Gadget makers are swarming over the tablet market like ants on a dropped sandwich, yet they’re barely making a dent in iPad’s dominance of the market.
Consumers are confused and don’t find much to lure them from Apple (AAPL). In just the past week, two newcomers have joined the rush at Apple’s iPad. Research in Motion (RIMM) introduced its BlackBerry PlayBook, running on the company’s proprietary operating system, and LG rolled out its Android-based G-Slate. Those tablets join the Motorola (MMI) Xoom, Samsung (005930.KS) Galaxy Tab, Dell (DELL) Streak and others competing in the space.
While the challengers have certainly swiped a bit of market share from Apple, that was inevitable, since in 2010 Apple had just about all of the tablet market share. The market is exploding this year, jumping from 17.6 million tablets sold in 2010 to an expected 69.8 million sold in 2011. This year, Apple has at least a dozen competitors, yet all of them together will sell only about 22 million tablets – less than half what Apple will sell by itself.
Although Apple announced this week during an earnings call that it sold less than 5 million iPads in the first quarter (down from an anticipated 7 million), no other tablet is even close to taking off. The majority are still getting pulled into the iPad’s orbit. How come? There are three key reasons:
Massive trust in the Apple brand
Apple has established itself as the one company that really knows what it’s doing in personal technology. That’s valuable in any market. It’s priceless in a confusing market.
You can see this lesson in the 1980s, when the personal computer market was first emerging and IBM (IBM) jumped in. Consumers and business customers saw highly-respected IBM as a safe choice, and IBM’s market share took off. IBM’s PCs weren’t necessarily better than everybody else’s, but in a new product category with lots of competitors offering lots of different platforms, people felt that IBM’s platform would be around for a while. They weren’t sure about the others.
The same is true now in tablets. Apple is the safe, easy bet. The boss isn’t going to yell at you for buying an iPad. Come back with a PlayBook, though, and she might.
Interesting point: Google (GOOG) has a stronger global brand overall than Apple, but not in the tablet niche – at least not yet.
Which brings up reason No. 2…
To consumers, the gaggle of challengers looks like a big gloppy mess
Unless you’re really working at it, who can keep track of the differences and similarities between a Xoom, a Streak, a Galaxy and a G-Slate? What’s the difference between Android Honeycomb and regular old Android, and which tablets have which? And, wait – RIM has a different platform? And so does Hewlett-Packard (HPQ)? So do they have the same apps as everybody else? Can I take the thing back if I can’t play Angry Birds on it?
No tablet has broken out and distinguished itself as a serious iPad alternative. There are really only two ways to do that. One is to make a tablet that’s hands-down better than an iPad. Maybe it would be paper-thin, or run entirely on solar power like those little calculators, or allow you to move the cursor with brain waves. The other way to challenge iPad would be to deeply undercut it on price – a $200 tablet that pretty much matches the iPad’s chops.
No challenger has yet done either. Which brings us to our final reason.
Steve Jobs was right: screen size matters
Late in 2010, Jobs declared that the public wouldn’t buy tablets with screens much smaller than iPad’s 10 inches. As usual, he knew what he was talking about.
The BlackBerry PlayBook and Dell Streak, for instance, both come in at 7 inches. They are just a little bigger than a smartphone – too big to carry in a pocket, but too small to get a full tablet experience. The gadgets fall into a product no-man’s-land, leaving consumers wondering why they should buy them. The G-Slate’s screen, at 9 inches, at least has reviewers calling it agreeable.
More than likely, the newcomers with smaller screens will have trouble winning customers from Apple, leaving the handful of bigger-screen tablets to do the heavy lifting in market share battles.
Importantly, though, nothing about the current state of the tablet market will stay this way for long. Just as IBM discovered in the PC market 25 years ago, as consumers get educated and the platforms stabilize, the lure of a trusted brand loses some of its clout. The gloppy mess of challengers will sort itself out and offer up some clear alternatives to Apple. And the lessons of screen size will be learned and implemented.
As Gartner Group sees it, by 2015 Apple’s share of an exploding market will drop to less than half, as some competing tablets finally catch on.
