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With the launch of the Apple (NASDAQ:AAPL) iPad behind us, we can finally compare the it with another emerging product: the Amazon (NASDAQ:AMZN) Kindle. However, much of the analysis has forgotten to address the demographics of the two devices.

In our September 21, 2009 blog we wrote:

Kindle may be the first general purpose technology device in which the early adopter demographic favors the over-54 age bracket instead of the usual 18-34 age bracket, effectively turning one perennial marketing trend on its head.

During the next few years, we believe demographics will split the e-reader consumer base into two camps, with the 35-and-up going with Kindle (boomers over 55 in particular) and the 18-to-34 (especially Generation Y) with the iPad.

It seems strange that Apple has given the 55-and-up consumer to Kindle without a fight, given its view of monetizing old media. A recent poll by Pew Research shows that boomers still place reading a book, magazine or newspaper high up on their daily activities (see bottom table) and they are still willing to pay for it. The Kindle was one of the most common 2009 Christmas presents for this group, and Amazon's e-books outsold paper books for the first time on Christmas day. We believe that the boomers like its low price, simple lines, keyboard and the fact it is "grandchild proof."

Source: Kindle Culture

Also, older or more serious e-book readers don't want a multifunction device with an LCD screen. They spend far too long staring at those screens for work and want to read normally, by ambient light. Kindle also uses a low-power e-Ink screen and offers much longer battery life.

Here's the problem Apple faces: It has launched a beautiful product (robust on the beach?) with a high price into the emerging very value-conscious consumer bracket of Generation Y. We do not believe the iPad will end up in the computer history museum, however. With the current price point, the company's legendary marketing team has its work cut out during the next two years.

Thinking out of left field, perhaps the iPad will end up replacing the laptop, just as the laptop has replaced the desktop as the primary computer in many situations. Also, Kindle could allow the newspaper industry to monetize the boomers' love of newspapers and magazines. If this is the case, newspaper stocks could be tomorrow's interesting contrarian play.

From a recent MarketWatch column:

Despite the physical attractiveness, the iPad may have some issues that could dampen its immediate appeal.

For one, there's the price. At first blush, $499 for an entry price tag seems far lower than anyone was expecting. But that only gets a WiFi-capable device. To get one that will work on a wireless network, a customer has to shell out at least $629 up front and $30 a month for unlimited data - putting the total ownership cost of the iPad above $1,300 for a two year period.

Given that Apple is hoping to take share from the Amazon Kindle, which can be had for a comparatively cheap $259 with no monthly charges, the iPad may be a tough sell to reading fans, at the very least, even with its many additional functions, such as Web browsing.

Another rub for readers might be book prices. Unlike the launch of the iTunes music store, where the 99 cent price per song was a widely-touted feature, Apple did not tout a standard price for the new iBookstore. In a demo by Jobs, in which he purchased "True Compass" by Senator Edward Kennedy, the cost of the book was $14.99. Amazon has pushed publishers to keep their prices at $9.99 or under.

It's too early to say whether the iPad is going to shake up any industries, take down AT&T's network, or end up as an exhibit in the Computer History Museum like the Newton. But it sure it pretty to look at.





Disclosure: AMZN is held in our model Beacon Master Portfolio

Source: Kindle, iPad Search for Niche in Differing Demographics