We have said that the iPad is simply a special instance of a smartbook, but it has become so powerful a marketing icon that it may well slow down, damage and reduce the impact that smartbooks have on the entire phone and portable device eco-system. It may become a mostly tablet market.
When we first heard the term smartbook it was from Qualcomm executives who said that they would experiment with multiple form factors, including tablets and devices which might look like netbooks.
But already the iPad has become the Tyrannosaurus Rex of smartbooks. Along it came, and all the diverse dinosaur’s trembled with fear and found food harder to come by, and it made some of them extinct.
Like the Tyrannosaurus the iPad is too heavy, too big and it should be too slow, but it isn’t. It’s very fast at doing what it was designed for. The T-Rex, it turns out, was not a predator, it would amble up and scare raptors from their prey and then help itself. It was very fast at doing that, but not fast enough to actually hunt down fast moving prey. More Cuckoo than Saber Tooth, if you’ll excuse an analogy skipping a few million years. As such it never got ALL of any meal, but it got a part of everyone’s. And the App store in particular helps this scavenging process ‘ this week a couple of new apps put the iPad up against digital photo frames for instance, suddenly there’s another product category scavenger stress.
And that’s what we’ve been trying to preach since we did our first evaluation of the product. It is not yet a market on its own, and although there may one day BE a tablet market, there currently exist PCs, Notebooks, Netbooks, ebook readers, digital photo frames, smartphones portable gaming devices and portable media players ‘ and it will have its share of each and every one of those markets before finally establishing that the tablet form factor of itself, is a separate market. If Apple then retains 70% of that market, it could have quietly doubled in size once again.
Beware beasts which are scavengers and products which are market scavengers. There were once specialist work processors, minicomputers which were tuned to spreadsheets, print shops and photocopiers, accounting systems and countless other forms of automation ‘ and they were initially impacted by, then killed off by the general purpose Personal Computer. The iPad has this feel about it.
Which is why this week, when a Morgan Stanley’s research analyst, using data from its Alphawise market research unit said that not only was the iPad putting a dent in Netbook sales, but they were also denting PC sales, we were not only not surprised, but vindicated in this view that the device, at its core, right now, is a market scavenger.
The note put out revealed that 17% of iPad buyers are making their purchase instead of a handheld video game player and 28% instead of an e-book reader; and 41% instead of the iPad Touch.
That is scavenging with a significant touch of cannibalism, at the expense of the previous generation of Apple products, which although still going strong, are now relegated to being second string at Apple, if not third string, the iPod role purely to introduce the young to the Apple brand so that they can grow up and worship Apple products without question.
The Morgan Stanley research also said that 44% of iPad owners bought an iPad instead of a Notebook and almost 25% bought it instead of a MacBook. The scariest figure is that 27% said they would now forego buying a PC.
It is worth going back for a second to the T-Rex analogy, and the fact that the iPad should have been too heavy, too big and too slow. It is too heavy at 1.5 pounds, and it IS too big at 0.5 of an inch thick, with a 9.7 inch display and if Apple didn’t have a habit of pursuing its product revolutions with savage evolution, then there would be plenty of room to undermine it. But the reason that it is out at all, and that it is not slow, but fast at what it does, (browsing the internet), faster than it has any right to be, is simply because Apple took the obvious choice of an ARM core and designed a chip itself that would get to market ahead of all the other smartbook chips, and also feature the type of tight graphics integration that it established in the iPhone.
There will be future generations of iPads, and they will feature a more power efficient chip, which will lead to a smaller and lighter battery (the battery on the iPad is way too big because the chip uses too much power), and it can revisit the display design to use less power (as new design technologies based on ambient light reflection instead of backlight are almost ready). The important thing for rivals to understand is that this second generation is likely to be announced less than 18 months after the first device was announced, and delivered under 18 months after it was delivered.
Right now, rivals which will rely on chips from Qualcomm, Freescale or Samsung or even Nvidia, now have the chips, but they are around 6 months behind Apple’s chip set in delivery terms, and they have not had them in volume for that long and so are waiting for finalized designs. This week we have read more than one Eulogy to the smartbook, which bloggers thought should be out by now. They were always due third quarter 2010. Their launch phases are predicated on being ready in time for Christmas, but Apple will rejuvenate it iPad line something like 6 to 9 months after other tablet form factor ARM based smartbooks are out. At the same time low power Intel chips will come available to drive Netbooks (in tablet form of course) and Android devices (tablets?) and MeeGo system (they will likely also have a tablet).
Suddenly in the middle of 2011, the Apple line refreshes, just as everyone else was about to give vent to a sigh of relief that they are finally picking up market share in the tablet market, just as hundreds of new tablet options flood the market and confuse everyone. In a confused market consumers go back to the market innovator, re-affirming their love of Apple. And so it goes on.
It’s not that an iPad can do everything that for instance a Home PC can, but some people in each home only use it for web browsing, watching videos or reading their email. And those users will fall away from the PC, reducing the urgency with which upgrades are required. It takes money therefore, directly from the market of home PCs, without doing many of the things that home PCs can do, and without doing it in so convenient a way. Yes the keyboard is too clumsy to enter data as well as a desktop PC keyboard, but it’s good enough.
It’s the same for each market you look at. Take eReaders. It’s more than twice as heavy and inconvenient to use an iPad over a Kindle, and the screen’s not as good and it’s hard to read it in bed (on your side for instance). But it will do for people that really don’t read enough to need a Kindle and cannibalize that market to some extent. Second generation iPad’s will cannibalize it further, whether they extinguish the separate eBook reader market or not.
This is another version of disruptive innovation ‘ and our rule for that used to be that it does something half as good for a tenth of the price. In this instance you need an initial reason to buy the iPad, but once you’ve gone and done it, an app can be acquired which does anyone of 100 things, for almost nothing. In each case ‘ ebook reader, email client, web browser ‘ it may only be half as good as what it replaces, but the ADDITIONAL price of doing it on an existing, already purchased iPad is so small, as to be irresistible.
So in the tablet form factor smartbook market, where these are supported by an App Store (such as Android Market), you will need an initial reason for buying every device (iPads and iPad impersonators) and that reason might be something like Google Voice, and then all tablets start munching on all nearby markets.
So if you are responsible for building one of these devices or bringing one to market, ask yourself ‘ does it have enough Apps, can it cannibalize enough other devices disruptively, and do you have a strong single initial reason for buying this particular device in the first place. If you can pass that test, then you must also ask if you can either a) Get enough money back from a 6 to 9 month sales window to make your device profitable b) Continue to sell it even after Apple has rejuvenated the iPad design or c) You can rejuvenate your design not long after Apple has upgraded its device.
To do a) you need to target the design aims that Apple will be targeting now for its first upgrade, 18 months out ‘ and to picture this, imagine you are Amazon selling the Kindle versus Barnes and Noble just introducing the Nook. The Nook is a great device, but it’s very late.
Which leads us to the headline. There is a saying in journalism, ‘Don’t get it right get it written,’ and this very much applies to tablet devices in 2010, ‘Don’t get it right get it out there.’ This is a marathon, not a sprint, get a device out there or prepare to be attacked by a T-Rex, which wants to each your lunch.
The only questions left is just how fast will it eat who’s lunches? We asked at launch if it might not takes 10% of 7 markets over the next few years. 10% of the 47 million handheld gaming market gives its 4.7 million devices, 10% of the 33 million Netbook markets would be another 5 million. 10% of iPods would add another 8 million ‘ in three major markets that’s already 17.7 million. Add ebook readers, PCs, Notebooks and you can see that even if it takes two years for all of this to come true then the original 3.6 million estimates of iPad sales was never going to be in the ball park ‘ it was always based on Apple telling financial analysts how many they were going to make and discounting it substantially. If you base it on the T-Rex model of disruptive innovation it was always going to be closer to 8 to 10 million ‘ as long as Apple can make that many, and it could be more.