This week marks the five year anniversary of the day the iPad went on sale — April 3, 2010. I thought I’d take a quick look at some of the numbers associated with the iPad, especially in the context of its falling sales, with a view to gauging where the iPad is in its lifecycle, and where it might go from here.
Much faster out of the gate than any other Apple product
One way to look at iPad sales is to put them in the context of Apple’s two other most recent new product launches, both of which came before it: the iPod, and the iPhone. It would be fun to put the Mac into this comparison too, but I don’t have those early Mac numbers (I’m not sure anyone does) and they’d be utterly dwarfed by these other products. The first chart shows quarterly sales for those three products, for the first 20 quarters from launch (i.e. quarter 1 is the quarter the product went on sale, and I’ve used an estimate for quarter 20 for the iPad, since it doesn’t end until this week and Apple won’t report it for another few weeks):
As you can see from the chart, the iPad was far faster out of the gate than either of the other two products and it took the iPhone about four years to pass the iPad’s rate of sales from launch. The iPod, meanwhile, largely fell short of the iPad’s sales to date in its first five years. That chart is somewhat lumpy since it reflects the cyclical pattern of sales for each of these products. So in some ways a better method to look at things is cumulative sales, which are shown below:
As you can see, the iPad’s sales over its first five years outpaced both the iPhone and the iPod, the latter very handily. Another way to look at all this is to ask how long it took each of these products to reach two key milestones: 100 million and 200 million cumulative sales, and that’s shown here:
You’ll see the iPad hit 200 million cumulative sales in four years, a period in which the iPhone was half that at 100 million. It took another year before the iPhone, now growing at an accelerated pace, hit the 200 million milestone. The iPod, meanwhile, took over twice as long to hit 100 million and almost twice as long to hit 200 million.
Reasons for the iPad’s slowing growth
In the first three years, the iPad appeared to be on an entirely different trajectory from both the iPhone and iPod, and at a significantly steeper angle, suggesting to the casual observer potential for a larger addressable market. But, of course, the addressable market for a tablet computer, unsubsidized and a companion to a smartphone and/or PC, was never going to be as large as the market for the iPhone. Rather, it’s become clear the rapid initial growth wasn’t so much a reflection of a greater overall opportunity, but a more rapid progression towards maximum penetration. The iPhone took a number of years to reach many of the countries in which the iPad was available in its first year. The price and subsidy model also took a couple of years to normalize. Apple was also utterly unproven in such small, touch-screen devices when the iPhone launched, and into a market where smartphones were already in rapid adoption. The iPad, meanwhile, benefited from the much larger number of Apple stores and carrier stores already carrying the iPhone, familiarity with the iPhone itself, and many other factors which allowed it to take off much more quickly.
Think about the fact that, thanks to these sales, the iPad has an installed base that’s likely around half the size of the iPhone base today (I’m no longer making comparisons about the same point in each product’s history, but actual current numbers). In other words, the iPad took just five years to achieve half the penetration rate the iPhone took eight years to achieve, despite the iPhone’s much bigger addressable market. At the same time, the iPad generated $127 billion in revenues for Apple over its first 19 quarters (we don’t know the exact numbers for the 20th quarter yet). Apple’s entire revenue as a company for the five calendar years before it introduced the iPad (2005 to 2009) was $127 billion. The iPad has made a massive contribution to Apple’s business over the period since, equating Apple’s entire revenues from all products over the previous five years.
So, why the slowdown? I’ve written about this a couple of times before, but I think there are a couple of main explanations:
- First, the one I alluded to above: the iPad reached a significant portion of its maximum penetration much more quickly than previous products, and at this point it’s converting incremental new users each quarter while existing users are perfectly happy with the devices they have and just don’t feel the need to replace them just yet. This is essentially an argument about replacement cycles, and it suggests we should be due for a bump in sales in the next year or two as lots of 3-4 year old iPads start to feel sluggish.
- Second, the argument the iPad served a temporary need in the set of devices we each carry, but the devices on either side are increasingly encroaching on the territory it once served uniquely well. As such, we feel less need for our iPads as we’re using our large-screen smartphones and our increasingly light and portable laptops more. In some ways, it’s as if the iPad landed in the wrong place in the evolution of Apple devices, and its decline at this point would have made more sense had the iPhone come later.
The next five years should be as interesting as the first
Which of these explanations holds true dictates what you think will happen to the iPad in its next five years: whether the replacement cycle for devices sold in its first two years will drive higher sales again, or whether the iPhone 6 and 6 Plus and MacBook Airs and MacBooks mean many of us simply no longer need an iPad. To the extent iPad sales are held up by sales of those other devices, I don’t think that’s a problem for Apple. But I also think there’s significant potential for the iPad to grow again, especially given the IBM deal and the sales force that will be selling these devices into businesses. Regardless of how you think things will pan out, I think the second five years for the iPad will be at least as interesting as the first five. I’ll leave you with this chart, which shows what happened to the other two products as they moved beyond their first five years: which of these is a better model for what will happen to iPad sales in its second five years?