Beyond the iPad Hype: Its Appeal May Be Fairly Narrow

iPad sales on release SaturdayApple (AAPL) says it sold more than 300,000 iPads on the much-hyped Saturday release, an impressive figure but nowhere near the 700,000 some bullish analysts had forecast.

These sales were as of midnight Saturday and included deliveries of pre-ordered iPads to customers, deliveries to channel partners and sales at Apple retail stores, according to Apple's press release. The release also says iPad users downloaded more than 1 million apps from Apple's App Store and over 250,000 e-books from its iBookstore during the first day. Apple didn't provide more specific figures.

What's getting lost in most of the media hype around the iPad is any sense of reality. Sure the uber-geeks such as the The Wall Street Journal's Walt Mossberg and David Pogue of the The New York Times loved the device, but they don't really speak for the majority of consumers, many of whom are too strapped for cash to spend several hundred dollars on a toy. Yes, it's really cool-looking, but it's a toy nonetheless. The iPad can't even run Web sites that use Flash animation or run two applications simultaneously.

Lost Senses of Proportion


Unfortunately for Apple, many Americans remain worried about their economic futures. Gallup's Economic Confidence Index remained depressed in the last week thanks to fears about losing jobs. These trends, though improving, don't bode well for a company trying to introduce an expensive new product, even Apple.

None of this means the iPad will be a failure (Apple's stock on Monday has been generally higher), but it's clear that some pundits tipped over too far as they swooned over it. The often-quoted Piper Jaffray analyst Gene Munster recently more than doubled his initial first-day sales estimate to between 600,000 and 700,000 units, including pre-orders, and lifted his 2010 forecast to 5.5 million units from 2.8 million, the Journal noted. Research firm iSuppli recently predicted that iPad sales would nearly triple from 7.1 million in 2010 to 20.1 million in 2012. An exception was Forrester Research, which has pegged sales at a modest 3 million in the first year.

The iPad is not -- at least for now -- a product with mass appeal such as the iPod or iPhone. It seems unlikely that many businesses and government agencies will be buying them in mass quantities. A recent NPD Group survey found that only 18% of all consumers surveyed expressed a real interest in owning an iPad, while 27% of 18-34 year olds and 24% of Apple owners said they were extremely or very interested.

After the Initial Surge, It Got Quiet


Stephen Baker, vice president of industry analysis at NPD Group, says initial sales of the iPad were strong and met the targets of most analysts. He also notes that a plenty of consumers were enthused about the product sight-unseen, which is unusual.

"Yeah, there was an awful lot of hype," he says in an interview. But sales "had an absolutely outstanding weekend."

The iPad's hefty $500 to $800 price tag can be a turn-off to consumers. As Baker notes, "that's an awful lot of money for most consumers to spend on a single product."

That may be why iPad enthusiasm appeared to wane during its opening day. According to reports in the Journal and Times, after the first flurry, sales activity died down -- a lot. Perhaps, people were scared away by the avalanche of publicity. Maybe they were waiting to see if Apple would quickly cut iPad prices as it did with the iPhone, or maybe they just had more important things to do on a Saturday.

More Important Than Sales?

The lessons here are many. Many consumers are reluctant to believe well-orchestrated media hype surrounding any product, even if every pundit with an Internet connection says it's the best thing since the abacus. Plenty of consumers are likely to covet the iPad once they see one. But they also yearn for fancy sports cars and expensive clothes. That doesn't necessarily mean they're going to buy something they can't afford.

When the history of computing is written, however, the sales figures may not matter. "The iPad's cultural impact will far surpass the number of units it sells," writes Forrester analyst Sarah Rotman Epps on her blog. "In three years, we'll look back and marvel not at how many units Apple sold, but at the way Apple changed computing."




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