The iPad Advantage

A decade after Microsoft‘s Tablet PC failed to gain traction Apple introduced the iPad on 27 January 2010 to positive if muted response from the general and technical press.

Initial derision over the choice of name was coupled with concern from tech geeks that it was an overpriced and underpowered computer tablet.  However, despite lacking technologies such as mini-USB, a memory card expansion slot, direct printing, a camera, and flash support the iPad received overwhelmingly positive consumer response.

In under a year the iPad now ranks as the fourth largest consumer electronics device behind TVs, smartphones and notebooks and may be the fastest selling consumer electronic device ever. It contributed to Apple’s shares surging over $300; after near collapse in the late ‘90s the company is now one of the most valuable in the US.

Blowing past initial analysts’ estimates of 5 million iPads in the first year, Apple has sold 7.5MM iPads and is on track to sell around 12 million units worldwide in 2010 with estimated sales of over 36 million units in 2011. Now that Apple has opened up to Verizon these forecasts could go even higher. Apple’s biggest problem is not customer demand; it is keeping up with it.

The iPad is a unique hybrid device sitting somewhere ‘tween a laptop computer and a smartphone but one that is optimized for a “lean-back” content consumption. The customer appeal lies in simplicity of use. An intuitive touch interface, a stunning 9.7” screen, and great battery life together with easy access to the Internet, email, and 300,000 total applications (35,000 specifically optimized for the iPad) available via the iTunes store dazzles and delights potential customers. Those who have purchased the iPad rank it as the highest scoring product ever tracked by the American Consumer Satisfaction Index.

Of course the iPad’s success will drive intense competition especially from smartpad devices powered by Google’s Android and Tablet operating systems. But today, Apple has a significant lead, achieved by carefully orchestrating hardware and OS integration together with its massive developer ecosystem.  

Competitors seeking to unseat Apple will be challenged to deliver a significantly better user experience at a more competitive price.

Optimizing for a 9.7” screen was no trivial engineering feat. The effort involved gave Apple a huge competitive advantage but was only part of the story.  While initial reviews suggested the iPad was little more than an expanded iPod Touch, many failed to fully appreciate that the overall user experience went far beyond just screen size.  

Apple’s key competition, Android, is designed for smartphones not tablets. Android 2.2 and even the upcoming Android 3.0 OS are optimized for up to 5” screens and with some tweaking can work on 7” and perhaps 10” screens (the rumored Motorola “Stingray”) but it’s not an optimal user experience and Steve Jobs, Apple's CEO made it clear during their earnings call that Apple did not believe that the 7" from factor provided a good customer experience.

Although a number of 7” devices using Android 2.2, notably the Samsung Galaxy Tab, will soon be on the market, key hardware manufacturers such as LG and Acer have publicly stated they are waiting for the release of Google’s Android 3.5 Tablet OS (codenamed Honeycomb) due in 2011 before introducing iPad competitors. 

In addition to Android tablets, Google had been rumored to be launching its own Chrome OS “Speedbook” tablet, manufactured by HTC and scheduled for November delivery via Verizon.

While the competition races to catch-up the iPad offers a new and exciting canvas to create and deliver mobile content but publishers still face significant difficulties negotiating business terms with Apple.

Unresolved issues remain over revenue sharing on subscriptions, the control over access to customer data and analytics, the split of advertising revenues sold via Apple’s iAd service, and how magazines are marketed and discovered within the iTunes store.

Per copy pricing on the iPad has largely been set at the Single Copy Sales price resulting in howls of protest from consumers who question why they can buy an annual print subscription to their favorite magazine for $12-$15 per annum but are expected to pay around  $4.99 per issue on the iPad, especially if they are already a loyal print subscriber.

As publishers consider “universal” subscriptions that combine both print and digital and even “cable-type content aggregation models” the revenue allocations and dealing with Apple becomes even more complex.

There is a lot of posturing from both sides. Apple currently enjoys a position of market strength and can largely dictate terms but at the same time recognizes the importance of the media to their long-term competitive success. Today media companies, while they balk at the business terms, have little choice but to embrace the iPad given the rapidly increasing installed base and Apple’s 160MM iTunes users with credit card accounts.

Much can be gained for both sides from a successful resolution. Maybe it just takes a good arbitrator to bring the sides to agreement and deliver solutions that really benefit the consumer.

Within the next quarter Apple is expected to launch a newspaper and magazine digital newsstand.  Will Apple’s digital newsstand launch embrace or compete against similar offerings from Zinio, Next Issue Media, Texterity, Pixel Mags, ZMags, Issuu, Exact Editions and others ?

While competition is good for consumers excessive fragmentation can hurt a nascent market. Both publishers and consumers will benefit greatly if there are more streamlined solutions for digital content production and distribution.

Publishers are taking a range of different approaches with the delivery of content on the iPad. Some publishers opting to distribute little more than pdf versions of their print magazines (sometimes enhanced with additional multimedia content) while some are taking more aggressive, innovative and more costly approaches that fully utilize the functionality of the device and Internet capabilities via dedicated applications.  Others are looking to distribute digital media content via mobile browsers using the rapidly evolving HTML5 standards.

A number of interesting magazine experiments on the iPad worth watching include:

Esquire from Hearst is using the ScrollMotion platform.  Great interactive elements if a little confusing navigation makes this app stand out especially as it does not try to include all the content from the print product. Another popular Hearst title, Popular Mechanics, has received positive reviews for the app and pricing at $1.99 per issue.

Food and Wine from American Express Publishing uses WoodWing’s Digital Magazine Tools. The app delivers several interesting navigation features to access content. WoodWing has delivered a number of iPad magazine applications from around the world with different pricing approaches to the per issue sale.

Popular Science and Popular Photography from Bonnier use their Mag+ technology. Mag+ demonstrated some initial design innovations but the pace of development on the Mag+ platform appears to have slowed.

Wired and The New Yorker from Condé Nast uses Adobe’s Digital Magazine Solution. Condé Nast initially assumed flash would be fully supported on the iPad and then had to adjust their strategy. The current iteration produces very large downloads.

Condé Nast has also lunched Gourmet Live App http://bit.ly/a2xSdR that was developed in collaboration with Anil Dash’s Activate. It deserves a call out for being developed in HTML5 as well as its extensive user of social networks.

People and Sports Illustrated from Time is pushing an approach that allows a free digital download if you are a print subscriber. Non-subscribers have to pay a single-issue copy price. Time's Josh Quittner addresses some of the practical investment challenges impacting app development.

Better Homes and Gardens from Meredith, one of the top circulation magazines in the US, is about to launch an iPad app. The slow time to market from major publishers such as Meredith opens up opportunities from more agile start-ups.

New York Post is the first periodical without a paid website that Apple has allowed to sell in-app subscriptions.  .

New York Times has finally unveiled an app that gives full access to the whole edition. 

Distribution platforms

Another major challenge facing publishers is dealing with several distribution platforms. Current options include:

Zinio which offers a paid digital newsstand platform and has an extensive number of top publishers signed up although the majority of them are distributing pdf replicas.  By investing in Viv Magazine http://vivmag.com/about-viv/magazine Zinio is trying hard to educate publishers on the potential of multimedia content on tablet devices.

Texterity is encouraging publishers to adopt a strategy of print plus digital subs and encouraging content sharing through their Coverleaf product http://www.coverleaf.com/ . These are welcome initiatives as too many publishers are taking a “walled garden approach and not embracing the social networks.

ZMags claims over 2,500 customers across 50 countries. They have issued a well-produced whitepaper to guide publishers on the transition to mobile. Issued in June it’s already a tad dated but their advice is very sound .

Pixel-Mags has announced in-app subscription in addition to single issue downloads. In particular access to 26 issues of AutoWeek for $5. The content is largely a replica of the magazine rather than being designed specifically for the iPad.

Next Issue Media  The consortium from Time, Hearst, Condé Nast, Meredith, and News Corp is looking to develop a cross platform content distribution service and digital newsstand but details remain sketchy. It’s uncertain if they will be a major competitive force to Apple’s iTunes.

Publishers are seeking a seamless solution that integrates well with their existing systems and allows distribution across a variety of mobile devices.  While looking to take advantage of the specific functionality of applications they need to be planning for a time when the mobile browser offers the functionality of today’s applications but does not lock them into any specific platform.

Recommended approaches

The mobile market for publishers is at a very early stage of development, it’s messy and confusing and unlikely to become simpler any time soon. However here are a number of recommended approaches:

1. Think hard and research the customer value proposition. Carefully consider what content is appropriate for print, on a smartphone and on a smartpad. The UI/UX varies significantly across platforms so replicating content across devices is not a good long-term strategy. Content navigation should take full advantages of the device’s features but it needs to be simple and intuitive.  Minimize the surprises for the user.
2. Ensure your publication has an effective mobile web page for all key mobile browsers before developing a mobile app. Check out how your publication looks on key mobile browsers and mobile platforms. 
3. Look to develop “universal subscriptions” that combine print and digital. Price digital subscriptions modestly above print subscriptions. A price of around $1.99 per issues seems to resonate well with consumers. Balance the per issue price with collecting addition customer data (with careful privacy considerations) so that advertising can be more targeted and can command higher CPMS. B2B publications should focus on collecting user information for lead generation programs.
4. If the approach is taken to distribute a pdf version, set customer expectations appropriately and price accordingly. Personally use the replica on mobile devices for a month or so to appreciate the customer experience and then determine if this is a good strategy to follow.
5. Go beyond a walled garden approach. We’re in a mobile social world so ensure that the content can easily be shared. Use social networking account log-ins via Facebook, Linkedin, and Twitter for easy connections.
6. Work through all the revenue opportunities – advertising, subscriptions, and data collection for lead generation, e-commerce, and affiliate revenue streams. Don’t over rely on a single revenue source.
7. Be extremely clear and transparent over the audience data being collected and what cookies are installed. Clearly call out your privacy policy.
8. Analytics should be embedded thought the mobile web pages and within the mobile app so that the customer usage patterns are well understood and the UI adjusted accordingly.
9. Discovery of apps is a major issue. Take every opportunity to promote your app at each customer interaction. Work with apps review sites such as Appolicious to get your app noticed. 
10. Mobile is the future of publishing. While it’s too early to advocate a mobile first strategy, publishers need to be investing in and planning for the mobile future today.

Publication brands have to consider content distribution across a variety of media - print, online, smartphones, smartpads and soon smartTVs. The engagement of the customers and the time they spend in each medium will ultimately determine the allocation of resources. 

Today revenues are being disproportionately allocated to legacy media but the transition to “new” media is occurring rapidly.  

The publishers who are preparing now for the world of digital, mobile, and social will see success. 

Updated 10/15 following Apple's earnings - Jobs speaks! The complete transcript

Comments

[Debaddass]

I keep saying that the "killer" iPad app will be the one by Publishers Clearing House.

[Jditlev]

Great post Colin - you really get around in the mobile trends.

Since you are asking directly on how the Apple Newsstand will have impact on the established digital publishing world, I will share Zmags take on this.

First of all, we see the latest rumours as a quality stamp of the industry. Digital magazines are here to stay - if not companies like Apple would never touch it.
Secondly we don't see the Apple newsstand as a direct threat to the industry for these reasons:
* It's highly focused on content that can be monetized and already has a price tag on their content. Thus, they are speaking to the publishers who struggle to nail their online strategy.
* The newsstand only covers a corner of the market: All other types of content like exclusive online magazines, B2B magazines, custom publishing and free titles are less interesting for Apple.
* Publishers main concern is to be present where their readers are. In that sense a newsstand is a distribution channel targeted at specific devices. It won't save their day for readers on Android, web or printed mags.

And thanks for the feedback about our whitepaper. Since you came across that we have released the Beta version of Zmags Mobile, which in essence is a browser-based solution that optimizes existing online content for the most used mobile devices. Please try it out if you have some time.

Would be happy to share more details with you if you are interested.

Thanks
Joakim Ditlev
Marketing Director
Zmags

[Jim]

Colin, nice work. Saved me a lot of time rounding up possible digital publishing solutions.

Best
Jim Capparell

Drupal Advocate
iPad, iPhone developer
kitchenandculture.com
iphoneworxx.com
digitalmania-online.com