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Pulse The iPad: is it really bigger than the iPhone?

For this edition of Emerging Spaces: Pulse, we take a look at the iPad and “tablet” devices; what they mean for the media landscape, and for online brand activities. Tablet PCs running Microsoft Windows have been around for a few years, but are yet to see any real success. So will the iPad have a similar effect as the iPhone did on the smartphone market, bringing a new beginning for the “Tablet” computer? We have been testing out an iPad for the last few weeks, seeing how people react to it, and what kind of situations it is likely to be used in.

Key Points:

Scott Thompson Senior Digital Research Executive Scott.Thompson@smvgroup.co.uk 28/05/2010

• A 9.7 inch touch screen offers a very immersive web browsing experience. • Priced between £429 for the 16Gb, WiFi-only version and £699 for the 64Gb, WiFi+3G model (with extra costs for 3G data), it’s currently a luxury secondary device. • Despite it’s ‘mobility’, we expect iPad usage to be mainly in the home. • Dedicated iPad applications present a ‘premium’ opportunity for both publishers and advertisers - but optimising websites for mobile and touchscreens should be a priority for brands • Although features like Flash player and a built in camera are missing, we didn’t find ourselves missing them in day to day usage. • Apple’s imposed restrictions on the platform may be the biggest selling point for iPad’s competitors. • As more Tablet devices come on the market competing on price, the category will grow, and the iPad will shift to a “premium” position.

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The iPad: Not just a big iPhone

Mobile, or portable? Where the iPad fits

The second thing that you notice about the iPad is probably either the bright, clear screen, or if you’re holding it, the fact that it’s surprisingly heavy in your hands. But the first thing that almost anyone says when they see the iPad is that “it’s just a big iPhone.” Which is true enough— but for understanding where the iPad will fit into its users’ lives, it’s also a slightly misleading impression.

One key finding from our Mobile Internet research in 2009 was that that 55% of users were accessing the internet from their mobile phones while at home, and this is the kind of usage that the iPad fits well with. While it’s certainly easy to carry around, it is less easy to actually take out and use while “on the go” than a smartphone. In addition, the monthly costs of owning the 3G version will also put many people off thinking of it as a truly “mobile” device.

While it is a “mobile” device, it’s not something that is going to be “always on” like a smartphone Although it’s small enough to fit into a reasonably-sized handbag, it won’t fit into your pocket. It is hard to imagine a scenario where a user won’t have a mobile phone (probably a smartphone) with them when they are using the iPad – which is probably why we didn’t really find ourselves missing features like a built in camera in our testing.

So it makes more sense to compare where the iPad will fit into people’s lives with books, magazines and newspapers than mobile phones or laptops. It’s closer to a “coffee table” book or magazine; something that users will want to sit down and spend some time with at home or on long journeys, rather than the “snack-sized” kind of sessions that are associated with mobile internet use.

So it won’t replace a smartphone. But it won’t replace your PC either — you will still need a “proper” computer to store all your photos, music and videos before you can transfer them to the iPad. This is why we see the iPad – at least for now – as a secondary device that will be used alongside a “normal” PC and a mobile phone.

Laptops have shown us a need for “portable” computers, while high use of mobile internet at home has shown us a need for something more lightweight. This is why we believe the iPad fits into a previously unfulfilled consumer need space.

So where will the iPad – and other tablet PCs – fit into people’s lives?

A Very Personal Computer Gadgets like smartphones and now the iPad indicate a move towards a new category of “computers”, where simplicity and ease of use takes the place of complexity and power. In addition, they are very personalised; set up with contacts and email, holding their personal music and photo collection, and storing passwords and other private information to automatically log into online services. While an “old world” PC might be shared between an entire household, these “very personal computers” are much more likely to be used by a single user.

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Mobile internet and the “touch web”

iPad Apps and Digital Print

The large touch screen means that the web browsing experience is very immersive. Because you’re interacting directly with the web page rather than operating it with a mouse and keyboard, there is a feeling of being much closer to the actual content.

When the iPhone 3G was launched in 2008, we noted that the simplicity of the Apps Store would lead to a significant change in the way that people use the internet from mobile devices. But it was hard to forsee the size of the market for paid-for mobile content that would quickly spring up.

However, two problems exist with the iPad as a web browser. Firstly, like most mobile devices, it can’t display content that uses Adobe’s Flash; a format used for a large amount of “rich media”, including video and rich media advertising. Although a growing amount of this content is also available in alternative iPad (and iPhone) friendly formats, this means that some websites – particularly video sites – simply won’t work on the iPad. The second problem is with websites that are not optimised for touch screens. Compared to a mouse, a finger is a clumsy pointer, and on the iPad’s large screen, it can become easy to mis-click a link if others are nearby. This has two key implications for advertisers. Best practice for rich media advertising has always been to have a fallback for users and devices that either don’t have a fast enough connection, or don’t have the capabilities to show rich content, and the iPad (and most mobile phones) make this even more important. Brand websites and microsites need to ensure their sites are not just mobile-friendly, but also touchscreen-friendly. The iPad isn’t a revolution in itself, but is a sign of things to come.

This is creating new revenue opportunities for brands and publishers, offering a new distribution method with the efficiencies of online, but with a more effective monetisation model – at a point in time when some are re-evaluating the business model of free online, ad-supported content. For print publishers, we believe this represents an opportunity. Two problems that exist for weekend newspapers can be neatly solved by a digitally distributed iPad edition; the size and weight of a weekend newspaper, and having to leave the house to pick up a copy. A bespoke, personalised version of the latest Tablet Edition, instantly delivered to any subscriber, without the wastage of entire sections that many readers will immediately discard, would also naturally extend itself to weekday reading, countering the threat of the freesheets. Print publishers are already recognising this opportunity. We’ve seen iPad applications that present versions of magazines like Wired and newspapers like the New York Times, which are much closer to being a digital translation of their print product than an optimised version of their online offering – with interactive, rich and clickable advertising built in. Sports content seems to highlight the kind of advantages that the iPad offers. Unlike a printed newspaper which can only offer pre and post match reports, an online iPad app can also offer live commentary. And while watching the sports results on a saturday afternoon might lead to arguments over the TV set, the personal nature of a tablet offers an ideal alternative to Sky Sports News.

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A luxury device for early adopters… but for how long? Although the iPad can surf the web, store music, videos and photos, or be used for reading eBooks, it doesn't do anything that a laptop can't do, so many will be seeing it as a nice but unnecessary gadget. So early buyers are likely to fit into a typical ‘early adopter’ profile; affluent gadget-lovers. However, two factors will change this positioning - one quite quickly (probably over the next year), and one over a longer period; a growing Tablet marketplace, and the shift from being a secondary to a primary device. At the CES show in January, several manufacturers announced their ‘Tablet’ ambitions, and these will inevitably draw comparisions to the iPad. Given Apple’s typical positioning, we expect competition to be mainly around price, which will shift the iPad’s position from being a unique “luxury” gadget to a premium device in a growing “tablet” market. Secondly, as the technology becomes cheaper and more powerful, the iPad will come down in price as we see new versions. Issues like Flash will become less of a problem, while more and more websites will be optimising their content for mobile devices. In short, the iPad will lose its reliance on a dedicated PC (as storage capabilities increase, and online storage becomes cheaper and easier to use.) We expect the iPad and other Tablet devices to become realistic replacements for the home PC over the next 3 years, quickly moving from being a luxury secondary device to a primary personal computer.

Key implications for brands and advertisers • “The Internet” is not just about PCs anymore. Mobile phones, tablets – and soon TVs – need to be considered. • iPad applications currently present a short-term opportunity for advertisers to reach a particular affluent audience, as well as a chance to experiment in a new, growing space. • Print advertisers should investigate cross-platform advertising opportunities with publishers’ early application experiments. • Best practice for Flash-based rich media advertising is to have fallbacks for devices that cannot read the Flash format. Similarly, websites that rely on Flash should have mobile-friendly alternatives. The growth of new internet devices makes these practices even more important. • Search campaigns should be optimised for mobile devices, ensuring that paid-for clicks do not direct iPad and other mobile devices to Flash-based websites. • Dedicated applications for mobile phones offer a premium experience – and one which some brands can monetise – but shouldn’t be developed at the expense of mobile and touchscreen-friendly websites which will work across mobile and desktop platforms. Searching Google, rather than searching the apps store, is going to be the first port of call for most consumers.

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If you’d like to discuss the subjects raised in this issue of EMERGING SPACES: PULSE in more detail, please contact; Scott Thompson Senior Digital Research Executive Scott.Thompson@smvgroup.co.uk

For more information about Starcom MediaVest Group’s EMERGING SPACES research and thought leadership programme, please contact; Donna Booth Associate Research Director Donna.Booth@smvgroup.co.uk Simon Stanforth Head of Research Simon.Stanforth@smvgroup.co.uk

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Is the iPad really bigger than the iPhone?