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Summary:

Just four years in and already some are saying the tablet market has peaked. It’s easy to draw that conclusion if you look at slowing and seasonal sales numbers but there are several reasons it’s too soon to dismiss the potential of tablets.

iPadMiniRetinaSilver
photo: Apple

I’ve been ill and mostly in bed since Wednesday of last week. The few times I was actually online I picked up the tablet from my nightstand.

Apparently, I’m using the wrong device. According to a guest article on Re/Code, “our love for the tablet is dying.”

The thesis comes from Zal Bilimoria, a partner at Andreessen Horowitz. Simply looking at the tablet sales trend, which is up but with a slowing growth rate, it’s easy to suggest we’ve hit “peak tablet.”

But I don’t buy that for several reasons.

1. Unless there’s disruption ahead, we’re early in the product life-cycle

Any time you have a popular new product class, you can expect fast growth at first. It’s what I’d call the “easy growth,” and it’s what the tablet market has enjoyed since 2010. This is the result of early adopters and product buzz.

lots of tablets

Additional growth is going to come from people who more carefully evaluate their budgets and need for a tablet. Some will instead hang on to their old computer a little longer or spend their money on a smartphone over a tablet because it provides nearly ubiquitous connectivity and is portable. For these people, tablets aren’t a necessity. They’re a luxury item, for lack of a better term.

That’s not out of the ordinary in any non-necessary technology product life-cycle that’s not even four years old yet. I’d argue that smartphones are more of a necessity due to their connectivity and voice communications support; that’s why smartphone sales continue to accelerate more than four years after their introduction. Note: There are some signs of a slowing growth rate for smartphones, at least at the high-end, seven years after the first iPhone.

With 361. 3 million tablets sold in the last two years alone according to IDG —  Bilimoria suggests only 225 million tablets have been sold in the last three years —  clearly there’s an established tablet market. For it to progress beyond the easy growth, it’s going to take time for mindsets to change about what computing is. Many tasks typically reserved for a traditional PC can be done on a tablet but not all are convinced. Chromebooks face the same scrutiny from people who think computing can only be done on a computer.

2. Changes in mobile broadband pricing will help

Bilimoria rightly notes that most tablets sold are Wi-Fi-only devices. That’s been the case since the iPad launched, but relatively recent changes to mobile broadband services are likely to change that ratio. Take T-Mobile’s offer of 200 MB of free 4G data for life with a tablet as an example. No, you can’t do much with that amount of data but it comes in handy for emergency or limited uses.

tmobile ipad 4g free

I’ve bought at least a dozen tablets in the past several years — don’t chastise me: it’s my job — but nearly all of them were Wi-Fi models. This time around, I bought an iPad Air with LTE because of the free and inexpensive data. Instead of sitting at home with the other tablets, I take the Air with me nearly everywhere.

att tablet addition

Here’s another example. When tablets with integrated mobile broadband launched, Apple shook up the market with pay-per-use pricing. You could purchase a few gigabytes of data for $30 or $50 and use it as needed; no contract required.

That model is still available but the advent of mobile share plans from the two largest operators in the U.S. made it even cheaper. In 2012, AT&T and Verizon created data sharing plans with the ability to add a tablet for $10 per month. With changes like this more consumers could opt for 4G tablets, which raises the value of the device thanks to everywhere computing.

3. The tablet app market is still in its infancy too

Hardware is only as good as the software available for it. And although Bilimoria is quick to focus on tablet sales growth slowing, the number of tablet apps has actually exploded. The initial iPad came with a dozen Apple titles specifically made for the tablet; most apps were scaled up iPhone applications. Fast forward to today and Apple says there are 475,000 iPad apps available.

made for iPad apps

Note: It’s difficult to pinpoint the number of Android tablet apps since Google takes a different approach: Android developers can have their software scale up as needed for different screen sizes and resolutions.

The point is this: The PC software market has matured over decades to make PCs as useful as they are today. Yes, hardware capabilities have improved as well but it’s a circle. Improved hardware gives app makers more capabilities to take advantage of. Overlooking a growing tablet software market that started in April 2010 and is nearing a half-billion apps on one platform alone is short-sighted. Tablet applications will continue to improve and expand into uses we haven’t even envisioned yet.

4. Phablets v. tablets: An irrelevant distinction?

One of Bilimoria’s main takeaways is that phones are the bigger story here. As I alluded earlier, phones are likely more important to most people than a tablet is. So I agree, to a point. But this raises the question of whether a “phablet” is a large-screened phone or a tablet?

I’m inclined to say tablet, mainly because I noted the phablet trend early on. In 2012 I suggested that tablets would replace smartphones for many but not in the literal sense. I didn’t expect people to ditch a standard phone and replace it solely with a 10-inch slate for example. No, I was pointing out that smaller tablets in the 5 to 7-inch size could become primary devices in lieu of a smaller smartphone. And for some, they have.

Sony Xperia Z Ultra

My premise was that eventually, cellular voice calls would be supported in small slates, although you could argue these are just big phones. Indeed there are some recent examples: Nokia’s Lumia 1520 and the Sony Xperia Z1 Ultra come to mind. Both are 6-inches or larger and act as traditional cellular phones. And as we move towards greater adoption of VoIP and Voice over LTE services, the “phone” part of a smartphone becomes available on tablets.

Whether we call these phablets or tablets is semantics in my mind. They’re still devices that gain the benefits of a tablet: A larger screen for improved consumption and creation of content, applications optimized for touch and native connectivity that lets consumers compute and connect to the web as needed.

The tablet isn’t dead: It’s maturing and morphing

One of the most simplistic and beautiful aspects about tablets is that at first glance, they’re a blank slate. Literally. That means they can be anything we need to them to be: Cameras to capture and edit 1080p video, a blank page to create the next best-selling novel, the daily lesson in your child’s classroom or the pilot’s flight bag for your next cross-country plane trip.

To suggest that our love affair is over for a device with such potential is akin to divorcing your spouse because you think he or she won’t be an interesting life-parter five years from now. Whether talking about a person or a tablet, thinking forward to see if your partnership will grow is a smart strategy. And I suspect our love affair with tablets will only further blossom thanks to new apps well optimized for these very personal computing appliances.

  1. Nicholas Paredes Monday, February 10, 2014

    Once we see more apps that allow people to work and create, tablet usage will accelerate. It is a little naive to think that tablet users want the same kinds of apps as on a smaller mobile device. These things are damn powerful. Enable them. Looking at you Apple and Google.

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  2. hmm…maybe this is correct.

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  3. Good post Kevin – When I saw the post by Bilimoria, my initial reaction was – “And here I thought Andreessen Horowitz people were suppose to be smart” – My view of AH went down.

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  4. A bigger iPhone will help disrupt the Tablet market.

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  5. Disruption IS ahead. We still don’t know what tablets are. If they are mere terminals to the cloud, tying them to a single user profile makes no sense, but if they ARE personal devices, they don’t seem to be user ID. We’re also not making use of them as desktop extensions, despite the fact that they are a more convenient and feature-packed display, control, and sensor bundle than a laptop.

    Mobile broadband isn’t improving that much. US carriers will fleece us until they are regulated to stop. Just like cable companies, they have no technical reason for charging per-device, they just want the money. Tethering in particular simply draws from the bucket of data you pay for, with the device you pay to access it, on behalf of another device. Consumers are right to reject ANY upcharge for that “privilege”.

    Without new underlying software, the well of app innovation is already dry. The App Store itself is almost six years old, and the iPad has been around for half of that. There’s nothing new out there.

    Phablets have a terminal size, whatever it may be, and when we get there, I don’t see a convincing argument to spend hundreds more for something just slightly different and bigger. It’s like owning a motorcycle AND a Smart car.

    Let’s stop trying to make tablets “happen”. On their own, they are good at certain tasks including some content creation, but that’s also true of Sugru, LEGO, or even duct tape.

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  6. If Apple makes such and innovative company making great products why can’t they integrate iPhones and iPads so that:
    - When your iPhone rings you can see who is calling on your iPad
    - Why can’t you text message from your iPad using your iPhone cell number account
    - Why can’t you use your iPhone as a remote control for your iPad when demoing things for people
    - Why can’t you open any file up on your iPad from your iPhone or from your iPhone have the option to open a file up or view a website link on your iPads larger screen
    - Why don’t you get FREE always on internet on your iPad from your iPhone without having to pay tethering or hotspot costs to your cell company

    Why can’t you also do any of the above with Google Android OS phones and tablets?

    With Blackberry phones and Blackberry’s (still useful) tablet we have been doing that for 3 years now

    But Windows 8.1 tablets really are also very useful too as you get to use all the software you already own while getting access to all the free Metro apps you want for touch items.

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    1. Uh domain you really should use an I device for a while before you comment. I reply to texts today from my iPhone, my iPad, or my Mac, depending on where I am at when I get the text. I have games played on my iPad with iPhones as a remote – not sure about other uses, but the capability is there today. I routinely open up documents with Apple software on all three devices, but I happen to prefer Drop. Any open window on all three devices are always available on the other devices, automatically. The free Internet is provider restricted… The only thing you mention is the phone number on both, but I do have all of those other things on my phone, pad and Mac today and have for a while

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  7. I recently replaced my Windows XP laptop with a Windows 8 laptop and looking to get a new Android big-screen phone, an upgrade from my Galaxy Nexus. My big-screen Android phone and Windows computer works great together.

    Tablets are too big to fit in the pocket, and a mobile OS tablet is not as useful as a real computer

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  8. Agree with you Kevin except that unless Mobile broadband in US falls in price drastically, it would hurt rather than help the tablet market.

    In India, here there is NO tablet market but a HUGE phablet market (anyway you call them the same) because competition here has reduced BOTH voice and data price drastically. Also wireline broadband is almost non-existant which again helps the phablet market.

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  9. I too see a better future for “bigger” mobile devices (aka Pablets) than for tablets. For content consumtion, video an games, bigger display (and horsepower under the hood) is always better. This is why you still can buy gaming PCs. And 9-10 inch tablet. Films look simply better on these than on a 4.7 inch “phone”.

    But as more and more consumtion is something on the go, the attractivity of smaller devices than “big” tablets is great. I never understood the aversity against phablets with the argument that that class is far to big for phoning. That is true, but phoning is the last thing users of mobile devices these days do with it. And for everything else bigger, at least a little bit bigger is better. Of course there is a hard ceiling for display growth: the archetypical pocketability.

    I therefore think that the size class from 5 inch to 7 maximum rather 6 inch will grow for a while. Perhaps not as much worldwide as the smaller and cheaper smartphones that the poorer parts of the world can afford if at all. But for mobile use this class will outclass all other categories i presume.

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  10. Kevin – good post. Based on research we’ve done w/ smartphone and tablet users, the primary determinants of choice and usage are (1) usability (can it do what I want it do); (2) pocketability (esp. for males); (3) readability (esp. for older individuals); and (4) “holdability” (esp. for conversations).

    As you point out, smart phones and tablets are converging on (1). The growing popularity of 5-7″ tablets is due to (4), for reading. However, there is still a maximum size (5-6″) beyond which “holdability” (for conversations) and pocketability suffer. So the relative market sizes for tablets, smart phones and phablets will depend in part on the incidence and importance of the various use cases by demographic segment.

    Hope you are feeling better.

    @phil_hendrix, immr and Gigaom Research analyst

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