Is owning 95% of a market enough?
Taking in a number of market share estimates, Apple iPads have about 5% of the potential U.S. market for pads/slates/tablets (or as the wags at The Register prefer to call them, Fondle Slabs).Â This is based on current P.C. market penetrations (north of 76% of households) and the estimated U.S. deployment of iPads.Â Thus, the green field of the slab market is currently wide open.
Which explains why several million Android slabs were introduced at CES last week.
Market mechanics are based on many things, with technical innovation being a misleading indicator.Â Apple has always been an innovator, but innovation in and of itself is insufficient.Â Apple invented the PDA market with the Newton, which sold four or five units.Â Pure innovation, but not only was it ahead of the market, it was also poorly marketed.Â Alternately the iPad was very innovative and well marketed (on the heels of the popular iPhone), and it immediately found its way into the hands of early adopters.
They make up about 5% of any market.
The glory of the iPad is not its engineering or innovation, but the identification of a need in the consumer electronics market space and the dexterity required to change the face of the market.Â Tablet computers have existed for years, their origami like screens providing both laptop and slab capabilities.Â But it took Steve Jobs rethinking human interfaces and providing always-on data to make the market respond.Â Apple’s early adopters showed that millions of units could be sold and this attracted the attention of every gizmo maker who wanted a share of the other 95% of the market.
Most of them chose Android as their OS, for painfully obvious reasons (cheap, Linux-based, Google supported, etc.)
The evolution of the slab market is beginning to mimic the history of the personal computer market.Â Old people (like me) remember that Apple offered the first truly consumer oriented personal computer.Â They had competition (Radio Shack’s TRS-80, IMSI, Altair, etc.) and each had its own durn way of doing things.Â Along came IBM, who could redefine any market, and introduced the world to a scrubby little operating system called MS-DOS from an unknown company called Microsoft.Â With the freedom to put MS-DOS on any computer, and with the market willing to clone IBM systems, the entire personal computer market sped toward ubiquity (aside from Apple’s perpetual 5% market share).Â Each vendor provided different price points, niche features and varying levels of support.
But they all ran MS-DOS.
Today we see sudden explosions in smartphone and slab markets.Â As Apple did with their desktops, they innovated and proved the viability of a market for slick pocket computers and slates.Â Other vendors, wanting some of that market chose what they believed to be the most viable alternative to the Apple operating system (MS-DOS then and Android now).Â With personal computers, once the decision for a standard was made, the market erupted, competition thrived, prices fell and Apple remained a nice player.
It looks like the same thing is happening again with mobile devices.Â Apple innovates and then is surrounded by something more portable, open and accessible.
(Before anyone utters the content access issue, know that Google and other vendors are able to inject music, book and video content into Androids, which erases any iTunes advantage).
This puts Apple into an uncomfortable long-term position (unless being an early adopter innovator pleases their shareholders).Â Apple must either continue to innovate at a hyperactive pace or be satisfied with 5% of the market (or they could compete on price, but that is always disastrous).Â Odds are they will continue their innovation streak, settle for minority market share, and sue everybody over patent violations.
But they won’t dominate the market because 95% will be owned by several dozen competitors backed by Google.
Markets are defined by forces much stronger than innovation.Â Sure, it is essential to innovate, but whatever clever invention you whelp will be cloned, or worse yet improved upon.Â Consistent innovation will build a great brand but not Microsoft-level market domination.Â This is the innovators quandary, a Sisyphus styled purgatory from which some people chose not to escape.