Apple Tablet Won't Be Runaway Success

by Braden Kelley

Apple Tablet Won't Be Runaway SuccessFirst we had incredible hype around Motorola’s Droid and its sales so far have proven to be just okay. Then we had even more hype around Google’s phone entry – the Nexus One – and its sales results so far have been meager.

So, now along comes Apple with its much-hyped (and only rumored) tablet innovation, which we expect to be announced on January 27, 2010 at a special media event in San Francisco.

There have been reports of Apple expecting to sell 10 million devices in the first year, and there have been rumors of a device price in the $800-1,000 range. If Apple’s new device does in fact turn out to be a 3G tablet, and even if Verizon and/or AT&T (or possibly even Sprint/Clear for 4G) subsidize $300 of the cost like they do with smartphones, that would still be a $500-700 price tag with another $60 per month for data service.

Are 10 million people really going to be willing to spend between $1,000 and $1,500 in year one for a tablet device after probably buying a laptop, an HDTV, and maybe a smartphone in the last 24 months?

iPod took 3 years to reach 10 million unit sales
I don’t think this will be the case. It took Apple over three years to sell 10 million iPods (Q4 2001 to Q4 2004). Three years! Apple took eighteen months to sell 10 million iPhones (2/3 of those coming in months 16-18 from iPhone 3G sales). People need to remember that even if someone launches an innovation into the marketplace, its sales don’t take off immediately. Let’s re-visit my definition of innovation:

“Innovation transforms the seeds of invention into a solution valued above every existing alternative.”

It’s that last bit (valued above every existing alternative) that will be a struggle for Apple’s rumored tablet in the short term. Even if people think that the device is better in some ways than devices they already have, will people replace a smartphone with it? Will they trade their laptop in for it? Or will this be an additional device?

While the device will likely ultimately be successful, it won’t set the world on fire out of the gate like people are expecting. It won’t be another runaway success like the iPhone, say what you will. It won’t exactly be the Newton, but its success will likely be more akin to that of the iPod.

It’s a good thing too because cellular providers are going to need time to build out additional network capacity, and possibly to even acquire additional spectrum, before the whole world moves from fixed-line and WiFi computing to cellular-network-based computing.

While the smarter strategy would be to make the iPhone faster and more extensible (creating a true pocketable computer), if Apple does launch a tablet with incredibly innovative capabilities, it will probably take 18-24 months for Apple to sell 10 million of them. Apple will be held back by the speed of 4G network rollouts (currently expected between 2010-2012 depending on provider) and by competition from the iPhone 3GS, iPhone v4, Macbook Pro, and other computing and entertainment options.

Even if Apple’s rumored tablet will take a while to catch on with consumers, it has already sent shock waves through the technology and publishing industries with every technology company under the sun rushing out either a new tablet computer or a new e-reader. Amazon is running scared. This week Amazon announced both better royalty terms for e-book authors and publishers, and new application development capabilities for the Kindle.

So, is Apple’s stock overvalued?

Do you think I’m completely wrong?

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Braden KelleyBraden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

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