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Five Reasons To Believe in Tablets

We recently made an investment in Tap ‘n Tap; they provide an Android-based software framework that enables OEMs to create tablets that compete with the Apple iPad. You have to believe a couple of things for this investment to work out: 1) the tablet market will be big, 2) Android will be a major part of it, and 3) Tap ‘n Tap can defend its value add: filling the gap between standard Android and what you need for a great tablet product. This post focuses on the first belief.

Of course there is lots of buzz about Tablets now, several major brands have announced products, and numerous analyst reports project strong demand. You need to take analyst support with some salt, however, as analysts’ bread is buttered only if the markets on which they are expert become important, so they work hard to make that happen. As investors we have to make up our own minds about what is going happen.

Here is why we believe the tablet market will take off:

• The tablet is the next stage of the “personal media player” market development that has been ongoing for 50 years, since the debut of the transistor radio. Consumers inherently value the ability to enjoy media in more situations and in more customized ways. The transistor radio introduced portability.  The Walkman added choice of music. The original iPod brought much more music and more control. The 3G+ iPods added video media. The iPod Touch added games and better video. Already the Touch is killing the portable DVD player, even with its 3.5″ screen. Tablets bring much more media viewing capability with 7″ – 12″ screens.
• The tablet fulfills a need not satisfied by either laptops/netbooks or the living room TV. Tablets are personal and portable; televisions are not. Tablets are light and comfortable to hold like a book (designed for viewing media); laptops are not. Some describe this as the difference between the work-oriented lean-forward experience (laptop) and the leisure oriented lean-back experience (reading a book, or a Kindle).

• Tablets make the internet available in every room of the house. Wifi does this technically, but ironically appropriate terminal devices are scarce: weather stations, clocks that know the time, family calendars and to-do lists, remotely reloadable picture frames, internet radios. Laptops have the wrong form factor for this. Specialized products are emerging in some categories (eg, wifi picture frames). Tablets will sweep up much of this demand.

• The tablet user interface (basically the iPhone/iPod touch interface) is remarkably intuitive for users, and also quite capable. My acid test for this watching children: my 5 year old grand-daughter (picture above) has complete mastery of my iPhone, even though she has never been trained and is just learning to read. There are few barriers here.
• Last and most, there is a ton of content ready and eager for these devices – this is a big accelerator for adoption. Most of ~150,000 apps available in the Apple app store will run on the Apple iPad with modest changes; the SDK for this (iPhone OS 3.4) is out already. Ditto for Android. Hulu, NetFlix, and others already offer a rich selection of TV and Movie content for streaming to internet connected devices.  Apple’s iTunes and iPhoto already offer capability to stream music, video, and photo collections throughout the house.  Amazon has 400,000 books available for Kindle, or the iPhone OS Kindle app. Many magazine publishers are eager to offer magazines via tablet because they see an opportunity to make magazine content compelling in the on-line world: eg, Wired Magazine is promoting a mock-up of a multi-media edition designed for a table (see the video embedded below).

• And, at no extra cost, a (sixth) bonus reason:  Apple set an aggressive price point.  $500 has long been seen as the threshold price point for consumer mass markets.  Emerging research is showing that pre-release demand for iPad is greater than it was for iPhone. (Check out the link below.)

http://digitaldaily.allthingsd.com/20100223/initial-ipad-demand-greater-than-initial-iphone-demand/)

A wise man said, “It’s hard to make predictions, especially about the future”. Keeping that in mind, and also the isolated instances in which we have been wrong in the past – ;) – we’re bullish on the tablet.