Based on my experience with the Nexus 7, I honestly believe Apple is in trouble. Now, I use the term “trouble” loosely here. Apple’s revenues will likely continue to grow at a high clip for the foreseeable future. Its iPhones will still command a significant share of the smartphone market and its iPads will still be among the hottest gifts this holiday season.
But the value in Apple has always been more about future expectations versus current demand. Even as Android-based phones have overtaken the iPhone in global market share, those future expectations looked pretty darn bright entering 2012 with its thoroughly dominant share of the global tablet market. But as the year has progressed, Android tablets have become much more competitive. Refinements in the Android operating system, advances in hardware, growth in the number of apps optimized for tablets, multiple form factors, and cheaper price points have resulted in better demand for Android-based tablets than many expected. Nowhere is this more apparent than in the Nexus 7.
Nevertheless, many have looked towards the iPad Mini to change the tide — to swing the tablet momentum back in Apple’s favor. But this will be tough to do. Unlike the iPhone and the original iPad, Apple was not the first entrant in the ultra-portable tablet market. Its late entrance, however, would be forgivable if the reason for the tardiness was to produce a product that was head and shoulders better than any competing product currently available.
Sadly, that wasn’t the case. In fact, spec-for-spec, the Nexus 7 out classes the iPad Mini in many key categories, including housing a newer generation and faster processor and a higher resolution screen. The main advantages of the iPad Mini are the quality of the build, its more robust media ecosystem and larger selection of apps optimized for tablets. But is that really enough to sway the average consumer?
I’ve read many reviews of the iPad Mini suggesting that you shouldn’t compare it with similar sized Android tablets, but rather, you should compare it to the larger full-sized iPad. From a consumer standpoint, that’s fine. But from a business standpoint, that’s terrible. Why? Because it tells me that it will most appeal to those who have already decided on buying an iPad or are already enamored with Apple products. At best, it’ll result in growth in sales from existing customers. At worst, it’ll result in sales cannibalization. Yet for Apple to continue growing at a rapid rate, it needs to expand its user base. That means it needs to compete for new tablet buyers. The Nexus 7 and products like it will make this far tougher to do going forward.
Brand equity certainly has heft. And there will always be consumers that are willing to pay up for better build quality and a more seasoned media ecosystem. But with the iPad Mini, Apple may have overestimated the value the average consumer places on these two factors. After all, it’s not like the Nexus 7 is made of straw. While it may not be cased in aluminum, I doubt most consumers would view the construction as cheap or of low quality in anyway. And while Google’s Play Store may not be as robust or refined as Apple’s Appstore, its offerings are pretty compelling, constantly expanding, and sync seamlessly with ones Google account. In my view, neither is nearly inferior enough to justify paying $130 or 65% more for a comparable iPad Mini that houses a nearly two-year old processor and one of the lowest resolution displays within the ultra-portable tablet market.
I’m also not the only one that thinks so. Cnet.com, which has never been shy about sharing their love for everything Apple, lists the Nexus 7 as their top holiday gift idea. One guess what it edges out for that top spot.
At a time when consumers are constantly looking for the latest and greatest yet also want to make sure that they’re getting the best bang for their buck, the iPad Mini offers neither. This should scare Apple. Because, the hottest gift idea this holiday season is the tablet, and dollar for dollar, there is no better value in this market right now than the Nexus 7.
But don’t take my word for it. If you’re in the market for a tablet or are considering giving one as a gift this holiday, go take a look for yourself. Go toBest Buy (BBY) or an Apple Store and play with the iPad Mini. Test out the Web browser, watch a YouTube video, peruse through a sample ebook, and play any games preloaded on the display unit. Then do the same with the Nexus 7. Perhaps then you’ll understand why demand for it has been so strong that sales figures to date have even shocked Google, and why the company now plans on shipping 5 million units by yearend — double its initial estimate. The scary part of all this is that the Nexus 7 represent just one Android ultra-portable tablet. There’s also Amazon’s Kindle Fire HD, Barnes & Noble’s Nook HD, Samsung’s Galaxy Tab line of tablets and numerous others. Again, this is great news for consumers. Not so much for Apple.