The Productive Student

There has been some great write-up (Gruber, De With, Pogue, Hewitt)  after Apple’s introduction of the iPad that really captures the larger picture behind this new product in terms of a business model. I myself find it fascinating in terms of a business move, which is why I’d like to share my thoughts here from that perspective.

Platform, not Product

The iPad, to me, is more of a platform than an out-of-the-box usable product. While the many applications demoed in San Francisco this week already make the iPad functional in many ways, Apple’s focus here wasn’t so much on what it does, but what i can do. Apple focused on packing in a lot of technological advancement which struck me more than the software features: For example, while the omission of ports and replaceable batteries are currently enraging the internet, one seems to forget that Apple has built in Bluetooth, WiFi, 3G, IPS screen technology, the best capacitive display out there, and a 30-pin iPod dock connector. This last point isn’t an obvious choice, Apple could have chosen Micro USB or, though unlikely, a propietary format. But they decided to position this as an iPod from a connectivity perspective – which means that peripheral manufacturers can adapt solutions to the iPad with minimal adjustments.

The fact that Apple is betting on the App Store is evident through the immediate announcement of the SDK. In fact, I am suspecting that this SDK is the original iPhone SDK they didn’t launch back in 2007. The workaround that iPhone apps scale up to fit iPad was probably not Apple’s initial solution, but came as part of a release roadmap when Apple realized that the iPad wouldn’t be released before 2010. Just my theory.

The iPad is a platform. For content producers, developers and consumers alike. It’s implications are far more than “a big iPod touch”. It’s interaction model is unique, and this is just the first product of this caliber. We’ve just started the new decade.

A Flurry of Revenue Streams

The iPod dock connector is a revenue stream for Apple. They license the use of the plug via the elaborate “Made for iPod / iPhone” program. If you extend this to the iPad, I ask whether we will soon see a “Made for Mac” label (an eerie thought, I know).

Beyond the connector, if we observe the price of this product, it isn’t a cash cow in itself. In fact, I suspect Apple’s margins are comparatively low on this product, considering that it is sold cheaper than an unlocked iPhone in Europe. If Apple were to sell an optimistic 10 Million units by Q1 2011 at an average price of $600, that creates a revenue of  $6bn. That’s a lot of money, and is definitely part of the reason why Steve Jobs mentioned that Apple is a $50bn company, for compariosns sake one year from now.

But how does Apple become a $50bn company if blockbuster sales of a product like this account for just 10% of their revenue? Even if you count Macs, iPods and iPhones, we’re left looking. Enter iTunes, App Store and iBookstore. Much of the reason why I’m intrigued by this product is that Apple has figured out how to deliver compelling content options to this device.

If any other tech company had released this product, with similar technology, it would not have been successful, because of the content channels available. How do you think the JooJoo will fare againts a product with Apple’s engineering resources and content delivery channels? Apple is the comfortable position that it can, thanks to the iTunes Music Store’s success, negotiate strongly with content publishers. The JooJoo can’t do that (though it might have been able to make some deals under Michael Arrington’s TechCrunch wing).

The iPad is just another way for Apple to sell iTunes media, books and applications. At an average price of 3$ dollars per app, downloads a year, sales, in the billions, and virtually no costs for offering additional apps, Apple’s proposition is that their revenue, nay, profit from iTunes is practically capless. The iPad will accelerate this.

On a side note, I believe that if Apple could pull off movie deals in 2nd-Tier countries (most European countries, South America) and Asia (China, India and Japan), they would multiply their revenue manifold. Remember that the iPod video was a useless product in Europe as there was no video content on iTunes, and still isn’t in most European countries as of 2010.

The demise of the Mac

The most hurtful statement to me at the Apple event was Steve Jobs’ proclamation of Apple as a mobile device company. While Macs are included in that category with Macbooks, I’m not sure that’s where Apple is really headed. Since the introduction of the iPhone, Apple has only marginally improved on the Mac. They’ve refined Mac OS X, they’ve polished the iMac and tightened up their laptop line. In other words: I think Apple’s is done with the Mac. In a bold move, imagine if Apple is planning on moving all their computing to a touch-based, file-system free, app-store driven model. The implications of that could fill theses papers and send chills down the spines of tech enthusiasts. Richard Stallman beware.