Will the iPad continue its tablet domination? A look at the market landscape

August 26, 2011 rguiu

By Ramon Guiu

This is the first in a series of articles about the tablet market and the impact of this new device on education and training.

The tablet is a disrupter for Learning & Development. Members at every level of your organization – from the field to management to the C-suite – are gaining the experience of touching, expanding, holding and dealing with content in a personalized and collaborative fashion. This is the new normal of content consumption and we as an industry can’t afford not to give this experience to learners.

Today, the iPad is the undisputed leader both for massive corporate deployments and usage in schools. Since Apple launched the iPad in April 2010, the first in the new generation of media tablets to hit the market, it has sold more than 30 million units. According to a study by Gartner published in April, 70 million tablets will be sold in 2011, 300% more than in 2010. In comparison, 325 million laptops were sold last year. These stats are shocking if we realize that before the iPad this market did not exist. And even more so if we take into account the current market conditions and the fact that the iPad often acts as a secondary device – or “second screen” – as it cannot completely replace a PC.

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According to the same Gartner study, sales of tablets will reach almost 300 million units in 2015 and the market will be clearly dominated by iOS and Android.

2011 has been so far a very exciting year for the tablet market:

The competition is fierce though. The HP TouchPad is already out of business, the PlayBook may soon follow. In Q2 of this year 30% of total worldwide shipments were Android Tablets from Samsung, Motorola, Asus, Lenovo and others. Sales are probably a different story though.

This leaves us with just two players for the future: Apple with the iPad and Google with Android. Or, then again, perhaps not?

iPad vs Android

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Apple created the tablet market and holds a very strong position that it will retain for some time, even with the sudden resignation of Steve Jobs. Many even go so far as to say that Apple actually created an iPad market rather than a tablet market and that’s why other devices are not selling well. And they may be right. Currently there is really no compelling reason to buy a tablet other than the iPad because other competing tablets don’t have anything near the strong app ecosystem that the iPad has – and their prices are in the same range as the iPad.

In the meantime, Apple continues to improve their platform. They will release iOS 5 in autumn and continue to improve and build upon the massive ecosystem they have created. iOS 5 comes with more than 200 new features. They have focused on improving the overall experience and provide better content services like Newsstand, for instant access to magazines and newspaper subscriptions.

The ecosystem

As of today there are 115,000 iPad apps in the App Store and this does not include all the iPhone apps that also run on the iPad. This is really amazing. I have not found how many apps have been built for Honeycomb but I expect this number to be in the hundreds.

Android will need time before it can compete with Apple in terms of apps. This is the typical chicken and egg problem. Developers don’t care about the Android tablet because there are not enough users to justify the investment. And users won’t buy an Android tablet unless there isn’t a compelling app and content story behind it. On top of that, the market is fragmented because Google does not have full control over it. Hence, some manufacturers are running the phone version of Android on their tablets while others are running Honeycomb. Google will try to solve this with the Android Ice Cream Sandwich that will run on phones, tablets and also on TVs and other devices which will allow them to leverage the full app ecosystem. The acquisition of Motorola will also allow Google to provide a tablet solution to the market where the hardware and the software work very well together – although Android OEMs will have something to say.

The price

If we look at the price, the basic iPad 2 model retails at $499, which is relatively low for Apple standards. They can keep the price low because they can leverage the app and content ecosystem to increase their profits. Most of the costs are currently related to the touch screen and the memory (around $200 according to IHS iSupply).

If tablet manufacturers want to compete with Apple in price they will have to either sacrifice their margins or wait until the technology evolves and prices drop.

Amazon to the rescue

In the phone industry it is common to subsidize the devices and amortize them over a 1 or 2 year plan. Carriers are not so worried about the upfront payment because they focus on the lifetime value of the customer over the whole period. This combined with the opensource nature of Android helped it succeed in that market.

This is not possible in the tablet arena because most of the units sold are the basic Wi-Fi model and they are not tied to any contract. That said there is one company that could apply a similar model to the tablet and compete with Apple: Amazon with its digital content ecosystem.

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In July, the Wall Street Journal revealed that Amazon plans to release an Android tablet by October. Users of the tablet could get instant access to a massive collection of digital books, music and streaming and downloadable movies through their Amazon Prime service. And this makes total sense for Amazon since they could build a device that is tightly integrated with those services, improving user experience and increasing their revenues along the way. They could afford not to make a penny out of the tablet and make all the profits through the sale of content

Don’t discard Microsoft just yet, though they are late in the game

Microsoft seems to be slowly catching up. They are doing things very well lately. Windows 7 is a very solid operating system and Windows Phone 7 has also received very positive reviews from the market.

Microsoft sees the tablet market very differently, though. Their tablets will run Windows 8 which will have all the features of the desktop version but will play nicely with touch screens. From what I have seen it provides two separate user interfaces that coexist, one based on the Windows desktop version and another one based on the Windows Phone version. Although I have some concerns about usability, for people who hesitate between a tablet and a laptop it could be the right solution. I think it will also be very appealing to the corporate market if it integrates well within the existing IT infrastructure.

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The latest rumors say that Windows 8 won’t be released until fall 2012. The tablet market will have changed a lot by then…

In my next article I will focus on the different ways tablets can be used, with a specific focus on education and training.

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