Gigaom has commentary today on predictions for the iPad’s market share; they think that Apple’s share of the tablet market will be significantly higher than most analysts believe. They foresee a iPod-like market share (Apple dominates the music player market) rather than an iPhone market share (there are of course many active players in smart phones).
The reason, they believe, is that the iPad is a “category defining” device. I think Gigaom is probably right about Apple’s prospective market share, but their reasoning seems dubious, or circular at best.
There was a market in music players before Apple; Apple’s product was just better, which they achieved in significant part by being simpler. Why then was the iPod a “category creator?”
Vice versa, the iPhone was the first smart phone to make full use of a pure-touch interface. You could call it the category-defining “touch phone”. Why can the iPhone not be considered a category defining product?
The music player market exploded in size when Apple produced the iPod. Likewise, while the smart phone market was already growing by the time Apple entered, the size of the smartphone market (reflected in both Apple and non-Apple devices) has also exploded since the iPhone was introduced in 2007. There is some difference in the size of the pre-existing market, of course, but hardly enough to say that one device was category-defining while the other was not.
Apple’s ability to hold on to such a large share of the iPod market has more to do with the weak quality of incoming competitors, whereas in the smartphone market – or the “touch phone” market – they have had to contend with competitors enabled by Google’s Android software.
The other big reason for the superior share in music players is that Apple were able to produce a range of players, right down to the iPod nano, that protected them from undercutting. They have not done that in touch-phones, at least not yet.
So why do I (like Gigaom) think that analysts are underestimating Apple’s future share of the tablet market? Simply, Apple’s product lead over competitors is great – it is like looking at the iPod vs. other MP3 players – not like comparing an iPhone with an almost-as-good Android phone. While Android might yet address the tablet market effectively, it has not done so to date. Secondly, Apple has been aggressive in pricing on the iPad – it is already trying to protect itself from low-end competition; and we might expect it to produce some lower-cost models in future to guard against creeping commoditization by cheaper devices.
Many startups overestimate the importance of originality, and of creating a new category. Most often, a killer product perfects things that already exist to address a mass market effectively. Then a continuing lead in product excellence, together with protecting the business from attack by adjacent competitive products (especially lower-end products), is the way to maintain and extend the success.