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Apple's
iPad Reality Check |
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The recent unveiling
of Apple's (AAPL) latest gizmo - the iPad - has created quite a
stir as a potential 'game changer'. The new device has been suggested to
be everything from the savior of for-pay journalism to the beginning of
the end for Google (GOOG).
While the iPad
is indeed 'cool' from a tech user's perspective, investors may want to
take a closer look at the actual numbers and game-changing potential before
jumping to any major conclusions. Here are some of the facts the Apple-maniacs
seem to have overlooked when making predictions about the disruptive power
of the iPad.
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Savior
of Revenue-Bearing Journalism |
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Assumption:
The iPad will finally allow
old-school print journalism to start charging for the web-version of their
news content.
 Reality:
The
original long answer that was intended to be inserted here has been replaced
by a much more concise - and much more powerful - answer than the
original. Here it is....
If users
aren't willing to pay for news on a home computer or via an iPhone, why
would they do so with the iPad?
Certainly a
few specialty publications will be able to successfully monetize their
news via the iPad, but if the iPad is a web browser, as long as one news
organization is willing to give it away for free, they all pretty
much have to follow suit.
Not that it's
apples to apples (no pun intended), but we remind you of a big Steve
jobs flop known as iTV. Basically, Jobs and Apple overestimated consumer
willingness, and underestimated the competition in the television content
space. Point being, Steve Jobs' intuition isn't flawless. Similarly, there's
no real, plausible evidence that consumers will magically plunk down dollars
for news content just because they own an iPad. .
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Out
With Google's Search Engine |
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Assumption:
The
iPad will unseat
Google as the mobile web search leader.
 Reality:
The
word is (a rumor, really) that Apple has been working with Microsoft (MSFT)
for a while in an effort to replace Google Search as the default search
engine in the iPhone, and replace
it with Microsoft's Bing. Bing is not only not the default search
engine on any iPhones yet, but Google is the default search engine on
the iPad. That's certainly not a step in the down-with-Google goal.
And even if
Bing was there, it's not going to be a serious threat to Google.
With iPad sales expected to come in around 2
million units in 2010 and 6 million units in 2011, that's only about
4% of 2008's
total smartphone market of 38 million total units. (The iPod's smartphone
market share has been rolling
in at around 17%.)
Moreover, even
if
Apple does oust Google from the smartphone search market, iPad sales are
expected to only total about 2% of 2009's
total PC sales of 299 million. Assuming one billion total computers
are connected to the web, and knowing that Google dominates the search
market with
85% of all search traffic, Apple can have all the mobile search
market and Google would still be fine.
That said -
and not that iPhones are iPads - but if the search engine used in
iPhones is any indication of what to expect with iPads, then Google will
be just fine. In a recent article posted at MacWorld.com, a study showed
that 48% of the time, iPhones were being used to run applications. More
than 50% of the time, the iPhone was being used to search the web.... using
Google as the search engine.
Assumption:
The iPad will dethrone Amazon.com's (AMZN) Kindle as the king of e-readers,
and drag down sales of all the other wanna-be digital book readers.
 Reality:
Actually,
this isn't a totally crazy concept. The iPad's screen is a little
bigger, and the other things the iPad can do aside from acting
as an e-reader may be the little extra something that pushes a would-be
e-reader owner over the edge and into buying one. That's a big 'if' though.
The question
is, can the price be justified enough for those who strictly want the
iPad to read books? The Kindle's price is $259 with free 3G connectivity.
The iPad's price with constant 3G connective is $629 PLUS the cost
of a wireless data plan. With a nearly $400
difference in price plus the monthly data plan costs, Apple
is really betting heavily - perhaps too heavily - on the 'other
things' the iPad can do to be an attraction.
It should also
be added that the Kindle reading application is a wildly popular app for
iPhones. Of course, it also just happens to display Kindle e-books...
Amazon's e-book format. Even if the Ipad does trounce the Kindle device
in terms of unit sales, Amazon still wins in terms of e-book sales.
Assumption:The
iPad will put mobile video on the map (and continue to build mobile
audio), since the screen is big enough to actually watch TV on.
 Reality:
This
idea is also somewhat plausible, even if a stretch.
We've heard
plans of major league baseball games being delivered via the device, and
will acknowledge (as MLB.com does) that sporting events are the apt to
be the most-in-demand TV content delivered via the iPad.
On the other
hand, TV networks like Viacom and NBC Universal have considered the iPad
as a venue, and
seemed uninterested.
The concept
of totally-mobile television content is plenty attractive, but what Apple
failed to address is who's going to pay for it. Will cable TV customers
really want to tack on another monthly fee, or will the networks supply
it for free and fund it with advertisements. What about the massive amount
of bandwidth that's needed to deliver that much television content? Can
events be purchased in a pay-per-view basis?
Again, Apple
is planning on the consumers' (or broadcasters') willingness and ability
to pony up some more incremental dollars... a cost that's not going to
be as easily-justified as Steve Jobs may think.
By thy way,
the iPad doesn't play Flash videos - the web's most popular format for
streaming video content. That knocks out Hulu.com, YouTube (though YouTube
is reportedly working on a new video format), and most other current
web-based TV content. This may be a little too alienating for web-television
watchers.
Yes, Apple took
over the music industry with the iPod, but that was a different scenario...
very little competition, a desperate need for mobility (a hand-held
device), and no need for constant connectivity to the web. There's
plenty of competition in the TV arena though - most of which is free
content - and the mobility factor may not be as pressing for television
broadcasts, particularly if it's going to be more than a little
costly.
The iPad is
undoubtedly cool, even if only a big-screen iPhone. And, the tablet
industry will certainly shake things up a little in the mobility market.
Moreover, the iPad should add some decent incremental revenue to Apple's
top line. A game-changer though? The numbers and the current data
say don't hold your breath.
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Updated: 6:01 am PDT (13:01 GMT), September 9, 2010
