Seeking Alpha

Bill Shamblin's  Instablog

Bill Shamblin
Send Message
I use market analysis and emerging trends to identify investing opportunities at the macro level - I look for the "big idea" and the company's best positioned to execute. My career includes stints as as a price and wage economist in Washington DC; a market analyst for a consumer... More
My blog:
Follow Bill Shamblin on Twitter
  • Why Apple Will Maintain Tablet Share: A Lesson From The IPod 1 comment
    Jan 9, 2013 7:32 AM | about stocks: GOOG, MSFT, AMZN, AAPL

    Apple's ability to maintain it's #1 position in the tablet space is a key component to the company's continued growth, with global tablet sales forecasted to grow 123% from 117.1 million units for 2012 to 261.4 million units in 2016 according to IDC.

    Read: Is Siri an Android Assassin?

    Almost 3 years into the Apple (AAPL) iPad launch there appears to be an interesting pattern emerging regarding tablet market share which could be good news for Apple investors.

    Despite the availability of a number of competitive tablets in the market with the release of Google's (GOOG) Android Honeycomb 3.0 in 2011, Apple appears to be holding it's own in table market share, with a 50.4% market share for 2012 Q3. (2012 share is expected to come in at 53.8%, source: IDC)

    Thinking back to the launch of the iPod, could it be the iPad (and tablets as a whole) will mirror the consumer purchase dynamics seen with MP3 players? Note, over the past 10 years, according to Apple, the iPod has been able to maintain a 70% market share.

    Recall, when the iPod was launched, the device, from a technical standpoint, was not revolutionary. In fact, there were a number of competitors already in the market prior to the iPod release. However, the iPod was able to capture the majority share of the MP3 player market via the iPods integration with the iTunes ecosystem.

    In the case of MP3 players, content and ecosystem soundly trumped product features in consumer purchase decisions. Manufacturers competed against the iPod with products that boasted similar features, but competitive products failed gain the share traction exhibited by the Apple products. The lesson? Making an MP3 player is fairly straight forward,the trick was delivering a seamless content solution for the consumer. Microsoft (MSFT) demonstrated this truth to the world with its ill fated Zune.

    Once a user was "invested" in the iTunes platform, it is very likely that the perceived personal investment of switching to another platform (moving content) became a key component of brand and platform loyalty.

    So how does this pertain to iPad? Tablets, like MP3 players, are used primarily to consume content (movies, games, books, etc.). And as such, must meet key consumer requirements prior to purchase, i.e. The consumer must perceive that the device meets their needs for both content compatibility and content availability. In other words, a consumer must be confident that:

    1. Currently owned content will work, seamlessly, on the new device (perceived content compatibility), and
    2. The inventory of available content for the device will continue to meet the consumer's needs now and in the future (perceived content availability).

    Note, the use of the word "perceived" in regards to content compatibility and availability. As a consumption device, tablets likely engender less research by the consumer prior to purchase than a computer. (The toy vs. tool argument). Thus communicating a single, clear content message, is key to influencing consumer perception for tablets.

    As demonstrated by the iPod, content consumers are platform loyal based on the devices content solution. The fragmentation of the Android market presents Samsung, Amazon (AMZN) and Google with a challenging content message to provide consumers.

    The ability of Android tablet manufacturers to develop and communicate the availability of a single trusted, complete, and compatible content marketplace across Android tablet manufacturers is a major challenge to capturing new tablet consumers. In addition, as competition in the tablet space intensifies, Android manufacturers may be tempted to offer their own branded content solutions to differentiate their tablets from their competitors (Ex. Amazon), degrading the content message for Android.

    In summary, a key competitive advantage of the iPad is Apple's ability to market a clearly understood and seamless content solution for its tablet devices; a competitive advantage Apple has exploited in the past with its MP3 players. As long as the iPad is perceived by consumers to be the best and easiest source for online content; investors can expect to see iPad maintain it's position as the #1 brand in tablets and thus continue to see substantial revenue growth in the tablet space through 2016.

    More Apple Analysis by Bill Shamblin:

    Read: Is Siri an Android Assassin?

    Disclosure: I am long AAPL, GOOG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Themes: long-ideas Stocks: GOOG, MSFT, AMZN, AAPL
Back To Bill Shamblin's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (1)
Track new comments
  • Great, simple article. I couldn't agree more. Customers love trusted brands and technology that "just works".
    11 Jan 2013, 11:01 AM Reply Like
Full index of posts »
Latest Followers

StockTalks

  • Software and hardware are the reason's iOS 7 is so important to Apple. seekingalpha.com/article/1564482
    Jul 23, 2013
More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.