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Speculations on the iPad’s Success

I would lose my tech punditry license if I didn’t speculate on the soon-to-be-released iPad. As a result, I’m going to add a few thoughts to my last post on the what we’ve been able to hear so far on Apple’s widely-hated/awaited device.

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Last time, I gave four reasons why Apple might not choose to enter the tablet industry – insufficient market opportunity, fear of cannibalization, immature technology, and lack of a clear vertical model. Although the existence of the iPad shows that Apple thinks they can overcome all of these challenges, it doesn’t make them any less real. In fact, it is the existence of all of these, plus a few other “wildcards,” which makes it very difficult for this pundit-wannabe to predict how the iPad will do for Apple. Below are 9 things which I think are open questions which will determine how well the iPad will do, as well as my preliminary scoring of how well Apple is positioned on each (on a scale of 1-5). Obviously, take these with a grain of salt as all I’ve seen are the videos everyone else has seen (although I intend to play with my friend Joe’s this weekend when he gets his):

  • image Market opportunity/pricing: The most basic concern is whether or not the iPad is priced appropriately. In my eyes, the iPad is an interesting hybrid eReader/netbook (or smartbook, actually, given its use of an ARM chip rather than a chip based on Intel’s x86 technology), and so, the relevant price comparison for the $500 point is with devices in that range. Currently, the only devices that fit this device niche at around that price are high-end netbooks (i.e., those with NVIDIA’s Ion technology), handhelds (like the Viliv) and eReaders (like Plastic Logic’s Que). Like the iPad, these are all fairly impressive devices with high functionality (partially because most are powered by Intel chips): the question is, is there going to be a big market for them? Given Apple’s brand power, rich app/content store, and smooth UI, I’d give them a pretty decent shot, so 5 out of 5.
  • Usability: Apple is renowned for its sleek and very usable user interfaces. So, on that point alone, Apple will likely get high marks. My point in bringing this up is not whether or not Apple will create a good interface (they most likely will), but whether or not the form factor itself will be usable. The initial iPad marketing blitz highlighted a few use cases such as web browsing, simple office application use, gaming, video watching, and ebook reading. The question is whether or not a flat tablet is particularly well positioned for this. My gut instinct is that the device form factor is great for video watching and web browsing (large screen, multi-touch), but will not be as efficient for applications that involve typing (it looks uncomfortable to hold and type, and I have my doubts on a soft, non-haptic keyboard of that size) or which require the user to hold on to the heavy device for long periods of time (ebook reading). In the end, the usability will depend on the dominant use cases, but I give Apple a 3 out of 5.
  • image Performance/power: Apple has done something very interesting with the iPad. Instead of relying on an external chip provider to make the processor (as they did with the iPhone and their computers), they’ve created an internal design using the chip design team they acquired when they bought PA Semi about two years ago. Most of the industry speculation that I’ve seen suggests that the A4 chip is actually only an optimized version of an older processor technology called Cortex A8, as opposed to the new and much-faster Cortex A9 technology that NVIDIA’s Tegra 2 and Texas Instrument’s OMAP4 chips (which will go into other tablets and smartphones) are based on. Whether or not Apple’s excursion into building its own silicon will result in decent enough performance and power consumption to butt heads with other devices (especially those running on Intel’s Atom processors) remains to be seen. If I were to have to put my foot down, though, I’d guess that the reason Apple still refuses to let multiple applications run at the same time is that the A4’s power/performance aren’t quite perfect, but with such heavy-handed restrictions, the final result will probably be pretty good so I will give Apple a 4 out of 5.
  • Cannibalization: This is less to do with the iPad’s success, and more to do with Apple’s. This is simply the double-bind that Apple faces in releasing a product like the iPad. If it’s too good/cheap, then there’s no reason for people to buy Macs and Macbooks. If it’s not good enough/too expensive, then nobody will buy it. This device has to exist in the sweet spot of performance and pricing. Given the huge demand in netbook/eReader-type devices, I would wager that the vast majority of people really only use their computers for simple web browsing, email, watching videos, uploading photos, and maybe playing a game or two. My guess is that the iPad can probably do all of the above relatively well and, consequently, Apple may have limited flexibility in terms of the iPad’s pricing to limit cannibalization or increase uptake. I will give Apple a 4 out of 5.
  • image Display technology: Apple disappointed me in choosing a fairly ho-hum display technology for the iPad. Granted, this was when I still thought the major use of the “iTablet” was going to be as an eReader, but the choice of a touchscreen IPS LCD display not only limits the battery life of the device but makes it unsuitable for use under direct light. The choice makes sense given Apple’s desire to also pursue applications/movies (which don’t work well with any of the existing alternative display technologies) and the full use of the touchscreen, but may limit Apple’s ability to penetrate as an eReader against more dedicated devices like the Kindle or the Que. However, it does give the iPad a leg up across every other dimension and may be “good enough” for most casual ebook readers. I will give Apple a 4 out of 5.
  • The Flash wars: The iPad’s lack of Adobe’s Flash support has caused many of the tech punditry to view this as a major battle in the war between Flash and the still-under-development HTML5 standard. I’ll explain my views on the subject more deeply in a future post but my take is that we are unlikely to see a clear winner in the battle between Flash and HTML5 in the near-term for several reasons. First, HTML5 is still under development and support for it is mostly preview/experimental. Secondly, Flash is currently installed on almost every single internet-connected computer in the world and will soon be available on Symbian, Blackberry, Android, Chrome OS, and Palm phones. When you combine that with the fact that Flash still supports a number of features a pure HTML5 approach can’t easily duplicate, there’s not only little reason for developers to abandon Flash, there’s little rationale to rapidly build HTML5 replacements for all of their features. While video-centric sites like YouTube and BrightCove have pushed HTML5 alternatives due to the relative ease, non-video Flash use will be more difficult to translate. And, as long as major web applications and features are still built in Flash, then I believe the iPad will suffer in terms of delivering the full web experience that is expected. 2 out of 5.
  • App transferability: One point Apple has tried to sell is that the same iPhone App Store will also work with the iPad. While I think one of the big strengths that Apple can leverage here is the existence of an already-populated App Store, the fact that many companies are racing to put out new iPad apps and the sheer difference in terms of the screen size make me somewhat skeptical of the ability of most iPhone apps to be used effectively on an iPad and vice versa. This is not something which I think detracts from the iPad or Apple’s design process – I believe strongly that different form factors require different applications and interfaces – but, in my opinion, it’s a bigger barrier to the usefulness in the short-run of the iPad than I think many people are realizing. 4 out of 5
  • image Book content: Apple has historically done very well with its vertically integrated model supplying not only the device (e.g., iPhone) and the software (e.g., iPhone OS), but also the content (e.g., the iPhone App Store, iTunes for music). They have continued this tradition with iBooks, Apple’s attempt to pull together a book content store. While the success of this will help the iPad, I don’t view success here as especially critical given the abundance of non-proprietary ebook content and the number of other functions that the iPad is capable of. With that said, I am disappointed that Apple again chose the DRM-content route with regards to its book content store (just as it did at first with its proprietary DRM MP3s on the iTunes store). Given that the eReader functionality is not the critical selling point of the device, I don’t think the inability to port iBooks content to another device will scare off too many iPad buyers (it certainly hasn’t scared away Kindle users yet), but time will tell. 4 out of 5 
  • Competition: This is always the big wildcard. The strategic challenge here for Apple (and its competitors) is that the device category is nested in between two enormous ones (laptops and smartphones) and needs to strike the appropriate balance in terms of performance and price, as well as offer up the right sort of applications, form factor, and content to have a leg up. My guess is that Apple’s big competitors here will fall into three categories: (a) innovative and low-cost Taiwanese netbook manufacturers like Acer and ASUS who will try to undercut Apple on price but have proven themselves to be willing to try all sorts of form factors and software platforms, (b) Amazon who likely views Apple’s content store as a threat to their own ebook and digital music stores and who is likely to expand their Kindle with application capabilities, and (c) Google who not only has control over a massive free and non-proprietary ebook repository, but a book search engine, and freely licenses two operating systems (Android and Chrome OS) for use in the tablet/netbook space. Of course, Apple is no slouch itself and has proven itself able to conquer new segments (cases in point: the iPod and the iPhone), but because the iPad doesn’t seem as imminently disruptive or game-changing as the iPhone and iPod were, I will rank this as 3 out of 5

My rating on every dimension but one with a 3 or better (average: ~3.6) shows that I have a fair amount of confidence in Apple’s ability to overcome individual obstacles to drive the iPad’s success. The real question which I’m still unsettled on is whether or not Apple will successfully overcome all of these. Only time will tell, but if I had to put money on it, I’d say yes.

(Image credit – Apple) (Image credit – Plastic Logic) (Image credit – A4) (Image credit – Apple) (Image credit – Apple)

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