Why the Non-iPad-Tablet Isn't Selling

This week I moderated a panel on tablet computers at the Freescale Technology Forum with tablet and eBook specialist Stewart Wolpin, Chuong Nguyen, and In-Stat's Stephanie Ether. We discussed why non-iPad tablets weren't selling, the fight between ARM and x86 for the future of computing, and whether Android or Windows 8 would have a chance in what is being termed the post-PC era.

Beating the iPad
The issue with competing with Apple (Nasdaq: AAPL  ) is that Apple monetizes their entire eco-system, designs products to be marketed, and out-spends and out executes their competitors by a factor of anywhere from 2x to more than 10x. Companies that try to compete with them tend to under-resource their efforts, which is why Apple dominated the iPod market and dominates the iPad market. Apple also crafts an entire experience, where most others do just one part. The result is that the product that comes out of this process appears to be much better for most buyers than what the competition offers. In combination with Apple's talent to create demand, the company is nearly unbeatable.

Until a vendor is willing to step up to this level of competition, the only way to compete effectively with Apple is to either create products that go where Apple doesn't want to go geographically or sharpen the product focus. Dell, for instance, is focusing on China first where Apple is weak, and Lenovo and Panasonic are focusing on business first where Apple is weak as well. Panasonic, in particular, is adding outdoor capability and heavy hardening so their tablet can be used in weather or simply outside.

ARM vs. x86
The sense is that consumers just don't want to care about the technology that is in their products. They buy an experience (which is, coincidently, what Apple sells). The panel made fun of current ads that focused on the number of cores in a tablet or the wireless technology that is in them rather than the experience, because it showcases that many tablet builders/marketers simply don't understand the market.

The trend is toward ARM for this new class of devices, but ARM as a platform is divided between competing vendors that don't supply enough cash to effectively co-fund the marketing for the devices they create. Intel has historically been much better funded and they, along with Microsoft (Nasdaq: MSFT  ) and Apple, fund most of the PC marketing in the world. Intel could reverse the current ARM trend, if it can bring an ability to create demand to acceptably competitive products.

Android vs. Windows 8 vs. iOS
As mentioned above, Apple is both focused and well-funded. Google (Nasdaq: GOOG  ) and Microsoft both have the capability to fund at Apple levels, but Microsoft has a history of starving the marketing of their own groups and Google of not funding marketing much at all. This is all about capturing the hearts and minds of people who increasingly believe that Apple is the only real choice. The longer Apple dominates tablets, the more expensive it will be to effectively challenge this dominance. Google is in the market now, but with three versions of Android on tablets and ChromeOS trying to enter the market at the same time. They are the exact opposite of Apple's focus and that, coupled with the severe lack of marketing, would suggest they are simply not willing to step up and compete at even a fraction of the level that is needed.

Microsoft is vastly more focused and potentially stronger, but they won't really enter the segment until late 2012, which gives Apple a significant period of time to consolidate and lock in the market. By waiting as long as they are they have, they significantly increased the cost of breaking Apple's market lock-in, but are unlikely to match their marketing budget to that requirement. They have one of the strongest marketing teams on the planet, but it is under resourced or otherwise constrained against a better funded and less constrained dominant vendor. Their odds are better than Android's long-term chances (unless Google takes this more seriously), but they aren't especially great either, at least not for tablets.

Tablets vs. eBooks
In-Stat just completed a survey with some interesting results. It showcased that, as you would expect, eBooks like the Kindle are bought and beloved by heavy readers, while tablets are bought by those wanting a better multi-media experience. A Kindle buyer is willing to pay over $500 for a tablet while a non-Kindle buyer was highly resistant to prices over $300. This suggests that a Kindle is actually a strong bridge to a tablet and that buyers use both devices, but for different reasons. In effect, the Kindle and the iPad, far from being the competitors we have always thought they were, are actually complimentary. These results suggest that if Apple brought out a successful eBook reader, it would be additive and complimentary to the iPad, particularly if the two would sync in the iCloud. Apple doesn't normally miss opportunities like this.

Conclusion
There was an overall sense that this tablet market is still very young and that different sizes and form factor products may eventually eclipse the iPad, but not without a better investment in marketing and the overall user experience than what currently exists in the market. There wasn't a lot of love for RIM or HP, the two vendors with their own platforms, because neither vendor has demonstrated the ability to step up to the huge burden of going against Apple alone. We all saw some amazing hardware designs that differentiate well against the iPad at Freescale's Forum, but we are waiting for a vendor to step up to the other requirements that would result in a device that would sell like an iPad.

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Read/Post Comments (12) | Recommend This Article (8)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 23, 2011, at 11:42 AM, anegin wrote:

    If Apple came out with an eBook I don't think it would sell very well. Remember that Kindle came out before the iPad, so if we already have an eBook we might want to buy an iPad because of all the additional functionality. If we bought an iPad there's no reason to buy an eBook because that functionality is already contained in the iPad. The appropriate question would be, "Of those people who bought an iPad, how many have bought an eReader afterward?"

  • Report this Comment On June 23, 2011, at 11:46 AM, daninkeller wrote:

    Nice article...Like many others, my experience demonstrates your point that Apple monetizes their entire eco-system. When we bought an Ipod, started spending money on Itunes, then bought the first Ipad, spend money on apps, then got ready to replace my wife's laptop, even I was surprised that we'd spend $1200 for a Macbook Pro, verses $700 for a nice PC Laptop. Now months later, we're not just satisfied -- we're thrilled with the whole Apple experience compared to alternatives not Apple. I'm thinking my old PC desktop won't be a PC for long. Google, HP, and MIcrosoft better get with it soon, or the race will be over.

  • Report this Comment On June 23, 2011, at 12:13 PM, Henry3Dogg wrote:

    I started to read this article expecting one more painful attempt to prove that Apple was just a fluke and so was suprised to find such a well made case.

    Only one small issue, and that's Apple's need for an eReader that syncs with iPad.

    It's there. It's been their for 12 months.

    It's an iPhone or iTouch with a Retina display.

    Before the Retina display, I never read for more than 10 minutes on the iPhone.

    But the Retina, and the fact that it's always there, has made this my primary reading device.

  • Report this Comment On June 23, 2011, at 12:18 PM, Henry3Dogg wrote:

    @curleyhead46 AKA GrowingForGreen

    Zoom is dragging is sales behind RIM and Samsung tablets and the 3 combined hardly scratches the surface of iPad Sales.

    Your bent statistics fool nobody.

    And it's time you were in bed.

  • Report this Comment On June 23, 2011, at 12:33 PM, mryogibear32 wrote:

    Great article. i believe that if/when Amazon comes out with their tablet, they might actually have a chance with their build in marketing machine of the Amazon.com homepage. Stay tuned for that one!

  • Report this Comment On June 23, 2011, at 12:44 PM, deemery wrote:

    Note by the way that Apple's R&D investments are well below industry average. They may outspend in infrastructure development (e.g. Apple Stores, the big iCloud facility in North Carolina), but their focus is most apparent in the huge bang-for-the-buck they get from their product R&D efforts.

    The monetization of the ecosystem is related to the need to -have- that ecosystem in the first place. That's part of the overall user experience; making each part pay for itself is just good business.

    Finally, it's worth noting, once again, the Apple 'cult of perfection' which is driven by Steve Jobs, but by no means is exclusive to him. To reuse a marketing cliche', Apple 'sells no product before its time', where 'time' is designed to be 'as good as it can be'. Apple doesn't always get it right the first time (e.g. original iPod), but that drive to perfection, independent of market timing and pressure, is an Apple discriminator. Contrast that to Microsoft, which is notorious for bringing products to market on a published schedule, that turn out to be unready.

  • Report this Comment On June 23, 2011, at 2:37 PM, melegross wrote:

    Deemery, the reason why Apple is able to do more with less R&D is because they have fewer products to divide the R&D into. We can look at Nokia, which was recently chided for its much larger R&D budget, but for the little it apparently gets out of it.

    Well, Nokia has over 200 phone models out there, plus its other products. Even though many of those phones may be differing versions of the same model, it still means that R&D is spread thinly.

    The same thing is true for other competitors, even Microsoft. They may have R&D in width, but Apple has it in depth.

    As for marketing, Google isn't making the big bucks on Android or Chrome. So they hope the manufacturers of the products, and the carriers will take on the heavy lifting in marketing.

    Microsoft, on the other hand spends billions on marketing, but has proven to be incompetent. Its marketing efforts have been heavy handed, clumsy, and not influential.

  • Report this Comment On June 24, 2011, at 12:04 AM, JBivins wrote:

    I was reading all the comments on this article and figured I’d toss my two cents in on the subject.

    Apple is selling a brand. I think your average consumer doesn’t really care anything about the technical specifications behind a mac vs pc. There is just this assumed idea that macs are better products than pcs and they are hip right now so everyone has to have one. Honestly, I bought a macbook over a year ago and haven’t been impressed enough to justify the price tag. I will not be buying another one after this one breaks on me. They are not very user-friendly products being that they are based on an UNIX architecture and they are very hard to fix yourself.

    I love that everyone is beating down on traditional “pc” companies like Microsoft and Intel. That means I can get them at a nice discount. Everyone thinks this whole tablet “revolution” is going to change the world. Maybe, I don’t think traditional PC’s will be how people interface with computers in the future, but somewhere there is going to be a processor crushing all the data. Everyone is moving to the “cloud”. All that really means is now they are going to store their data on a remote server. Guess who has higher revenues on servers chips than pcs chips? It’s not apple or some other ARM manufacturing, it’s Intel.

    Signed

    -Tried of all the hype

  • Report this Comment On June 24, 2011, at 12:35 AM, demodave wrote:

    JBlivins, our Mac product won't break on you unless you drop it. You just may never come to figure it out.

    curlyhead46m, in addition to your noted alias as GrowingForGreen, I suspect that you are also Billy Joe. Your Billy Joe moniker is associated to Twitter @slowbutlearning and just might indicate that you should learn more and talk less. Beyond that, you must be getting paid to spew your idiocy.

    (Disclosure: long AAPL.)

  • Report this Comment On June 24, 2011, at 12:23 PM, mikecart1 wrote:

    Apple does so well because the public is brainwashed to believe their products are superior. I had a 5g Video iPod that died recently. I got it in 2005 fall and it died earlier this year. Does it still work? Yes. It turns on fine. It has all 80 gb of my songs. It is awesome! It just produces zero sound because the sound card in these and matched with complaints of other owners on the Apple forums is that the sound card is a piece of crap. My iPod Shuffle still works but I can see it failing due to the headphone connector wearing out. It is a bad design and location and gets a lot of dust.

    Apple just makes the public believe they are best. They really aren't.

  • Report this Comment On June 24, 2011, at 12:37 PM, caltex1nomad wrote:

    Oh sure....Like Apple will ever buy anything or Gulp!!! pay a dividend with all that cash.

  • Report this Comment On June 25, 2011, at 10:28 AM, baldheadeddork wrote:

    I think reports on the demise of non-Apple tablets has been greatly exaggerated, to steal a line from Mr. Clemens.

    How long have Android tablets been on the market? IIRC, didn't the very first rushed-to-market models appear during the Christmas season last year? We are just now seeing a large number of devices hit the market, and now they have an OS that has been optimized for use on tablets.

    I'm not saying that the success of Android tablets is a sure thing, But they definitely are not dead yet, for at least two reasons. First, the Android tablets will come in at price points well below the iPad. Second, the success of the Android OS in smartphones is creating a huge number of potential buyers that are already comfortable with the OS.

    Think about this: If Android can beat iOS on market share in smartphones where carrier subsidies make the iPhone cost-competitive with Android devices, why would Apple's lead in tablets be inherently secure?

    About Apple monetizing their entire ecosystem, I think that claim is a couple of years past its pull date. That was definitely true during the iPod years when you had to buy music from iTunes, but they haven't been able to recreate that with the iPhone or iPad. Apple sells streaming movies and has an eBook store, but the top apps on the iPad are Kindle and Netflix.

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