With its recently announced iPad, Apple is trying to bring to market a new product that in order to succeed needs to provide a materially improved user experience and carve out a position in the crowded consumer electronics marketplace.
Analysis
At first glace, the Apple iPad looks to be an innovative product but one that has the difficult task of creating a category and spurring demand for a device that has overlapping functionality with other products. The iPad aspires to invigorate the “tablet” product category, and will compete for budget and attention in the following consumer electronics neighborhood (approximate 2009 volumes):
Mobile phones (~1.14 billion units)
Smartphones (~200 million units)
Notebooks (~180 million units)
Netbooks (~30 million units)
E-readers (~3 million units)
In the Apple tradition, the iPad appears to be a sleek, sexy and user friendly device that is great for media and entertainment consumption. The 9.7” screen, intuitive interface, thin design and lightweight hardware combined with the application developer community and content publishers already on board bode well for the product’s appeal.
The iPad, however, is not geared toward content creation and is thus limited when compared to a laptop or netbook. In addition, the device has no voice capability. Without native voice and limited data creation the iPad cannot displace a smartphone or a PC (notebook or netbook). Therefore, in the list of “must have” communication and entertainment devices and in the fight for consumer electronics budget, the iPad at best comes in third behind a mobile phone and a computer. In fact, the only device it functionally replaces from the above list is an e-reader (to a lesser extent the iPad can claim overlap with a netbook if the netbook’s main purpose is Internet access and media consumption).
There is also the issue of connectivity and a possible monthly data charge (for the 3G-enabled iPad). At a certain point consumers will suffer from “subscription fatigue” when asked to pay for connectivity on several mobile communications devices, even when subsidized. In addition, a potential maintenance matter may arise as carrying and charging too many mobile devices may become burdensome.
The iPad, therefore, has to create a new, superior and highly appealing content consumption experience in order to push its way into the consumer’s product portfolio. Apple has several initiatives in the content and cloud arenas, including MobileMe, iTunes, Application Store, Apple TV and the North Carolina data center, so an optimized media consumption device is in line with their strategy. Apple also has a history of product innovation (e.g. Mac), raising the bar in an established market segment (e.g., iPhone), and developing a fledgling product category (e.g., iPod). In addition, magazines, authors and other publishers might view the iPad as a lifeline and push for the product’s success. There may even be vertical markets, like education or health care, which gravitate to this device. The question is whether the device and the user experience it enables are compelling enough that the mass-market will carve out a spot in their consumer electronics portfolio and budget for the iPad.
What we know for sure is that PC and mobile market participants worldwide, including HP, Dell, Lenovo, Acer, Amazon, Microsoft, and Nokia, as well as mobile operators, publishers, gaming companies and advertisers will all be anxiously awaiting and evaluating Apple’s latest consumer electronics initiative.
