Apple iPad: In the Fast Lane to Success

Jobs says 1 million iPads will be sold in 28 days

It's too soon to call the iPad a game-changing tech success story, but that lofty title gets closer by the week. With soaring sales, huge gains as an e-reader, real cuts into the netbook market, and sky-high (albeit early) customer satisfaction rates, the iPad's biggest challenge has been living up to all of the pre-launch hype.

"One million iPads in 28 days--that's less than half of the 74 days it took to achieve this milestone with iPhone," said Apple CEO Steve Jobs on May 3, only three days after the 3G version had hit the market.

Roughly translated, that's about 200,000 iPads sold every week. iPad sales now outpace Mac sales (110,000 per week) in the United States, and are approaching iPhone 3GS's sales rate (246,000 per week), according to RBC Capital Markets.

Piper Jaffray analyst Gene Munster recently checked in with 50 U.S. Apple retail stores and found that the iPad had sold out or is in limited supply at many of them, reports AllThingsD. Analyst predictions range from five million to six million iPad units sold in the first year.

When Jobs announced the iPad earlier this year, ChangeWave Research polled more than 3,000 U.S. consumers and found that 4 percent were "very likely" to buy it, and 9 percent "somewhat likely" without having seen it.

After the iPad hit the market, ChangeWave asked 3,174 consumers this month the same question: Do you plan on buying the iPad? Those numbers jumped to 7 percent and 13 percent, respectively. All tallied, one in five U.S. consumers plans to buy the iPad, according to ChangeWave.

Early signs of customer satisfaction also show promise. ChangeWave surveyed 153 iPad owners and found a 91 percent satisfaction rate, which nears "nosebleed" levels, says Paul Carton, vice president of research at ChangeWave. This high rate of satisfaction comes despite stutter steps in iPad Wi-Fi connectivity and Apple's ban on Flash.

E-Readers, Netbooks Under Siege

Much of the hype about the iPad concerned two threatened markets: e-readers and netbooks. Analysts predicted the iPad would upend the first and carve into the second. So how is the iPad faring on these fronts?

Since its debut a few weeks ago, the iPad has already captured 16 percent of the e-reader market, surpassing more established players like the Sony Reader (10 percent) and seizing second place behind the Amazon Kindle (62 percent), according to ChangeWave.

"The survey shows the Apple iPad is now poised to capture an astonishing 40 percent of the e-reader market going forward in the first 90 days after its launch," writes Carton, in his research note.

Moreover, the iPad is slowly making good on another e-reader-related promise: transforming newspapers and magazines. ChangeWave says three times more iPad owners read e-newspapers and e-magazines than other e-reader owners, although the overall number is still paltry.

On the netbook front, the iPad is looking like a menace. The once-super-hot netbook market has cooled recently, according to a Morgan Stanley report. Netbooks had an amazing run, peaking last summer with a 641 percent year-over-year growth rate. By April this year, however, that number had fallen to 5 percent.

Of course, it's hard to say how much the iPad has had to do with the netbook decline. Yet the timing of the decline seems to lean in iPad's favor. A Morgan Stanley/Alphawise survey from March found that 44 percent of U.S. consumers planning to purchase an iPad are buying it instead of a netbook or notebook. (For more on this trend, read CIO.com writer Shane O'Neill's iPad the Destroyer: It's Getting Ugly for Netbooks.)

A downside for Apple in the ChangeWave survey: One out of four respondents who plan to buy an iPad says they've put off buying other Apple products. "You can't have a million iPad sales within a few weeks without having some cannibalization," says Carton. Then again, he's quick to point out that the iPad might have a "halo effect" that ultimately leads people to buy other Apple products, but is difficult to measure.

Room for Improvement

The ChangeWave survey also showed a few iPad problem areas. When asked to list their dislikes, iPad owners cited the lack of Flash support, problems with Wi-Fi connectivity, trouble keeping the large screen clean, and desire for more native iPad apps. (The latter gripe had to do with Apple not releasing the iPad to developers prior to launch.) Nevertheless, Carton says, "There was no smoking gun."

When consumers were asked to name something they wanted in an iPad, however, one feature jumped out: a front-facing camera for video conferencing and video chat. Analysts have speculated that the iPad initially did not come with a camera in order to help Apple keep prices low and compete with cheap netbooks.

Front-facing camera aside, there's no question the iPad has leapt out of the gate. But can it sustain momentum? The best is yet to come, says Carton.

"The wave of Apple iPad demand is likely to continue strengthening throughout the first six months after its release," Carton says. "We're going to have an iPad holiday season."

Tags Applesteve jobse-readersiPad

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Tom Kaneshige

CIO (US)

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