Apple iPad Sales: Why Tablets Are Even Bigger Than We Thought

Consumer product strategists, even those not in direct competition with Apple, should pay attention to the iPad, because it’s defying common assumptions about consumer technology adoption.

In Tuesday’s earnings call, Apple announced that it has sold 3.27 million iPads in the quarter ending June 26. On June 22, it had announced shipping 3 million iPads—that’s 270,000 units in less than one week.

In our previously published forecast, we projected that US consumers would buy 3.5 million tablets in 2010 and 8.4 million in 2011, and that 59 million US consumers would own a tablet by 2015. Critics comparing our numbers to Apple’s have missed some important differences: Apple’s published numbers are global (in 10 countries so far, and 9 more starting July 23), consumer and enterprise (Apple claims that 50% of Fortune 100 countries are “deploying or piloting” the iPad), and represent shipments, not necessarily sell-through. Our numbers are US-only, consumer-only, and represent final sales to consumers net of any returns — all of which help explain why our numbers will always be lower than Apple’s.

However, based on new data from Forrester’s consumer surveys, as well as Apple’s rate of “millioning,” we think our initial forecast was conservative, especially in the short term, and we plan to publish an update later this year once we have more supply-side and consumer data.

A core tenet of Forrester is that our research is objective, transparent, and rigorous. We’re continually monitoring new industry and consumer data to inform our analysis. In this case, we missed the mark regarding our short-term forecast, so we’re revisiting our initial work.

One of the assumptions we made in our initial forecast was that the iPad would behave like other similar consumer devices in its first year of adoption: When it went on sale in April, we assumed that sales would be strong based on pent-up demand for a hyped product; we then assumed that sales would slow in a summer slump, as is common with consumer technology purchases; and that sales would spike again in the holiday season. But the iPad isn’t behaving like other consumer devices: It has a steamroller of momentum behind it that indicates incredibly strong demand for this entirely new form factor.

The iPad’s momentum is helped by the full-force ad campaign and store real estate that Apple has devoted to it (Apple doesn’t devote the same resources to all new products, such as Apple TV). The iPad is also helped by the social influence of iPad buyers — according to Forrester’s data, the average iPad buyer is 20% more likely to use Facebook and 40% more likely to use Twitter than the average US online consumer, and has more friends and followers than the average US online consumer.

Let me share some data with you some very recent data from Forrester’s Consumer Technographics surveys that indicates how strong consumer demand is for tablets. This data was collected in an online survey of 3,990 US online consumers in June 2010. The survey has a +/- 5% margin of error.

  • Awareness of the iPad is incredibly high. In our June survey, only 5% of US online consumers claimed that they had never heard of the Apple iPad before the survey. We asked the same question of consumers in a May survey (also of 4,000 US online consumers), and 17% said they’d never heard of the iPad. For context, three years after the Amazon Kindle’s release (another entirely new type of product), 25% of US online consumers in the same survey said they’d never heard of a Kindle.
  • Nearly 10 million US consumers say they own or intend to buy an iPad. In our June survey, 1.3%, or 2.5 million, US online consumers reported already owning an Apple iPad, and an additional 3.8% (7.4 million) say they intend to buy one. (No time frame was specified in the survey question.)

Now, we know from decades of consumer survey experience that you can’t believe everything consumers tell you — not every person who says they are going to do something actually ends up doing it; in addition, the margin of error in the survey must be taken into consideration. Still, these numbers suggest that iPad adoption will be rapid on the front end. We anticipate making major adjustments to our 2010 and 2011 numbers, but we believe our long-term forecast is on solid ground as of writing this blog post. Our five-year forecast was already aggressive — 59 million consumers owning a tablet in 2015 means that 27% of US online consumers will own one. Rather than a typical S-curve adoption, we now see tablet adoption spiking upfront rather than gradually accelerating to a hypergrowth point, with a very short period of takeover time (the time it takes for a technology to go from 10% to 90% of its ultimate market saturation).

A big takeaway here for consumer product strategists (and analysts like me who advise them) is that new products — with enough demand and buzz behind them — can break the old patterns of technology adoption. If you’ve seen evidence of other products breaking the S-curve pattern, I’d be interested in knowing about it. Are S-curves shrinking, or are tablets an anomaly?

Comments

S-curve departure

Sarah, could there be two populations of users, one rapidly-adopting population consisting of iPhone users, and one more slowly adopting population consisting of everyone else? Something like that might explain your observed departures from the S-curve, which presumably models just one uniform population. (Although I haven't read your exact methodology because it apparently costs $400, I'm familiar with logistic curves.)

S-curve departure

@ Andrew Perrin: Really interesting hypothesis. That's definitely possible, and likely.

If this is the correct

If this is the correct hypothesis, then you should see a "bump" in the curve at the time when the fast population levels out.

I had a go at visualizing what the graph would look like in qualitative terms (assuming the slow and fast populations don't affect one another, which is probably wrong, but let's keep it simple). The graph is just two sigmoids added together with different rate constants. I assumed the fast population was 25% of the total and the slow population was the remaining 75%. You can see a distinct kink in the curve where the fast population saturates.

I personally think that the

I personally think that the market for tablet computers will be a lot more than 100 million units. If that's the case, 3.27 million might just be the innovator group.

iPad

Analyst's always gain (not lose) credibility when they just admit they blew it. Secondly, Bill Gates and Microsoft had been trying to build a tablet market for what feels like a decade. They haven't come anywhere near the production of a successful product that sold in quantity. Hence there is no indication that there is a tablet market. Every tablet that had been announced at CES of any note has since been pulled and is either abandoned or back in redesign. There is only an iPad market and whatever imitators may follow it.

Admitting we're wrong

Thanks, Bill :-) We won't always be right but it's always better to admit when you're wrong and take the punches.

Excusatio non petita

In synthesis: you were arguing that the whole tablet market in the U.S. would have been 3,5 million for 2010; Apple, alone, sold one million iPad in U.S. only by a single month. That's enough alone to make you err on the side of, well, 100%, likely much more.

I wonder what your so-called analysis are really good for, and how much are really worth. "Objective, transparent, and rigorous". How can you call "rigorous" this one?

Typical saving face argument

Ms. Rotman. Remember next time use a better approach to save your credibility, which might be more critical than saving face:

First, admit wrong, no excuse, no consumer/enterprise, US/international splitting hair. (We all know how hard to buy an iPad abroad, and how much more it may really add to the number.)

Second, try better next time. Don't defense your previous approach. Try "Think Differently".

Read after me: Apple is not a mere consumer product company!

Get it? You so called "analyst"!

Thanks, Tris. Appreciate your

Thanks, Tris. Appreciate your enthusiasm for Apple. You're right, they're not a "mere consumer product company." I'll try to remember that next time :-)

Hi Sarah! Don't mind the

Hi Sarah!

Don't mind the haters -- its difficult to predict the future and frankly from what I've read the vast majority of analysts/trade press severely underestimated the number of iPad units.

Part of me wonders if this is partially influenced by Apples conservative policies around AR/PR whereas Microsoft is extremely aggressive in trying to 'influence' everyone that iPad was nothing more then a blip on the radar.....

Thanks, Shooter. I am growing

Thanks, Shooter. I am growing thicker skin. There are a lot of reasons we got this wrong, and I won't pass the buck to Apple.

Don't conflate Apple's success w/ pent up tablet demand

Sarah,

I think it's good that you guys are updating your forecasts and were quick to admit that your assumptions were too conservative. But I'm not sure that one of your new assumptions is right either: that the "steamroller of momentum behind it [the iPad] indicates incredibly strong demand for this entirely new form factor."

We have seen different approaches to tablets and PDAs over the past decade and only the iPad has seen any level (actually significant) success. I believe that much of the success of the iPad, beyond the Apple "cool" factor (not to be dismissed) is the user experience that it delivers + a very rich app developer and App Store customer base. But I want to underscore the user experience as a defining factor of the success of the iPad. I'm a big believer in UX for all products, but I think it's specifically important in consumer success. The intuitiveness of the interface is hugely important.

Compare that with some of the existing Win7 or Android-based tablets and even the misguided effort known as the Dell Streak (really a 5" tablet?; I know larger sizes are planned; but I also don't believe that every hardware company SHOULD make a tablet even if they are physically capable of doing so, but that's another topic) and I think it's clear that the form factor is not in and of itself enough to drive demand. So while I think that tablets may eat a large chunk of the projected netbook demand (I'd be curious to see how much of a shift in demand you project from one form factor to another) I'd caution you not to conflate one company's success with the potential of the segment.

Similar Findings from MyType's 20,000 Person iPad Survey

Sarah,

At MyType, a personality application on Facebook, we asked over 20,000 of our users from March through May about the iPad, just to see how personality influences iPad opinion. Our findings (freely available at http://www.scribd.com/doc/34438276/iPad-Opinion-Profile-by-MyType-July-2010) are mostly in line with yours. After weighting the sample to reflect the US population between the ages of 13 and 49, we found that 1.15% already purchased the iPad and 2.1% planned to buy one. Our intended buyer percentage is lower because we offered a range of options besides "plan to buy one" including "i want to play with one first", "will wait for later versions", etc. We also found that 6% of people don't know what the iPad is.

More interestingly, each of these respondents completed our personality assessment, and some completed our values survey. With all of this data the iPad owners and intended buyers emerged as "selfish elites". They tend to be wealthy, highly educated and sophisticated. They value power and achievement much more than others. They’re also selfish, scoring low on measures of kindness and altruism. This is in line with your observation that iPad buyers have a lot of social influence. We also found that they are more extraverted, confident and enthusiastic than average, making them very effective promoters of things they like. This of course bodes very well for the iPad, and I agree with your decision to increase your sales projections.

We also found that the technology geeks who are usually the early adopters of new tech products are disproportionately critical of the iPad. I speculate as to why in my blog post, which also provides a good overview of our findings (http://mytype.com/blog/?p=109). Anyway, this is just further evidence that the iPad is not following the normal pattern of technology adoption.

I'd love to compare notes, and see if there is a way our data could be useful to you. Please shoot me an email if you'd like to discuss further.

Thanks!
Tim

Clarification

We weighted the sample to reflect the age, gender, and personality composition of the US population between the ages of 13 and 49.

Hmm

I wonder if Mr. Colony would call himself a "selfish elite?" In some ways he fits your behavioral projection.

However, I think for most of these people the form factor is the key factor. Apple has hit on what they've been looking for. It is less obtrusive, yet fully functional. I'm still not sure why the form factor is such a hit - certainly it is not pocket sized.

I suspect the "effective promoter" is going to make this a true win for Apple. As Mr. Colony points out, this device is now in the hands of people who are going to drive new apps, which will drive more new apps. If MS doesn't get the right product out very soon, the sheer momentum will keep Apple on top.

When the apps get to the point where the general consumer truly benefits, there will be another major spike in sales. When Mom can keep score for the Little League, or find an up-to-date grocery store layout that pinpoints where the items on her shopping list are located, there will be a new interest in the device.

There is a lot more to come and Apple should be seeding the market now. The "selfish elite" are looking for one kind of app, but Mom is looking for another.

I can't believe the amount of

I can't believe the amount of sales with these ipads.

James Brown
hom furniture

S-curve for Smartphone vs. Tablets

Can the tablet S-curve be predicted based on that of the smartphone? It would be interesting to know whether the iPhone/iPad product launches are both having the same 'flattening' effect.

Smartphones were definitely

Smartphones were definitely an analogous technology we looked at. Another commenter suggested there might be different S-curves for different populations (e.g., iPhone adopters vs. everyone else) and we're looking into that. So far, iPad owners and intended buyers are 3x as likely as US online consumers in general to own an iPhone.

It's the smoothness

The reason the ipad is so successful where previous tablets have flopped, is because Apple paid attention to the overall user experience. They made sure that the thing will work as smooth as butter, which meant the software is perfectly meshed with the hardware. The thing works so smoothly, it enables you to lose awareness that you are interacting with a computer, compared with other things such as an android device which pulls you back to reality when it experiences hiccups and slowdowns due to its multitasking load. In short, Apple did not create this thing to win a contest of specmanship (ie, our tablet has more pixels, or more memory, or a faster CPU, or "full" multitasking). They designed it to win a contest for your heart and mind. If Apple were smart at marketing, they'd bring out Geoffrey Holder to do an ad for them. Remember the 7-Up uncola guy? "Crisp, Clean, and Refreshing...ahahahaha". This product is a disruptive new device that set the consumer on fire. Sarah, have you studied the parallels between the ipad and the Nintendo Wii? The Wii is another device that seemed to enjoy insatiable demand for seemingly forever. I'll bet it didn't follow the S-curve either!

Maybe I missed something.

Perhaps I didn't look hard enough - I leafed through yours and your collegue McQuivey's blog posts - didn't find the part where you specified that your estimates were limited to US sales and did not include international sales. Seems like a bit of a cop out at this point. And, seeing as how nearly half of Apple's sales as a company now are international, a tad irresponsible for a group selling investment advice.

Extension of the Tablet Comuputing to other demos

Syndicated research, sales data, census and sources show how Hispanics will become a majority pop by demographics, but also they over index in consumption of digital media.

I would be interested in seeing and hearing from the group what percentage or numbers of Hispanics have adopted the iPad. If the correlation can be made to their adoption of the iPhone then it would be a sizeable number. Especially when a lot of the sakes are coming from California.

Any ideas?

Business vs. personal iPad sales

Sarah:

I'm not surprised by your observation that iPad "isn't behaving like other consumer devices." I believe business adoption of the iPad is the reason ... something we're seeing with our own clients and their sales forces.

Do you have any data on sales of iPad units to businesses vs. personal consumers that might put this trend in perspective?

Any latest forecast ?

Sarah: First of all thanks for your analysis and insights. They are helpful. Do you at Forrester have any revised forecasts with Apple releasing the Q4 numbers. I am especially interested to know about the adoption in the corporate market. I see a rapid adoption within corporates, but would like to know what the forecast numbers for the corporate market is. Would ipad mimic Blackberry's corporate adoption circa 2007 in 2011 ?

What are the barriers to adoption to corporates (security)? and how does Apple plan to address these concerns? Does providers like Logmein suffice ? or will Apple have to develop their own propriety encryption and servers (similar to blackberry) to drive Corporate adoption.

Apple also is focusing on the Education sector, any forecasts for 2011 / 2012 would also be great. What are your thoughts on how educational institutions would handle product upgrade for the iPad what that happens.

Hi, Thanks for a great blog!!

Hi, Thanks for a great blog!! I was wondering if you know WHY people are so keen on tablets? What are they using them for, what do they think that they will gain? How will their lives inprove?