Increased Threats to the iPad Coming?

Increased Threats to the iPad Coming?

It is ironic. As we enter 2012, a year that is by all accounts setting up to be “The Year of the Tablet!”,  we are likely to see the dimming of the preeminence of the iPad, the device that created the category in the first place.

We tend to forget that many jaded pundits scoffed at the launch of the iPad.  How could an iPhone that did NOT make calls and was too big to fit in ones pocket be interesting to any customer, particularly when a customer already has an iPhone and laptop — AND the price of the iPad is precariously close to the price of a laptop?

The rest as they say is history: the alchemy between ultra portability, 3G/4G connectivity, Wi-Fi, a vivid display with gestural touchscreen capabilities — and a computing platform capable of running applications — proved to be intoxicating.  The whole was greater than the sum of the parts, and customers showed a surprising lack of price sensitivity.  In the words of its visionary, Steve Jobs, the iPad was and perhaps still is “insanely great”.  A new product category was created that is continuing to redefine not only the mobile product landscape but also the computing landscape as a whole.

And yet as the impact of the tablet continues to emerge in 2012, the iPad seems almost certain to lose market share.  Threats are coming to the iPad on many fronts.

Kindle Fire and Nook Tablet

The clearest threats are the new tablets that compete with iPad directly, specifically, Kindle Fire and Nook Tablet.  The iPad will find it challenging to defend against the following:

  • Price.  The price points are not close: $499 for iPad2 vs. $199 for Kindle Fire. The Kindle Fire and Nook Color hover around the magical $200 price point, above which are so called “considered purchases” that typically involve extended research  —  and lengthy discussions with spouses.
  • Content Trumps Services.  Tablet offerings attempt to distinguish themselves with more than hardware alone.  In the case of Apple, this principally comes in the form of innovative technology and services made largely possible through its mobile operating system, iOS: iCloud storage, iTunes-based ecommerce, Wi-Fi-based iMessage, and Siri, the intelligent assistant (for iPhone but not yet for iPad).  Cool stuff.    Cooler still:  free content that Amazon Prime customers get on the Kindle Fire.  This includes a monthly quota of free front-list titles, and some b-list streaming content to boot.   If a Kindle customer has been buying two  e-books per month, on average, and is subscribing to streaming services like Hulu or Netflix, the $199 is paid off in less than a year.  The customer comes out ahead.
  • Total Cost of Ownership.   If the device is significantly less expensive AND there is a significant amount of free media, the total cost of ownership (device plus content) between the Kindle Fire and the iPad is “insanely significant”, at least for consumers with any level of thrift.

User Experience vs. Customer Experience

Apple defined the strategic impact of an effective and engaging user experience.  To use an Apple product is to be immersed in a world of design elegance and simplicity that is not only efficient — it is also enjoyable.  This approach ensured  successful products, strong brand loyalty, and immense wealth for Apple.  The iPad remains a more effective and compelling user experience when compared to the Fire and the Nook Tablet.

And yet, there is one place where the new entrants experientially trump the iPad: customer experience, the purchase experience.  Amazon understands more than all others about how to construct a smooth digital purchase experience.  The way in which Kindle media is distributed to and managed across devices creates a far smoother and customer-centric experience than juggling devices with iTunes.

Blades and Razors

Gillette makes money by selling blades, not razor.  Apple remains focused on making money by creating razors (tablets) that are better than anyone else’s offering.  Amazon and B&N realize the tablet is the razor and that content is the blade.  They want to keep selling blades.  Touché.

Mobile Performance and Ultrabooks

When the Kindle Fire and Nook Tablet were released, they were given a vigorous drubbing by the nerd-orati for failing to match the computing speed of the iPad2. But is it enough to matter?  The performance differential is not enough to significantly impede a user who is using the tablet for media delivery, email, and basic apps.

However, if mobile computing performance IS a significant factor, then this need is likely to be met best by a super-portable laptop, and not by a tablet at all.   Inspired by the elegance of Apple’s MacBook Air, the so-called “ultrabooks” (which is in fact an Intel trademark), provide a computing platform far more powerful than any tablet — on non-Apple hardware. The size of the ultrabooks is not much greater than the iPad.  Some models to be launched in 2012 will allow for the screen to be detached from the keyboard  — to become a tablet.  Intel estimates that by the end of 2012, 40% of the laptop market will be ultrabooks.  This will put additional pressure on the iPad’s predominance.

The irony is complete: On one side, the iPad is threatened by the Fire and Nook Tablet, clearly based on the iPad.  Yet on the other side, the iPad is threatened by ultrabooks, inspired by the MacBook Air.

Victims of one’s own success, indeed!