Like Clint Eastwood in The Good, The Bad, and The Ugly, Apple is looking unbeatable in the wild tablet market. Will the iPad be the last man standing after the smoke clears?
It doesn't help that tablet rivals seem to be stampeding toward an early end. Android makers have caused confusion in the market as they wrangle with competing operating systems. RIM has made the cardinal sin of launching a lackluster tablet with promises of critical features to come--and customers are still waiting. It's pure BlackBerry PlayBook folly.
Then there's the gunslinger, Apple. During the company's earnings call last week, Apple showed off some downright scary iPad numbers. Apple sold 9.2 million iPads compared to 3.3 million in the same quarter last year, almost catching up to huge demand; the iPad 2, which debuted in March, had been backlogged for weeks. iPad sales not only beat the red-hot holiday quarter setting a new record but surpassed Mac revenue.
All of this begs the question: Is the iPad's lead insurmountable?
Apple created the tablet market only 18 months ago, or rather was the first to discover gold in them thar hills, and by definition has first-mover advantage. Making matters worse, tablet makers dawdled on their way to market and delivered inferior products that often cost more. Meanwhile, Apple delivered the next-generation iPad 2.
Not only has Apple been quicker to the draw, each new iPad customer joins an ecosystem that becomes harder to get out of as time goes on. The average iPhone or iPad or iPod Touch has $100 worth of songs, movies, books, apps, and services, according to Deutsche Bank analyst Chris Whitmore. iPad owners jumping to another tablet risk losing all or part of that content.
"Consumers will only migrate if there is compelling value on the other platform or the platform they are on becomes burdensome," says Gartner analyst Van Baker. "The stickiness really does matter."
Tech analyst Rob Enderle likens the iPad's lead in the nascent tablet market to the iPod's edge over MP3 players in the early 2000s. "Apple is on the path of locking the [tablet] market up," he says. "But they haven't reached the scale that makes them uncatchable yet."
While the iPad's lead is impressive, the tablet market still has a long way to go. Enderle figures the tablet market has a potential of over 300 million units, and there are some 30 million iPads out there today. If Apple continues on its torrid pace, Enderle says, the iPad can reach unbeatable status sometime before 2014 or 2015.
Apple naysayers will point to the success of the Android smartphone in its bid against the market-making iPhone. Why can't the same thing happen in the tablet market? "The carriers assured the quality of the Android phone and picked up a great deal of the marketing load," Enderle explains. "That didn't happen with the Android tablets, which have had both quality and completeness issues."
Android tablets have been riddled with confusion. Google lit the fuse with its Chrome OS, effectively confounding its OEMs, app developers and customers, Enderle says. "Until and unless Google can focus on one platform and get the rest of their application and services up to speed with their cell phone apps, quality, and marketing, it is doubtful Android tablets will reach their potential."
The other real player in the tablet market is RIM and its PlayBook--the ugliest of them all. With its stock dropping like a rock, RIM began laying off around 2,000 employees, or 10.5 percent of its work force, this week. Shareholders have put the company's two-CEO structure in their crosshairs.
RIM clings to the hope that its business-heavy customer base will buy PlayBooks, but even this enterprise play has come under siege. During its earnings call, Apple claimed 86 percent of the Fortune 500 are deploying and testing the iPad, up from 74 percent last quarter. Nearly half of the Global 500 are testing or deploying iPads. Indeed, iPads are showing up for work in the strangest places.
"RIM has lost complete control over their image, and they are now seen as a declining vendor," Enderle says. "RIM's inability to partner well, coupled with their loss of consumer focus, is killing them in the market. They need to fix both, if they are going to pull out of this dive."
While the iPad isn't unbeatable yet given the tablet's vast potential, the pale rider is getting closer toward total market control. Not only is Apple hitting its strides, tablet rivals are making it easier by stumbling at every turn.