iPad: Segway or segue?

Apple has set the date for their next big event.  It will be this Saturday, April 3rd, 2010.  That is the day they start selling what many believe will be a revolutionary shift in how people use computing devices and access not only the Internet, but all of their media.  Certainly Apple believes this.  To be sure, the introduction of the Apple iPad isn’t the first time a tidal shift was expected in how our lives would change.  Remember the Segway Human Transporter?  Inventor Dean Kaman predicted his device would change how we moved around cities, and that everyone would be using these personal transport devices.  That was in December 2001.  Indeed, they are still being sold, but the adoption was far less than universal, with reports indicating that just over 50,000 have been sold.  Now we see them in use in many niche markets: law enforcement in shopping malls, tours around the Nation’s Capitol, and as a novelty ride at Disney’s Epcot Center.  Will the iPad be the next Segway, or will it be a segue into the next era of personal computers?

Clearly, Steve Jobs and Apple believe that the iPad will be a segue, defined by the Random House Dictionary as “any smooth, uninterrupted transition from one thing to another.”  During the product launch in January 2010, Steve Jobs presented the case for Apple being a mobile devices company, illustrating the gap between smartphones and laptops with a listing of things a mobile device user is most likely to do: Browsing, Email, Photos, Video, Music, Games, and eBooks (shown between the 7 and 8 minute point of the video):

“If there’s going to be a third category of device, it’s going to have to be better at these kinds of tasks than a laptop or a smartphone.  Otherwise, it has no reason for being.  Now, some people have thought that’s netbook.  The problem is that netbooks aren’t better at anything.  They’re slow, they have low quality displays, and they run clunky old PC software.  They’re not better than a laptop at anything; they’re just cheaper.”

It was at that moment that he defined the niche market that the iPad is designed to reach.  Later in the speech, he pointed out (and demonstrated) that the iPad interface works just like the iPhone and the iPod Touch, of which they’ve already sold over 75 million units (1 hour, 29 minutes into launch video) - these users already know how easy it is to use this interface; and have already discovered that no special training will be necessary for any new user to begin using the iPad within minutes of unboxing.

At the launch, Steve Job’s announced that the iPad would be available in 60 days.  Apple traditionally holds their launch parties at 6pm on a Friday, as they have done in the past for various versions of their operating system and the iPhone.  The choice of a Saturday is quite telling about the audience they want to reach.  Friday nights are known for happy hours, family movie nights, and first dates.  Most everyone chooses a Friday night as time to wind down after a full work or school week.  But Saturday is a new day!  The weekend!  Instead of keeping stores open til midnight for a 6 hour launch party and competing with traditional Friday night activities, their stores will open at 9am on Saturday for everyone to come in, look it over, and possibly even buy a new iPad.  The key word there is everyone.  Everyone gets out on the weekend, whether to run errands, take the family shopping, or get together with friends.  Now we have something else to do that day.  And, by announcing this date early in March, they gave us all a month to plan for how we will spend part of that day.  And, the fun lasts all weekend!

You can imagine Apple Store employees in matching colored t-shirts with a clever slogan, and some stores may even give away an iPad to a lucky visitor.  But, come early if you want to be among the first people to get your hands on one -- launch days have been known to be the reason lines form overnight in front of the store. Not everyone can fit in the store at once, so be ready to stand on-line with like-minded folks who want to touch and hold this latest creation out of Cupertino.  I’ve been in these lines before for the launch of Macintosh products -- they are a mix of die-hard Apple fans (users) and the merely curious.  But mostly fans.  I predict that the folks in the iPad line will be a broader mix of people, especially given the widespread adoption of the iPhone that has introduced the public to what a touch-screen computer can be.

And, just like a Friday night launch, the stock market is closed, so there won’t be any crazy immediate market reactions if supply can’t meet demand, or if it exceeds demands.  Ditto if there are any problems with the roll-out or unexpected system crashes -- Apple has a chance to make a press release before the market bell rings at 9:30am EDT on Monday.  Just last week, Apple announced their battery replacement program for the iPad; dodging any post-purchase consumer complaints about what to do when their sealed battery no longer holds a charge.

But this product launch is not without lots of press reports extolling the pros and cons of the iPad.  A simple Google or Bing search will lead you to many articles that will tell you what is great and what is wrong with the iPad.  Likewise, those sites will give you all the technical details -- I’m not about to repeat all that here.  There are even several articles and blog posts comparing the iPad to the Segway and the Apple Newton (Also, I discovered that I guess you have to write your blog post early after a news announcement if you want to be the first person to mention the Segway or Newton in your review; oh well!).  I’m going to assume you’ve probably already read those reports and technical details if you were interested.  Therefore, I’m going to comment on a few of the discussions I’ve read, and make a few of my own observations.

iPad -- What’s in a Name?

At the iPad announcement, countless reporters in the tech community and even regional media bemoaned the name, made petty jokes, and questioned why Apple would pick such a name.  To me, it was obvious why Apple picked this name.  Of course, the first part of the name was in-line with their lower case “i” branding of iPod and iMac for consumer products.  But the choice of “Pad” aligns perfectly with what you would use a “pad” for - taking notes and writing letters.  Today I take a pad of paper to meetings to record my notes on.  Some peers do this on their laptops now; and even fewer use a Microsoft Windows-based tablet with stylus to take notes.  In another related application, how may pads of Post-It brand sticky-pad notes have you used in your life?  Did you ever use that pad of paper on the night stand in a hotel room?  Once a letter is penned on pad of paper, the sheet of paper would be dispatched, posted, or folded up for later use.  And the next sheet would be ready for use. When I was in college, my mother wrote me weekly letters from a pad of paper.  Today, once I write a letter, I will most likely send it electronically instead of putting a stamp on it.  Between this and electronic banking (which you’ll also be able to do on an iPad), the US Postal System has less mail to move, and is looking to five days of delivery verses six.  Times change as every decade passes, and the way we interact with each other changes to match the technology available (just think, we don’t ride horses to work anymore, we don’t use much film anymore today either, and I’d bet that few people send and receive paper letters anymore).  Get it?  We have been using pads in our lives for a long time...

Names including notepads, notebooks, and netbooks have already been defined by others in the marketplace.  Two other suggested names for Apple’s device would include slate or tablet.  But it’s not a slate, which conjures up images of heavy old blackboards, or even the smaller slates used for notes in century-old school houses.  A slate let you take notes and is reusable, but offers no way to transfer your information easily to someone else without showing it to them.  It’s also not a tablet, which conjures up images of Moses and the 10 commandments - permanent images chiseled in stone; not even re-usable!  Instead, Apple called it the iPad.  A PAD!  Get over it, everyone!

Where is the market?

As I pointed out earlier, Apple is targeting a market segment at a place between laptop computers and smartphones, banking on Steve Job’s claim to be the largest mobile product company.  But I think the early adopters will be either the Apple fans who buy one of every new product out of Cupertino, or early adopter gadget-loving folks who can’t wait to try new technology.  But the stores will be full of curious and interested folks on Saturday who just want to see it and touch it.  They’ll be the second wave of buyers, who wait to find just the right mix of applications they would use it for (even if that means waiting for “version 2” in a year or two which might include the coveted front-facing camera).  But it’s likely that Apple already knows this, and will be counting on these two groups to be the product evangelists in communities throughout America.  You can be sure that if you are an early buyer, and you are using one in public, that strangers will come up to you and ask questions to satisfy their curiosity.

Other likely market segments that will buy the iPad early include book readers, college students, and Verizon customers who like the notion of “apps” but wouldn’t switch to the AT&T iPhone.  Plus, as new iPad-sized apps become available, more people will discover something that makes the iPad useful to them.  Add in a few “there’s an app for that” TV commercials featuring the iPad, and Apple will continue to attract buyers until the 2nd wave of buyers show up for version two (probably in a year, based on Apple iPhone release history).  Plus, in a year, the production costs will go down enough to include a camera and maybe even more memory at no additional cost.  Just study any iPod “size and features” timeline, and you’ll see that these iPad feature upgrades are inevitable in the future.

I see a market segment that hasn’t been talked about much in the media, and that includes people like my parents and grandmother.  They won’t be the first people to buy the iPad, but once they start seeing not only their children and grandchildren using them, but also their peers -- then look out!  This demographic didn’t grow up with computers, but have started to adopt them over the past decade to use the web and to communicate with their families who did.  As a result, the things they would use a computing device for are exactly the same things that the iPad excels at -- email, web browsing, reading books, and keeping up with their families on sites like Facebook.  Could the iPad become the “recipe manager” that people envisioned way back when Apple introduced the Apple ][ three decades ago?!  Add in a social network-enabled recipe manager, and you just might have something…  Plus, I already can see that my father would enjoy the MLB app that was demonstrated during the keynote.  Just imagine what other apps will be developed that might cater to the retirement-age market segment!

Another use case that hasn’t seen much attention is the user groups who would use the telephone network enabled versions.  Some might say that unless you have a super fast 3G network that you are crippled; but I would disagree.  Network communication over the AT&T Edge network is sufficiently fast enough for email and most all web browsing activities.  Indeed, if your life requires YouTube videos and streaming media downloads, then yes, you’ll need 3G or wi-fi to satisfy your requirements.  But for many others, the cell phone plan will be all they need.  And therein lies the best part!  For a mere $15 per month, an iPad user who does mostly email, web browsing, and book reading will be perfectly situated -- and, they won’t need to pay monthly land-based broadband fees which typically cost $40-$50 per month.  And, if they need more bandwidth, the $30 per month plan will accommodate them -- still cheaper than most broadband plans.  Plus, they can travel with their iPad, and use it wherever they want (of course, there needs to be cell phone service available and a way to charge it).  And, here is the best part -- in this use case, if they don’t have any other computers at home (like my grandmother), they don’t need to maintain a wireless router, anti-virus patches, or calls to the grandkids for computer support.  This group will enjoy some of the least expensive Internet access in America along with trouble-free network access -- something to make many of us tech-savvy users with $50-per-month broadband plans envious for sure!

But, there is a group of potential users who will not likely buy one.  This group includes the power-users who wanted a full copy of the Mac OS with command line interface options available to them in the iPad form factor.  They were disappointed when the iPad launched, because it wouldn’t feature the full-sized operating system options that they could imagine. But, from a marketing perspective, I imagine someone at Apple would remind this group that they do sell some really nice laptop computers with these features.  It’s certainly clear that “one size doesn’t fit all” with the iPad.  If Apple was to build a product that does everything for every possible user, it would likely weigh more, have half the battery life, and cost more.  Successful marketing happens when creative products intersect with a large group of people who are willing to beat a path to your door.  Even though this group aren’t going to beat a path to Apple’s stores on Saturday, I think Apple is fairly confident that there is a group who will.

Apple has optimized the iPad for their targeted market segment between smartphones and laptops. It’s more than an iPhone and less than a laptop - on purpose. They’ve chosen to use their touch-based version of OS-X already in use on the iPod Touch and iPhone for a good reason -- there are already 75 million users who know how to use it.  Between those users, and those who watch the guided tours posted on their web site this week, potential buyers will be able to start using it right away.  Plus an external keyboard or mouse is not required.  Neither is a stylus that can get lost.  Rather, they are using a stylus you’ll have with you all the time -- your finger!

Unsung feature

The photo frame!  How many have bought photo frames in the past two years since they became popular and affordable?  Imagine that when you aren’t using your iPad (no matter how much you are in love with it, you probably won’t use it 24 hours a day), that it can sit in its charging cradle and become a photo frame for you.  It’s design is as attractive as any photo frame on the market, and it’s likely that a whole new set of apps will be developed to serve as photo frames.  The more advanced photo frames, such as those by Kodak, eStarling, and HP (eStarling Touch Connect, Kodak EasyShare W820, HP DreamScreen), offer not only photos, but wi-fi connections that bring in emailed media, Flickr photos, and other internet-based features.  Well, guess what?  The iPad should be able to do all of this while it is resting.  If not yet, then there soon will be an app for that!  And, oh, so much more that it can do when it’s not at rest!

Book Reading

It looks like the Kindle vs. iPad “game is on” if you are looking for a portable book reading solution.  Amazon has recently been showing television advertisements for the Kindle, and advertising how the Kindle features free 3G wireless connections.  Of course, that is a good deal if all you plan to do is read books on your device.  Certainly, there is a market for that, as Amazon has already been able to demonstrate (they just don’t seem to want to share sales figures, though).  But I think the market for the iPad will be one where book reading is not your primary reason for buying a $499 device.  Rather, you’ll be able to do so much more!

Facts: Just the FAQs

I’ve found one web page that has aggregated facts and rumors in the form of a FAQ, and they have clearly indicated what is real and what is speculation.  That page comes from Macintouch, a daily news blog for all things Apple. Here is a link to their Comprehensive Apple iPad FAQ.

Why no camera?

I think the answer to this one is quite obvious - because they didn’t have to.  This is a version one product, and there will be plenty of time to include new features and capabilities in the future.  It has so many capabilities and it will find users in so many niche markets that don’t require a camera.  One day they will include a camera, perhaps in version two in a year or two -- just about the right time to add memory, a faster processor, and another set of amazing applications. And, just like most gadgets sold today, there will always be an upgraded version to entice even the early adopters to sell their previous version (on a site like eBay or Gazelle) and buy a new one.

But I think there is another answer to this as well.  Economics.  I can envision that someone (probably a full department) at Apple runs their economic analysis on spreadsheets that would cover at least a pair of 30 inch monitors.  And this is where they set profit margins vs. piece part OEM prices on any product they are preparing to sell.  So, if they want a 50% profit margin, they can decide what components can still be included in the shipping product to meet this goal.  And, as they designed version one of the iPad, the cost of the camera, if even just $5 extra in parts, broke the planned margin.  Years ago, I spoke with an economist from MIT, and she told me that most large companies hire economists to forecast pricing models and ultimately set retail prices.  For example, she said that it was clear that Microsoft used this model for pricing their Office Suite packages, such that the suite price was just a little more than the cost of two individual components.  Indeed, those of us who are not economists (like me), might think that we know how to do this.  But this economist insured me that corporate America is one of the primary locations where freshly minted college economics graduates are hired to help companies establish marketable price points for their products.

About a month ago, the Apple repair shop Mission:Repair reported (with photos) on their blog that the replacement frames for the iPad included a space for a camera, and that the replacement camera used for the unibody MacBooks was a perfect fit.  The tech press picked up on this, and immediately speculated that the iPad would be getting a camera in the future.  I was reminded of what I learned in college about the design of the IBM 360 (IBM press release from 1964; Wikipedia entry).  They built a single platform that could be sold to several different users, each at a different price point.  However, the hardware was the same in each system, and a service technician would configure a set of internal jumpers to activate higher speeds and capacities.  The benefit to IBM was that they built it on one assembly line, and they could meet user needs in multiple markets.  We see this today with the many versions of Windows available to address different user requirements -- and we can be sure that Microsoft doesn’t have a different code base for each version.  Rather, they compile each edition with carefully set compiler flags to include the proper set of code in each version.  For this reason, it is not at all surprising that the frame includes a cutout area specifically for a camera.  If you were an economist, why would you make multiple frame styles?

What about Flash?

I think the answer to this one has to do with how Apple perceives their market based on nearly 3 years of iPhone and iPod Touch usage.  Those users have done fine without Flash, and it doesn’t seem to be a go/no-go decision point for the majority of potential buyers.  Sure, there are reports that Flash is processor intensive, and would end up slowing down these devices.  Apple might want to tell you that they don’t want to use Flash because it is a proprietary technology that they don’t or can’t control. However, that argument won’t hold up long given that Apple has prided itself for a long time on their proprietary systems and choice to not license their systems to other hardware manufacturers (at least not since Steve Jobs returned to Apple in 1997 and shut down the Macintosh clones by companies like Power Computing, UMAX, and DayStar).

Apple controls the experience

Relative to technologies included or not included in the iPad, I think it comes down to one thing: Apple owns and controls their technology.  If you like it and want to use it, you will have to use it according to how they want you to use it.  In 1999, Apple introduced their new blue and white G3 desktop computers without floppy drives.  The tech press nearly declared it heresy!  How could Apple do that?  How will I live without a floppy drive?  Well, guess what?  Just about everyone I know has not used a floppy disk in years.  I’m sure the horse buggy manufacturers were outraged with Henry Ford a century ago, too.  Likewise, now Apple hasn’t built in extra ports for memory cards or a USB interface on the iPad.  Rather, you’ll have to buy an external connector if you want that.  And, Apple is likely going to limit what USB devices can plug into it - so far, they’ve only promised digital camera connectivity.  Sometimes, a company has to be bold about the actions it takes.  And the success of the touch interface for Apple certainly emboldens them as they introduce the iPad with the features we’ve seen advertised.

Conclusion

Segway or segue?  I think the iPad is definitely the segue.  It is not a reincarnated Newton, nor is it just a big iPod Touch or big iPhone.  It is going to bring in a new class of Internet-connected devices, hopefully with lots of competition that will serve to make everyone’s devices in this product space better.  Apple gets to leverage its successful iTunes store, and will likely have the lead in this category for some time.  However, that doesn’t mean that a competitor won’t create a better product one day.  For example, it will be exciting to see what becomes of Google’s Android operating system over the next five years.  Likewise, it will be interesting to see what open standards evolve that let these devices to interact and exchange data as this market grows.

We have already seen reported estimates from CNN that first day pre-orders eclipsed 120,000 units; which already tops the number of Segways ever sold.  But, at $500 compared to $5,000, that should have been expected.  This is where I go out on a limb and make a prediction -- Yes, I think that the first version of the iPad will be successful.  Despite the complaints and dissension you may have read in any number of reviews, I think that after 3 years, we will see people using all 3 categories of mobile devices that Steve described: smartphones, tablets, and laptops.  Will iPads and tablet-like devices dominate the other two categories?  No, I doubt it.  Will it change the number of smartphones that are sold?  No, I doubt it.  Will it become an attractive alternative to a laptop device for users who don’t need all the complexity available on a laptop?  Yes.  Will it dent the laptop market?  Perhaps, but just a little.  Since there will always be new users entering the computing marketplace (even if you just count the next generation of children), there will always be an increase in the number of all 3 types of units sold.  The iPad will offer a new option to serve an emerging market segment for mobile devices, and time will tell how companies develop creative uses for this device that we haven’t yet imagined.  The mere fact that there are now over 140,000 applications available in the iTunes App Store should be an indicator of the level of creativity in this world.  The “cost of entry” is low, and always welcomes new ideas.  Of course, you can’t be too creative, because Apple is still playing gatekeeper here, the tech media is taking note -- but that is a topic for another day.

Over its lifetime, Apple has demonstrated that it is possible to remain a vibrant and viable computer company with a market share under 10% -- this should serve as inspiration to any startup that can create the next “must have” gadget.  All you need is a good idea!  And some capable marketing folks wouldn’t hurt either!

Footnote: Will GrumpyHerb be buying one?

Maybe someday.  I currently have an iPhone and a laptop, so I have both ends of Apple’s wireless device spectrum covered.  When I see some “must have” apps that only work on the iPad, I will begin to consider one.  Or if I decide to develop an app.  Or if some irrational techno-lust for a new gadget overtakes me...  It is easy to get excited after watching those guided tours on the Apple web site and listening to podcasts like MacBreak on the TWiT network and Scott Bourne’s PadPundit!

But, just like any new technology item, the base price of $499 is just the starting place.  To be as useful as I can imagine it being, the real cost of entry will be much higher no matter which model you buy. I will likely need a protective carrying case ($30), a USB adapter ($30), a VGA adapter ($30) a screen protector ($20), and a cool Apple BlueTooth keyboard ($70).  Add in a few apps (such as Apple’s Pages or Keynote for $10 each), and you are closing in on $200 real fast.  So I’m now at $700 for the least expensive device before sales taxes...  Because my iPhone has Internet access for those places where I’m not connected to my wi-fi network, I probably won’t buy the 3G-enabled version when and if the time ever comes.  However, you can bet that I’ll be inside an Apple store on April 3rd, or as close to that date as possible!