There have been many good articles on the iPad lately.
However, I still think there are several missing pieces of the iPad puzzle. While it is still all theory, I’d like to offer my perspective on the iPad and tablet market. The source of my optimism for tablets is rooted in the unique combination of form and function. The larger screen makes it more capable, as well as more diverse, in its function than a smartphone. The lack of a clamshell design with attached keyboard makes it more portable/mobile than a traditional PC. This combination allows the device to be extremely varied in its supported uses. Specifically, the iPad is the most general purpose computing device I’ve ever studied. It can be so many things to so many people and do a wide variety of things well. It can be a DJ’s mixing board, an art easel, a portable DVD player, a music recording studio, an e-reader, a web browser, a gaming console, and so much more. I believe this range of supported use cases is what made the iPad Apple’s fastest growing product and one of the most quickly adopted devices in consumer electronics history.
As I have reflected on this point, it has led me to think the iPad may be cursed. It may be too good of a general purpose device in that it lacks a preferred or specific use case. What I mean is the iPad lacks a function its owner prefers or can only do on the device. One that can not be done on any other device they own. We recently received a large data sample of consumer use cases for PCs, tablets, and smartphones. Included in this was usage data of each device. What stood out to me was, of the top 50 most common tasks ((The survey defined these tasks and was very comprehensive. Things like check email, search the web, make an online purchase, watch a video, watch a movie, play a game, etc. It was a global survey of 30,000 consumers)) consumers engage in with computing devices, there was not one single task they indicated they did more on their tablets than their PCs or smartphones. This data supports my theory that, for most average consumers, the iPad/tablet did many things well. But in relation to their smartphone or PC, it didn’t necessarily do any one thing better which led them to use the device exclusively for that function. Even if we can make the case the iPad does succeed at doing a few things well or better than a smartphone or PC, are those things worth the cost of the iPad when most consumers still have access to either a smartphone or a PC? Because of this I feel, for the time being, the iPad is still viewed as a luxury not a necessity. Its place between the smartphone and the PC is evolving but while we still have a huge number of people with access to a traditional PC in their home or workplace and owning a smartphone, the role the iPad plays is one more of convenience/luxury than necessity. The iPad’s curse may be it can do many things well but does it do anything better? That is a key question.
The iPad’s Consumer and Commercial Divide
I make the above points with the distinction I am talking about the general consumer mass market. Without question, the iPad has distinct and differentiated value in commercial and education markets. For field workers who don’t sit at a desk all day or who work from a stationary position, the iPad has been a valuable asset to their job. In many schools, the iPad is the absolute best device for student-teacher interaction and learning. When it comes to the commercial verticals we study and the education sector, I can rattle off dozens of use cases where the iPad/tablet is not only the preferred task for the job but also the only product uniquely designed to fulfill that job.
I also make the above points understanding the iPad’s role for kids and seniors. That the iPad is fulfilling the task of a primary PC for these groups who have no PC or are limited in their computer literacy is a significant point and one worth including in tablet analysis.
How Much is the Smartphone to Blame
The other element worth adding to the puzzle is the degree to which the smartphone is to blame. I believe there is merit to the idea the smartphone may have covered more ground for consumers’ general computing tasks than previously anticipated. It was our conviction the PC over-served the broader consumer market. The upside of the tablet was this device was good enough to replace the PC for most consumers. It turns out, the smartphone may actually be good enough for the masses–for the time being. Add a larger screen to the smartphone and the number of use cases it can cover as the primary computing device grows even more.
We look at the chart above and initially believed the decline was directly correlated to the iPad’s release. While there may be some truth to this observation, we can also argue 2010 is approximately the time the smartphone went mainstream. Hypothesizing the smartphone may have more to do with the PC decline and the slowing of the iPad may not be too far off. It seems clear in many markets we have had an interesting perfect storm occur. The PC market, for the most part, became saturated with nearly half the planet’s population having access to a PC in some way, shape or form. We had the rise of the smartphone as it went mainstream and we have had nearly half a billion tablets sold. By the end of 2014, we will have a combined installed base of 4.1 billion PCs, smartphones, and tablets. ((All stats here from my firm Creative Strateiges, Inc))
The key takeaway is the iPad/tablet is closer to the PC than the smartphone. We never modeled the tablet to have a total addressable market as large as the smartphone but we also agree it is larger than the PCs TAM which currently sits around 1.5b (although declining). We remain bullish on the tablet but the dust must settle in pure consumer markets with their use of the PC. We believe the iPad/tablet still represents the best form and function as a mass market personal computer. With regard to the smartphone we must keep one thing in mind. While essential, it may always be limited by its screen size. This limitation opens up the opportunity for larger form factor computing devices. I anticipate a battle between the tablet and the PC over the next few years for the hearts and minds of mainstream consumers. If I had to bet, I’d put my money on the tablet.
For a more formal note on the tablet market, read my latest report at Creative Strategies titled Tablets: The Next Frontier in Personal Computing.