By Brian Dipert
I’ve found myself of late pondering the tablet computer market both in an absolute sense and relative to the cellular handset business. Consider that Apple near-singlehandedly created the smartphone market with the first-generation iPhone, unveiled in January 2007 and shipping beginning in June of that same year. Google responded with the T-Mobile G1 one-plus year later, in October 2008. Android-based handset shipments have dramatically ramped since that humble beginning, to the point that they now notably (and, I’d argue, sustainably) exceed those of iOS-based cellular handsets.
Apple’s iOS also powers other devices, however…the iPod touch, the second-generation Apple TV, and the other subject of this writeup, the iPad. To wit, check out this contrast; Apple released the first-generation iPad in April 2010, and Android 2.x-fueled competitive tablets appeared shortly thereafter, with the Android 3-based Motorola Xoom unveiled at this past January’s Consumer Electronics Show. Yet, while Apple recently revealed that through the end of June it had sold an aggregate 28.73 million iPads, some conservative extrapolation of Google-sourced statistics suggests that only 1.21 million Android tablets are in use. And in spite of ongoing development and promotion effort by companies such as Acer, Archos, Asus, Dell, Motorola, Samsung, and ViewSonic (along with a whole host of lower-tier suppliers) and their retail channel partners, the iPad-vs-Android market share pendulum doesn’t show any tangible signs of swinging in Google’s direction any time soon (if ever).
Two case studies. Seemingly similar beginnings. Completely different conclusions. How to explain the discrepancy? I suspect that subsidies coupled with profit margins are part of the answer. To date, Apple has followed a very traditional Mac OS-vs-Windows reminiscent sales model with the iPhone. The company has chosen high prices (and consequent high profit margins) over high volumes, focusing on a limited set of carrier partners, and introducing only a limited assortment of product models, each newer one tending to obsolete the prior (although the iPhone 3GS is still available for sale alongside the GSM-variant iPhone 4). Google conversely engaged with all four major U.S. cellular providers, along with a plethora of hardware manufacturers, and to date has rolled out many dozens of branded phones at a diversity of price points all the way down to ‘free’ (with two-year contract).
With the iPad, Apple chose to ‘think different’ (as per the company’s iconic albeit grammatically incorrect promotional campaign of a few years). Profit margins on the tablet are healthy but not extravagant, as with past hardware. Apple has seemingly realized that robust per-unit subsequent sales of iTunes Store-sourced content (music, videos, eBooks, games and other apps, etc) are worth the tradeoff of a slightly lower upfront fiscal prize. Note, too, that the iPad is sold unsubsidized i.e. contract-free by both AT&T and Verizon in the United States.
Android-based tablets such as the Xoom are optionally sold with service commitments, but ironically their subsequently subsidized prices are not much lower than the iPad’s unsubsidized price tag. And as with the largely failed 3G netbook experiment, it’s not clear to me that consumers ‘get’ the concept of subsidization with computer-like widgets (of which a tablet seems to qualify) versus with cellular handsets (and cable modems, and set-top boxes, and…), where consumers are already well ‘trained’ in the concepts of multi-year contracts, early termination fees, and the like.
Another reason for the ongoing success of the iPad versus the Android Army, I believe, has to do with promotion. Check out, for example, Apple’s latest iPad 2 commercial:
Now compare it against a recent Verizon Wireless ad for the carrier’s line of Android tablets:
The difference, I hope, is strikingly apparent to you. Verizon focuses on features. Apple focuses on benefits. Techies such as myself (and the bulk of you reading this, I suspect) love features. The mass of consumers couldn’t care less about them. As long as a widget does what they expect it to do, as fast as they expect it to (i.e. performance) and for as long as they expect it to (i.e. power consumption), that’s all they concern themselves with.
Finally, the striking lack of differentiation both between upstart Android-based tablet models and the iPad status quo is, I believe, a notable hamper on the former’s desire to usurp the latter. Consider the Xoom. It comes in a 16:10 widescreen display format, versus the iPad’s 4:3 aspect ratio, which arguably makes Motorola’s device preferable for watching movies…but does nothing comparatively notable (and in fact is arguably a negative) for web browsing, email, eBook reading, and other common tablet-as-predominantly media consumption device tasks. The Xoom is thicker and heavier than the iPad 2, and it’s also commonly believed to be larger, although a comparative length-times-width calculation reveals it to have a slightly smaller surface area.
The Xoom’s cameras are higher in resolution than those in the iPad 2, it has twice the RAM and an expandable (but still not enabled) microSD storage slot…it even includes a silicon barometer! But it delivers notably shorter battery life. And to the degree that it is a clone of its primary competitor from a hardware standpoint, it’s hampered by Apple’s successful gamble on the iPad’s ascendance, which led to the signing of numerous long-term supply source contracts; for displays, touchscreens and controllers, DRAM, NAND flash memory, etc.
Perhaps even more importantly, in the all-important services arena, it and its Android peers pale in comparison to Apple’s ‘closed garden’ ecosystem. Key utilities are missing from the fragmented Android-plus-Amazon app stores, or are feature-deficient in comparison to their iOS-compiled counterparts. Google doesn’t (yet) have a meaningful response to iTunes’ eBook, music and video delivery capabilities. And the means by which you share content with other devices in the home after initially downloading it to an Android tablet is immature and fragmented in comparison to Apple’s Airplay scheme.
If you don’t develop tablets (specifically) or consumer electronics devices (generally), you might initially think that there’s no lesson for you in this blog post. That, I feel, would be a mistake. Whatever the particular technology market you participate in, you have competitors, some of which may predate you and others that may be newer players with you in their sights. You also have customers with a diversity of operating skill sets and purchase motivations.
George Santayana famously opined, “Those who cannot remember the past are condemned to repeat it.” So remember away, and learn away…or fade away. That’s my suggestion for today.