The iPad: In the middle (of nowhere)

Not even 24 hours since the announcement of the much-hyped iPad and much real and virtual ink has already been spilt. Here is my two cents. I think the iPad is aimed squarely at the center – of nowhere. I’m trying to understand the scenarios where the iPad does something that other devices we own (including Apple’s own iPod Touch and iPhone) don’t do well enough to justify the price of the iPad.  Further, I struggle to come up with scenarios where the iPad will be a complete substitute for either a laptop or a netbook or a smartphone.  And I’m forced to make a heretical statement – I’m sorry, Mr. Jobs, I think you messed up on this one. The iPad, in the final analysis is either a) an oversized and overpriced iPod Touch; or b) a Netbook/laptop substitute wannabe that is marvelous at content consumption but is nowhere as good at content creation.  Maybe Apple will conjure up a market of people who don’t own iPhones or iPods or iMacs or Netbooks or laptops, and are willing to pay a hefty price for an admittedly gorgeous browsing experience.  I’m not sure there are too many people like this left. When Apple did the iPod and the iPhone, they created truly breathrough performance, design and usability that reinvented the categories these devices participated in. But with the iPad, Apple is trying to create a new category, a much more difficult task.  There is a hole in the market between smartphones and netbooks, and it is a hole for a reason.

And then there is the TCO (Total Cost of Ownership). If I take the median hardware device (32GB) and add in the 3G coverage (without which the mobile value proposition of the iPad is seriously compromised), I am out $729. If I add the umlimited data plan from AT&T (the 250MB/month plan isn’t enough if I want to watch movies), that’s $30/month additional.  Over a 24 month period, that’s a TCO of almost $1,500. I’m sorry, Mr. Jobs, did you realize that 10% of Americans don’t have jobs? Apple is trying to make money on ALL three elements of the business – the hardware, the connectivity and the content. Amazon swallows the connectivity fees, and the iPod Touch doesn’t require a data plan.

What’s the outlook for the iPad? There will be long lines on the day it becomes available, because a million or so die-hard Apple fanatics will buy anything Apple puts out, even if it is a brick.  Seduction and lust is a powerful emotion and it will drive sales for a while. Once the early adopters have forked over their money, the rest of us will start to ask difficult and incovenient questions about the value relative to the price.  And Apple will be forced to make some drastic adjustments to the pricing and the connectivity fees. The iPad won’t be a failure, but Mr. Jobs, this is no iPhone.

Then again, as Richard Bach notes in the last page of Illusions - “everything in this book may be wrong”. And so may everything I have said. After all, Jobs is the brilliant billionare, and I’m just a modestly-paid academic!

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