I’ve been thinking about the current dominance of Apple in the tablet market with the iPad 1 and 2, and the failure of Android (or other) tablets to make a significant dent in Apple’s share by now (March 2011).
What Apple have is not just superb design (and desirability), a well-oiled supply chain and a premium brand with loyal followers, but an innovative business model which involves locking down the platform to make significant revenue on content, from the App store, from their slice of any subscription revenue from licensed apps, and of course from their own publishing service, iTunes.
In effect they are treating the iPad more like a games console than a PC. And if they haven’t reached the position of games console manufacturers, who sell high-spec hardware below cost in order to make revenue from the games (a strategy to make King Camp Gillette smile), this is certainly a possible outcome, and one which would reinforce Apple’s current market dominance - it would be near impossible to compete with such a market leader by using a traditional PC business model depending on hardware profit margins.
In the last few days, however, we have seen some interesting announcements from Amazon.
Each of these builds on existing Amazon strengths - the appstore on their highly polished and ever-evolving online retailing; the cloud drive in effect a retail version of their S3 storage services combined with their MP3 presence.
But that’s not all. Amazon are already leaders in the related field of e-readers. Although not as sexy as iPads, Kindle users (in my experience) love their Kindles, so Amazon already has a successful product design process and supply chain to work with.
Add in their impressive set of additional monetisation channels selling Apps, ebooks, MP3s and of course the cloud storage to hold your content, and I am now convinced that Amazon are going to introduce an Android tablet. It may or may not use the Kindle brand, but it will be cheap, it will be loved by its users, and it will make Amazon pots of money. And from a consumer point of view, I hope it will support an open eco-system, leaving room for Android hardware and software products to fit in.
(What I don’t know, being stronger on ideas and trends than I am on numbers, is how that will affect share prices. I see that Amazon already has a much higher price-to-earnings ratio than Apple, so it may be that these developments are already reflected in their share prices. Please don’t take anything I say as investment advice!)