Apple has sold 2 million iPads in 59 days and now is shipping in many international markets. The iPad sales surge is impressive and Apple is building a nice lead ahead of what will be a bevy of copycat devices on deck.
The real difference maker: Apple’s platform (iTunes, App Store, iPhone, iPod). In a statement, Apple said that the iPad has 5,000 new apps just for the device. Toss in another 200,000 apps or so on the App Store and the iPad has a huge ecosystem behind it.
As noted last week, the Android tablet army is forming as a bevy of tablets will hit the market. But the buying decision may come down to the ecosystem. Apple just has a richer selection of stuff. To effectively compete with the iPad, rivals—whether Android or Windows 7 powered—will have to bring the apps and ease of use quickly.
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If Apple keeps up this pace, there may be 10 million iPad units in the field before a valid competitor—Dell, MSI, Asus, HP or someone else—emerges. Simply put, rivals may not have as much time as they thought to catch Apple. The first quarter of 2011 may be too late. The iPad won’t have an iPhone-like lead in the market place, but Apple can sell enough units to create a nice virtuous cycle.
What does this virtuous cycle look like?
Deutsche Bank analyst Chris Whitmore examined the Apple ecosystem effect in a research note last week.
We analyzed the size of the iPhone, iPod and iPad installed base in the context of customer dollars invested in content (Apps, video, music etc) via the iTunes / App store. As highlighted below, we believe the installed base of Apple mobile devices (iPhone, iPod and iPad) is currently ~150M units and should grow to 200M+ units by the end of next year (assumes a 2 year life on hardware). Meanwhile, Apple’s ‘Other music related products and services’ line represents a good proxy for music, apps and videos sold for exclusive use on these devices. Using this framework, Apple customers have invested ~$15B in content cumulatively for their Apple devices, which we see growing to ~$25B by the end of next year. This averages to ~$100 of content for each installed device; suggesting switching costs are relatively high (not to mention the time required to port and free apps). When Apple’s best in class user experience is combined with these growing switching costs, the resulting customer loyalty is unparalleled.
It all makes for one pretty chart:
Bottom line: Apple is building a moat around its iPad business at the 60-day mark. If rival tablets—Android or otherwise—are going to compete they better hurry up.
