Will Windows 8 and Android Tablets take down iPad and iPad Mini?

Well, on a long enough timeline, there is definitely some Tablet or some device that will take down iPad and iPad Mini. So, for the purposes of this post, let’s restrict our question to a 5 year timeline.

Do we see something happening in the next 5 years that will take down iPad and iPad Mini?

Here are my thoughts and some rough strategy.

I. Yes, iPad and iPad Mini are going to fall to being the #2 or #3 Tablet Device within 5 Years

This is an easy one.

If we’re talking about market share, then iPad and iPad Mini will definitely get overtaken. We’ve seen it with how iPhone lost market share due to its stubbornness to give users what they wanted (larger screens, availability on more networks, a lower priced model). We’ll see it again with iPad and iPad Mini.

It might take 2 to 3 years. iPad would still have the ‘high profit’ upper end of the Tablet Market. However, we will definitely see iPad Mini and iPad become the 2nd or 3rd bestselling Tablet Brand.

Note: No hedging of bets here. No ‘This will happen IF X and Y happen.’. The decline of the iPad just seems very, very inevitable. It wouldn’t be Apple if it didn’t cede market share to focus on profit.

II. Windows 8 Tablets have a strong strategy (Entertainment + Productivity) but it might not work

The fundamental problem with Windows 8 is that it’s sacrificing what users are used to (desktops and laptops), to create something that may or may not be the future (mobile and Tablets).

A Tablet that can be used for BOTH Productivity and Entertainment is a strong, strong thing. An exceptionally strong product that cannot be beaten if done right. However, morphing the Desktop OS to be more like a Tablet OS is the wrong direction.

You don’t meddle with the product that’s absolutely dominant in its market to try to give a leg up to a product that’s a distant #5 in its market.

Microsoft would have been better off saying -

  1. We have Desktops and Laptops and let’s make them better – for Desktop and Laptop users.
  2. Let’s keep fighting with our Mobile products.
  3. Let’s figure out the Next Wave – Wearable computing? Motion and Gesture Based Computing? Let’s focus on that and use that to beat smartphones and Tablets. To be fair, Kinect is a big step in this direction.

So the Windows 8 Tablet strategy is strong. Use Entertainment + Productivity Tablets to go up against Entertainment Tablets. Just not sure the methods/tools used to implement the strategy are the right ones. In fact, they are probably the completely wrong tools.

III. Android Tablets have a strong strategy too (Cheap + Free Software) and it probably will work

Google is doing a lot right with Android. That is what has helped it get huge market share in smartphones.

With Tablets it may very well repeat its success. We can already see how Google (and Amazon) have scared Apple into releasing iPad Mini. Over the next few years we might see one of two realities play out -

  1. Apple transforms into a company focused on market share and keeps cutting its profitability. Note: This is why there is such a big sell-off in Apple stock (in addition to capital gains issues). People see Apple make a fundamental shift in its profitability focus.
  2. Apple decides it’s better to have 70% of the Profits and just 10% of the Market Share.

In either case Android will beat iPad and iPad Mini in market share. In the second case because Apple chooses profits over market share. In the first case because Apple doesn’t really know how to win this war.

That’s Apple’s biggest problem. It can choose the known (high profits, low market share) or it can choose the unknown. The unknown promises the dream scenario of high profits and high market share. However, the unknown might also lead to other scenarios that would be more nightmare than dream.

IV. The Dark Horse is going to be a company like Vizio or Razr or Jawbone or GoPro

We need a hungry company.

Not a $50 billion cash in the bank company. Not a company where there are 20,000 people who all feel like special cogs in a special machine – but deep down they know they are still just a replaceable, meaningless cog.

The way the Internet and Technology is going it’s setting up a lot of ‘Platform takes all the Value’ ecosystems. It’s hard for the next big company to rise from software because the Platforms control too much.

Look at all the ‘big’ new software technology companies from the last 3-4 years and a few things are missing – profits, control of their destiny, their own channel to customers.

However, all of that changes when you look at the device side.

That’s where REAL companies are being formed. Companies that sell to users. Companies that control their destiny.

$50 billion cash in the bank means nothing if a (relatively) small company like Vizio or Jawbone comes out with a product that is better, easier to use, prettier, cooler.

My money is on a company like this coming out of left field and just decimating the cash cows Apple has. This isn’t painfully apparent yet but Apple’s cool is GONE. It might never come back.

A company like Vizio or GoPro or Razr is going to do to Apple what Apple did to RIMM and Nokia. Tyrannosaurus Rex should watch out for the harmless looking mammals.

V. iPad Mini is going to finish off iPad before anything else does

Perhaps the most delicious aspect of all of this is that Apple got so worried of someone hurting the iPad that it decided to beat them to it.

In Apple’s mind the iPad Mini would affect smaller Tablets and not the iPad. In reality we will see Apple refuse to break out iPad and iPad Mini sales numbers in 2013.

In theory it seems a good idea to cannibalize your product before someone else does. However, the reality is that iPad Mini makes a LOT less profit than iPad. So Apple would have to probably sell 2 to 2.5 iPad Minis for every lost iPad sale. That’s just not feasible. We don’t know whether the ‘Will buy Apple Tablets’ market is that big. In fact, the entire Tablet Market might not be that big. Furthermore, we don’t know if iPad Mini can completely decimate 7″ Tablets.

VI. iPad Mini represents a fundamental shift for Apple, and one that goes against its core strengths

Apple was already losing some of its ‘status signalling’ qualities. The iPad Mini takes it down to a new level of commonness.

It might sell better in China and India because more people who want to show how much disposable income they have will be able to afford it. However, what about the people above them. If you reach 20 million new users, the 5 million above them aren’t too happy to lose the status signalling abilities.

They will search for something else. If Apple loses them then it would have exchanged customers who buy $2,000 products for customers who buy $300 products.

If we think of it as bands of people with different amounts of disposable income – Apple is trying to capture the next lower band while keeping its current one. The current band, however, will soon realize that it suddenly shares ‘status’ with a lot of people it has never shared ‘status’ with. If you own a Porsche would you want to be clubbed with people driving Yugos?

VII. Where does that leave us?

Apple has now opened itself up to attacks in two areas -

  1. Its premium band of customers are vulnerable. If companies like Jawbone and Razr can bring out ‘exclusive’ products, that let these premium customers signal to others that they can afford stuff the unwashed masses carrying iPad Minis can’t, then Apple loses these premium customers. Why settle for something 100 million people own when you can have something only 5 million people can afford?
  2. It is appealing to a new band of customers who already have lots and lots of people vying for their attention. People who might be better served by Google and Amazon and Vizio.

So now Apple has to fight the war on two fronts.

VIII. Amazon

Why mention Amazon last?

Because Amazon is both the most dangerous enemy and the least dangerous enemy.

  1. It’s the most dangerous because it has the customer trust, relationships, buying patterns information, credit card numbers, and deep pockets to challenge Apple for a long, long time. It has Jeff Bezos while Apple no longer has Steve Jobs.
  2. It’s the least dangerous because Amazon wants ALL bands of customers. It’s not going to be happy until iPad customers and Google customers and Microsoft customers and ChinaTablet customers all become Amazon customers. There are a lot of markets to pick off first before it focuses fully on the iPad.

Amazon is not very dangerous in our 5-year discussion. If this were a discussion of the next 20 years then you could bet your house that Jeff Bezos would completely decimate Apple. It isn’t. So we might not see Amazon take over the Tablet market any time soon. However, the things Amazon is doing are worth noting. It is building Tablets that are selling channels right from the start. When we get into things like recurring revenue and revenue per user, Amazon is going to simply destroy other Tablet Makers. I can’t explain this fully – After having worked for two companies that made the shift to recurring revenues it is hard to fully explain just how huge of a shift it is and how far behind Amazon will leave everyone if it can pull off what it is trying to do.

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