iPad Mini: Sweet Spot Challenges Google & Apple

The iPad Mini will shake up the consumer tablet market.

The iPad Mini will shake up the consumer tablet market.

The key takeaway from Apple’s event was the iPad Mini. The interesting part of the Mini’s launch was its size and pricing which demonstrated the market segment that Apple was targeting. During its presentation, Apple went nuclear on Google’s Nexus 7 but the Mini’s product placement doesn’t specifically match the Nexus 7.  So, what exactly does the Mini mean for Apple and Google?

 

New Category or Sweet Spot?

The 7.9″ iPad Mini slides into a spot between the 7″ Nexus tablet and the 9.7″ iPad 4. The pricing structure yields the same argument. The Nexus 7 is priced at $249 (16GB), iPad Mini at $329 (16GB) and iPad 4 at $499 (16GB). Comparing products by price and category makes sense in this case because it is difficult and often biased to compare based on ecosystems. The Nexus 7, iPad Mini and iPad 4 belong to the same use case scenarios. Here is how they square up – price to size.

Price vs. Size: Note the gap between the price line and bars.

Price vs. Size: Note the gap between the price line and size bars.

The Nexus 7 still offers the best value for money in sharp contrast to the iPad 4. What is interesting here is that the iPad Mini not only falls in between in price and size but also in terms of value. One may argue that the iPad 4 boasts a much higher screen resolution and a very powerful processor, but lets get this straight – do those specs really matter? No. Each device here has sufficient power and display quality to carry itself.

 

The iPad Mini gets price, size and value right. It is in the sweet spot for consumer tablets.

 

Considering that these products are in similar territory, it’s hard to see the iPad Mini as a new category. Instead, this represents a sweet spot. Apple has nailed the market at the right spot. This is not usual for Cupertino’s famous firm. Apple has consistently adopted a premium pricing model for all its products. However, stiff competition from Android based tablets such as the Nexus 7 and Amazon Kindle Fire have forced Apple to bring a value proposition to consumers. This is what strong competition does for the industry. The consumer has benefited from a tight battle for its dollar.

 

Mini Undercuts its Bigger Brother

The iPad Mini is great news for consumers but a mixed bag for Apple. I am confident the Mini will fly off the shelves. As mentioned above, it is in a perfect spot. But this is at the detriment of both the Nexus 7 and the iPad 4. There’s nearly nothing that the iPad 4 can do that the Mini cannot.

The iPad Mini will gobble up its bigger brother.

The iPad Mini will gobble up its bigger brother.

I always felt that big tablets (greater than 9″) are too pricey and too large for simply reading, playing simple games, surfing the net and checking email. Bigger devices need to do more. Google’s Nexus 7 and Amazon’s Kindle Fire satisfied a 7″ market that formed because it made sense. I used to recommend the iPad in the big tablet category but there’s no reason to get the iPad 4 now. Just get the mini, does everything at a better size and price.

 

I used to recommend the iPad in the big tablet category but there’s no reason to get the iPad 4 now – just get the Mini.

 

Steve Jobs was always wrong about 7″ tablets being dead on arrival. That rant on the earnings call was down to fear exposed by arrogant belief that phones should be tiny and tablets big. You can see how that has gone now. The iPhone has sized up and the iPad sized down.

What does this mean for profits? Apple’s already huge profit margins will increase. iPad 4 sales will fall but the Mini will sell way better than the iPad ever did. The Mini will bring in new consumers due to its reduced price points.  This won’t have the same big profit effect of an entirely new product but the value proposition is good enough to see the Mini take over the tablet market – both Android’s and Apple’s iPad share. Also considering how Apple has burned its iPad 3 adopters (by making a product dead in 6 months), I’m pretty sure the Mini will outstrip the iPad by a mile.

The Mini is what the iPad should have been. Competition has truly brought the best for the consumer in this product space.

 

Google – Two Options

Google has a huge fight on its hands. Google’s interest is not making hardware profits but pushing its Google Play store. It needs to continue eating away at Apple’s iTunes AppStore. The Nexus 7 still represents the best value for money tablet out there. Google will react in a week’s time and you can expect the Nexus 7 price to be lowered but the race to the bottom is not a right strategy for Google.

Nexus 7 - Needs a software boost.

Nexus 7 – Needs a software boost.

Google has to look at product refinement rather than incredible value. It has two options at hand. Offer a $99 / $149 Nexus or add value to its current line up and bring software up to speed against the Mini. I personally hope Google goes into product refinement.

 

Android is a great phone operating system and in many ways better than iOS. But on tablets, Android is way behind.

 

The Nexus 7 is a great product but Android’s weakness has not been the hardware but rather its software. Android is a great phone operating system and in many ways better than iOS. But on tablets, Android is way behind and that is why I could never recommend a premium Android tablet. The Nexus 7 was different and I was tempted to get one for my parents. Yet, I didn’t because of Google’s decision to place a variant of Android bearing a phone’s UI on the Nexus 7. I am still deeply puzzled why they would do that.

Google has to respond now. It’s app store is massive but has very few tablet orientated apps. Google has to do something about its offerings on a tablet device and both app and OS optimizations are critical.

 

Microsoft – Quietly Smiling

Redmond must have be wearing a huge grin today. Microsoft’s Windows 8 launch comes this Friday and Apple has conveniently moved out of the way. Apple has more or less killed interest in its 9.7″ offering and Windows 8 hybrids will slot into a widening gap.

 

Windows 8 hybrids need time to get its stuff right and Apple has stepped away to give it space.

 

I was hoping Apple would take the fight to Windows 8 hybrids. It could have done so in a few ways such as allowing mouse input on the larger iPad and announcing high powered productivity apps that could match 90% of the capability of fully featured traditional applications. That would have brought the iPad 4 up a level. But, Apple didn’t.

Microsoft has only itself to blame if it messes up its Windows 8 launch. Apple is returning the favor that Microsoft showed it 15 years ago when both Jobs and Gates made peace.

 

Conclusion

I have to admit it is gratifying to get guesses right. I mentioned in a former post that the iPad Mini made perfect sense and that hybrids would take over the 10+” space. Co-movements by Apple and Microsoft are proving that right. This is also Apple’s most exciting event from a technological standpoint. WWDC was a bore, the iPhone 5 was nothing new but the Mini has brought to market a perfectly placed product.

At current price points, Android phones will continue to lead as Apple cements its dominance in tablets. Microsoft has a free reign on hybrids that will compete strongly against traditional laptops. This is possibly the most exciting week in tech for 2012 as Windows 8 launching in 2 days and Google responding in 6. It’s a great time to be a geek.



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