an Airport Near You

— Urban Outfitters Replaces All Cash Registers With iPads

— BlackBerry Dropped by Booz Allen for Apple, Android

— Australia’s Woolworths drops RIM for iPhones

— U.S. Immigration and Customs (ICE) dropping RIM BlackBerry and purchasing 17,000 Apple iPhones

Windows 8 Is Late

Windows 8 is arriving on Friday, October, 26th and it’s none too soon…

…in fact, as far as mobile goes, it may already be too late.