Why iPad 2 Won’t Have Much Competition In 2011—Unless It’s From Amazon

Forrester published a new report today making the call that the iPad challengers that have been announced so far—Android Honeycomb tablets from Motorola, Toshiba, and others, as well as the BlackBerry PlayBook and HP TouchPad—are solid products with fatally flawed product strategies.

In short, competing tablets are too expensive, and can’t match the Apple Store as a channel. These two claims are related: Forrester’s research has shown that consumers attribute more value to Apple products because of the in-store service. Consumers are not only comparing feeds and speeds; there’s also a human factor. The humans working in the Apple Store will have a huge impact teaching consumers about the iPad and how to use it. Compare the experience of walking into an Apple Store, where the iPad is front and center, to walking into a Verizon store where the Samsung Galaxy Tab is collecting dust at the back of the store and the sales reps don’t quite know what to make of it. Or walking into a Best Buy store, whose shelves will soon be lined with similar-looking tablets with similar functionality.

Competing tablets to the iPad are poised to fail, which is why we’re forecasting that Apple will have at least 80% share of the US consumer tablet market in 2011.

But what comes next? It would be easy to call the game for Apple as the second inning is starting, but we won’t, because we see a market that’s ripe for disruption by Amazon in particular. Amazon could create a compelling Android- or Linux-based tablet offering easy access to Amazon’s storefront (including its forthcoming Android app store) and unique Amazon features like one-click purchasing, Amazon Prime service, and its recommendations engine. Here’s what Amazon has that others don’t:

  • The motivation to counter Apple’s threat to its business model. By implementing onerous rules for eBook sellers and other content providers that require in-app payments, Apple may have created its own worst enemy.  Now Amazon has the motivation to launch its own device, where it will have more control over payments and customer data.
  • A pricing model that could work. The mass market of consumers wants cheap tablets. But the carrier-subsidy model that Motorola, Samsung, Dell, and others are offering to bring down the price of their tablets won’t appeal to consumers: Forrester’s data shows that consumers want flexibility with their mobile broadband contracts on tablets. Amazon could offer a different model — selling a tablet at or below cost and making up for it by selling content, as it does with the Kindle. Unlike the Kindle, however, consumers would need to foot the bill for 3G/4G service, as they would be using far more data than eBooks alone require.
  • The brand, content, and channel to pull it off. More consumers considering buying a tablet say that they would consider Amazon (24%) than Motorola (18%). Amazon’s content assets include not only media (Kindle eBooks, MP3s, videos, and games) but also eCommerce goods — 50% of current tablet owners say they use them to research and purchase products – and services like Amazon Prime.  Amazon.com is also a channel in which a sizable segment of consumers feel comfortable purchasing electronics: 28% of consumers considering buying a tablet say they would prefer to buy it from an online retailer like Amazon, compared with 11% that say they’d prefer to purchase a tablet from a carrier.

Amazon isn’t the only potential disruptor to the still-forming tablet market. In our report we outline ways in which Sony, Microsoft, and Vizio could disrupt the tablet market too. All this disruption leads to some surprising conclusions. Product strategists delivering content on tablets need to rethink their priorities—most companies we speak to are prioritizing Android apps after iPad, but it’s not a foregone conclusion that Android tablets are worth the investment this year. Product strategists on the device side have some reformulating to do—some may find it makes sense to wait until the market settles before launching a tablet that won’t sell in volume this year.


Only 80%? I thought Apple had 90+% today

Do you agree with Apple's claims that they have 90+% of the market today? If so, are you predicting that they will lose 10% share?

Interesting, would like to see more though...

Amazon (if they are entering the fray) is wise to sit on the sidelines and wait. Let the complaints about existing tablet devices all percolate to the surface, and then engineer their eventual offering to avoid all of those issues.

Form factor will be an issue... and it's not all about gaining access to media (ebooks, movies, music, etc). If that *IS* going to be their focus? Screen size, display quality, ability to view in bright and dim light situations, weight, "4G speed" and reasonable service prices will naturally be BIG issues... but it would seem that the vendors with larger market share will be the ones to drive prices down and improve on features more quickly.

I think there are those users who will be cooing loudly over the Motorola Atrix ability to plug into a 'laptop' (of sorts) as a truly exciting feature, but the jury is still out on that as well. Is this how an Amazonian offering might gain market share? I dunno... after all, there's already one out there.

I'm not 100% in agreement

I'm not 100% in agreement with the "flawed" business model. RIM may have an outside chance not because it's a great tablet but because of what it really is: a decent blackberry device with a big screen that fits in your inside suit pocket, breifcase or purse. There are still lots of exec's out there who would love a Blackberry they don't have to squint to see.

As for Amazon I see them giving away Kindles a lot sooner than bringing a tablet to market. Would a color e-reader help? Well, Samung could produce the device: they have already have their version of E-Ink and they make ARM processors: throw in decent browser, SD slot and slap a "Kindle Color" label on it and it may be compellling enough of a device for many (using your tethered Galaxy S phone for video of course!)

A few comments

Thoughtful article but still could use some work. I believe Apple's claims of 90% market share in 2010 are correct, if you actually look at sell through not sales to the channel, which is all that will matter in the long run. I don't think the estimates that Apple was down to 75% share by the 4th quarter even thought about estimating the volume in the channel for both companies (meaning Apple and Samsung) which means they're not worth much. Here's just one decent analysis:


Okay. Is Amazon Apple's biggest competitor? Certainly, but that's true whether they ship a 'tablet' or not. Just by selling the Kindle at $139 they are already Apple's biggest competitor. IDC estimates (using flawed assumptions but in this case its all we've got) that tablets sold 18M in 2010 and eReaders sold 12M, with the Kindle accounting for about half of that. So already the Kindle is Apple's biggest competitor--cheaper, lighter, better screen for reading outdoors, etc. And they've got a good marketing campaign going and good customer awareness.

So... you argue that Amazon will be forced to compete with Apple in the tablet space because of Apple's new subscription rules. First of course we don't actually know who the rules will apply to. Read Daring Fireball on the subject for example--Apple clearly needs Netflix on its Apple TV device, yet if what everybody is assuming is true, Netflix would likely pull out of the iOS ecosystem and off the Apple TV. So one possibility is that Apple will come up with some reason the rules don't apply to Netflix. Includes discs or something, even though that $7.99 rate doesn't include any discs. Anyway, I would argue that the Kindle is in a similar position. I'm not at all sure its in Apple's best interests to kick the Kindle app off the platform. At least not yet. So I think you may find some of the predictions of doom and gloom are fantasy. The only obvious data we've got at this point is that Amazon hasn't said anything, not a peep. Why would that be if they're going to pull out of the store by the June deadline? Maybe they know something we don't...?

Make a better tablet

I don't think anybody is going to seriously challenge Apple until they make a better tablet. Same as the iPod, which has maintained 75% market share for almost 10 years. There has been an endless parade of music players coming and going that whole time, each selling a very small amount.

Amazon has an MP3 store … if Amazon makes a device similar to the iPod, will they take significant iPod sales away from Apple? I don't think so.

With tablets, Apple has even more of an advantage over competitors than in music players, because tablets are a kind of PC, and Apple is the world's oldest and most influential PC maker. iPad is even more in Apple's wheel house than iPods were. Apple knows PC sales, software, and support; they know native application platforms; they know Web application platforms; they know audio video; they know battery life; and they have incredible synergies between iPad and the Mac, with a common core operating system (OS X) on both, and easy porting of Mac apps to iPad and vice versa.

It's not going to be easy for Amazon to make a device that is even close to iPad. Where are they going to get the expertise to do it? Android is not a magic bullet. Walt Mossberg said in his iPad 2 review that during a week of use the brand new iPad 2 did not crash once, unlike all Android tablets he has tried. Google's tiny mobile software division is staffed with people who couldn't get hired down the street at Apple. The idea that Amazon slaps Android on some hardware they get from who knows where and ships enough of them to make a dent in Apple's iPad juggernaut, say 10 million per year, just really doesn't fly with me. There are maybe 3 Android devices (out of about 100) that have even sold over 1 million, and none that have sold 10 million.

So basically, again, if you want to compete with Apple, you are going to have to make a better device. Consumers are going to need a HUGE reason to pass up a $499 tablet with the heart of an iPod, the most popular music player, and the brain of a Mac, the most popular high-end PC. We're talking about a MASSIVE design, engineering, production, operations, sales, and support effort. Who even has half the infrastructure to do it?


Fred, you hit the nail right on the head. No one develops hardware better than Apple. It would be insane for Amazon to compete outside of its key competency areas, commerce and content distribution. Th would lose their shirts and piss off their shareholders. An eReader is not an iPad. The iPad is something entirely new, not just the device, but the business model as well.

Unless Amazon decides to

Unless Amazon decides to employe a razor/razor-blade strategy and give away the ipod to drive music downloads. It may be the only competitor able to do that vis. Apple.

Good & bad investments

There are good business strategies and bad investments. Amazon already has a presence on he iPad. They don't need to displace the iPad to extend their distribution to the iPad channel and users. I dont think that Amazon investors will take too kindly to management going toe to toe with Apple in the tablet space. It's a losing proposition unless they acquire a device manufacturer. Given what seem to be very poor sales of Xoom, I don't think acquiring Motorola will help Amazon's stock.

I agree with Fred--the other

I agree with Fred--the other thing people have to bring to the table to compete in the consumer market these days is an unbelievable hardware/software experience. Apple has been providing that for years, often at a price premium. The iPad is the first device I can think of that offers the top-shelf experience without the top-shelf price. I don't think Apple is going to stop there. They will continue to have premium products, but I expect they will increasingly start to compete on price, which will create a very difficult barrier for others to overcome. Apple has built to this point over the past decade or more. It will be hard for competitors to build their ecosystem to the same level in a short amount of time.

Fred is right, but Apple is wrong

Apple is great, as long as you fall within their view of how you can use their product. Typical monopoly (vertical rather than the horizontal type that Microsoft depicts) behavior. While they may be "creative", they stiffle it in those who wish to create new functionality via attached (or implanted?) devices or software. They have the most restrictive requirement (e.g. you can ONLY compile software for the iPad on a Mac, running OS/X, as if it mattered, it just forces developers to buy an overpriced, restricted PC.)

The reason that Android is so popular is that ANYONE can develop an application that does ANYTHING (even things that are for adult consumption--yes, you can watch R rated movies on an Android, maybe even something racier, if you know what I mean, wink, wink) with ANY PC (that will run Eclipse). The tool kit, compilier, IDE (Eclipse) are all free, open source, with an active community of people (besides Google, who obviously has the most people doing the work) working on the core operating system (Linux).


It works.

iPad sales are just getting started

iPad's sales trajectory will mimic the iPod's - it is just getting started: blog post http://bit.ly/fsokhU

iPad Ecosystem

I find developing applications for the iPad easier than for Android. Amazon is non-exist for custom app development. Clearly, the iPad is a better platform for software developers to deliver their products on, especially when you can add iPod touch and iPhones with little or no changes to the app ... double sweet :)

Now with the new iPad2 the system has double the CPU and ram, making things run all the faster. This just enables us to do more on the platform, making it more valuable to developers and consumers alike.

You wrote, "Consumers are not

You wrote, "Consumers are not only comparing feeds and speeds; there’s also a human factor. The humans working in the Apple Store will have a huge impact teaching consumers about the iPad and how to use it."

How is your notion that Amazon could compete with the iPad going to address the lack of retail stores to provide the "human factor"?

You wrote, "Now Amazon has the motivation to launch its own device, where it will have more control over payments and customer data."

But what will customers prefer? Will customers prefer vendor that protects its data by giving them the choice to share their personal info, or will they prefer the vendor that gives them no choice about the privacy of their data?

You wrote, "Amazon could offer a different model — selling a tablet at or below cost and making up for it by selling content, as it does with the Kindle"

How long has it taken Amazon to bring the Kindle price down to where the market was willing to buy? Will customers buy a product where the content is priced higher than the competition's? I mean, Android content is the opposite isn't it?

You wrote, "28% of consumers considering buying a tablet say they would prefer to buy it from an online retailer like Amazon, compared with 11% that say they’d prefer to purchase a tablet from a carrier."

Sure, given a choice between Amazon and a wireless carrier, I'd choose Amazon, but between either of those and a retail store, most a would choose a retail store. It's why Dell has stagnated during the shift to notebooks from desktop PCs.

IPAD competitors could prevail unless

IPAD competitors could prevail unless Apple breaks down and allows flash content to be viewed on its IPAD. There are a lot of media folks whose businesses thrive on websites with flash content. I was ready to buy the IPAD II this week until I learned that my main website content cannot be viewed with the IPAD.

I am a die hard Apple user and it will almost kill me to buy a windows based tablet....but I will if I have to for business and to support my lifestyle.

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