iPad 2 Launch Report

Mapping the Customer Experience Landscape for the Tablet Market

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An Argus Insights White Paper

877-99ARGUS (877-992-7487) www.argusinsights.com sales@argusinsights.com April 5, 2011

What's Inside
Introduction Problem Statement Study Approach Executive Summary Head-to-head Analysis Conclusions

iPad 2: Buy it or skip it?

The Apple iPad 2 went on sale in the US on March 11, 2011. Here at Argus Insights we were curious to watch a new product launch as it unfolds, to see what we could predict from the customer sentiment data. The original iPad launched in April 2010 was a game-changer, creating a brand new experience that did not exist before. Since then, other companies have jumped into the tablet game with their own offerings, with additional tablets on the horizon. Apple reinvented the tablet market, and it is clear that the market is here to stay. So, the burning questions are: Is the iPad 2 yet another hugely innovative product from Apple or will it be just a ho-hum upgrade? Given there are multiple tablets now on the market, how do they stack up compared to Apple?

How can you anticipate tablet market share shifts?

Stanford Research, published in 2005 , shows that user experience data can predict market share shifts. This research, conducted by the Argus Insights founder, showed that product social capital the share of mind that a product has based on customer sentiment delight and product buzz leads market share 2 by one to three quarters, with varying degrees of correlation . Argus Insights leverages customer sentiment approaches to compare products head-to-head across a number of categories, to help companies with marketing, product design, retail experience, supply chain planning and other needs.
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Methodology: Where do the insights come from?

Argus Insights methodology comes from Design Thinking and Market Intelligence, based on the principles that a users experience with their products can: Indicate how delightful (or disappointing) a particular product is overall Provide an early indication of whether a specific product will be successful Identify attributes of a product that are particularly delightful or disappointing Provide a peek around the corner as to future market performance Argus Insights uses customer ratings and reviews from multiple sites, leveraging ratings to gauge overall sentiment, and using review text to identify specific product attributes that are viewed positively or negatively. Argus Insights compares how users feel about competing offerings and about each products specific attributes (e.g., performance, design, etc.), and present those in a variety of different views, depending on our clients goals. All of the data in this report except where explicitly stated as our opinion are based solely on user-provided information about their experiences with their products. There are no expert opinions in this report this is the world according to actual users.

What is the market telling us about the iPad 2?

The initial user response to the iPad 2 is somewhat more positive than the original iPad, though muted in comparison to the initial buzz and magic of the original. Users comment that the new features meet their expectations for the original iPad. In the face of growing competition from both Windows- and Android-enabled tablets, there is a renewed cry for Apple to make peace with Adobe and support Flash, especially given the expectations buoyed by web browsing on a larger screen than its iPhone cousin. Overall user sentiment dropped rapidly to match the current value of the iPad, indicating that incremental improvements were not radical enough to drive new delight into the market. Interestingly enough, the tablet that currently most delights users is a Windows 7 slate.

2011 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com

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Head-to-Head Analysis
Argus Insights looked at tablets based on iOS, Android (various versions), and Windows 7. Our initial data-set includes the following tablets: ASUS Eee Slate (Windows 7) Samsung Galaxy Tab (Android 3) Elocity A7 (Android 2.x) Augen GENTOUCH (Android 2.x) Dell Streak 7 (Android 2.x) Motorola Xoom (Android 3) iPad (iOS) iPad 2 (iOS) Additional tablets will be added as released. Figure 1 above shows Figure 1. User Experience Landscape (as of April 3, 2011) the user-rated delight for the tablet market segment, graphed over time. This data comes from user ratings and reviews that are aggregated across multiple publically-available sources. The delight score the vertical axis is normalized across the rating scales (e.g., number of stars) of all sources. It can range from -1 (completely disappointed) to +1 (completely delighted). The pink line shown is the original iPad delightful from launch. The short dark grey line starting in March is the iPad 2. As shown on this graph, the iPad 2 is delightful as well but not at this time any more delightful than the original iPad. Rated above the iPad 2 are the ASUS Eee Slate and the Samsung Galaxy Tab. (We will hold off on the HP Touchpad line for now, as that is not yet released and is based on pre-launch buzz, the anticipated experience rather than real usage feedback.) We will look into specific attributes of each product, but first lets look at how the delight around each product compares to the buzz around each product. This buzz is defined by how many people are talking about each product within each time period. In Figure 2, the product buzz is indicated by the area (size) of the bubble. The delight is in the vertical axis, as in Figure 1. As of today, none of the new tablets including the iPad 2 match the buzz initially generated by

Figure 2. Tablet Delight and Buzz (as of April 3, 2011)

2011 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com

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the iPad. However, the most talked about tablets right now are the iPad 2 and the just-released Motorola Xoom. In comparison, the ASUS slate and the Galaxy Tab are more liked but less talked about. In a relative sense, the Dell Streak is both less-well-liked and less-discussed. In Figure 3, we show the most commented-on attributes in the iPad 2 reviews. We use programmatic algorithms to analyze the review content along the different attributes of the user experience. The bars in green show the percent of positive commentary around that attribute, while the red bars show percent of negative commentary. (We also look into what the reviews say to add some color to the comments.) The speed/performance is the most positively Figure 3. iPad 2 Attributes of Note viewed characteristic, with the style/design a fairly close second (we at Argus Insights agree that the style is exceptionally cool). Opinions on the camera are split between positive and negative. Looking into the review text, we see a number of comments about the camera, many of which fall under one of the two following buckets: Camera quality is not great the iPhone 4 camera is better Apple could have easily included the camera in the original iPad, but chose not to, just to extend the life of the product, which may be an indication of some bitterness in the market

Interestingly, user comments indicate a shift in Apple brand perception. At Argus Insights we focus on product sentiment, not brand sentiment; however, sometimes we can glean insights about one from the other. Negative user comments about Apple as a company included complaints about its persistent lack of Adobe Flash support. According to comments, among the key uses of the iPad is web surfing; the larger screen (compared to the iPhone) may drive an expectation of a richer web browsing experience. There are also several comments about recently-announced changes to force content pushed to Apple devices through iTunes, rather than apps, with Apple taking a sizeable cut of the revenue. Other interesting items of note are the equal split of positive and negative sentiment around quality and reliability, and the negative sentiment around pricing/value. In the qualitative data, we see commentary around the difficulty of getting files on and off of the iPad 2, printing challenges, and lack of HDMI, USB, and SD ports. Argus Insights can also segment the iPad 2 data based on the degree to which a particular review is overwhelmingly positive (Emphatic Yes, or lovers) to overwhelmingly negative (Emphatic No, or curmudgeons). From the segmented analysis we can see that sentiment around style/design is uniformly positive, while the camera dimension has quite a bit of negative sentiment across lovers and haters. Connectivity is viewed quite positively. Sentiment around quality is quite mixed;
Figure 4. Segmentation of Attribute Sentiment

2011 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com

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positive in aggregate, but more negative than positive in all categories except the lovers. Curiously enough, the most negative sentiment around price/value is in the Emphatic Yes category. Now lets compare the iPad 2 with some of the other tablets. Below in Figure 5 is the Experience Equalizer. It shows the sentiment for the most commented-on experience attributes across the products. This chart measures the volume of sentiment, and the direction of sentiment, for each product along each experience attribute weighted by the overall number of reviews for that product. So, for example, we can see how top-of-mind the speed/performance is as a characteristic within the set of folks that are reviewing iPads. The height of the bar, including both green and red areas, shows the relative importance of that topic within the user community. The ratio of positive to negative sentiment shows the perceived performance of that product along that experience attribute.

Figure 5. Experience Equalizer comparing Experience Attributes across Tablets

For Speed/Performance, we see two stand-outs: the eLocity on the positive side, and the GENTOUCH on the negative side. This data shows that the perceived performance for the eLocity is higher than that of the other tablets. For Size/Weight, the Galaxy Tab is the most positively perceived tablet, with the Dell Streak as the most negatively perceived. For Quality/Reliability, we see some fairly even split (positive vs negative) for most products, potentially indicating significantly variability in the quality of tablet production. The stands-outs on the negative side are the eLocity and GENTOUCH. For Price/Value, we have the eLocity as a positive stand-out, and the GENTOUCH as a negative stand-out. Among these tablets, the GENTOUCH is also currently the cheapest, indicating some users question the value of what they get for the price. The ASUS Eee slate is the most expensive tablet; however, the sentiment on price/value is still tilted positively. It appears that users are willing to pay for quality in this market segment. For Apps, we see that the relative volume of Apps sentiment for the iPad 2 is lower compared to the others, which may be an indication that they are becoming taken as a given on the iPad 2. There was a greater relative degree of sentiment around Apps for the original iPad. Although mentioned in some reviews, Apps was not in the Top 10 most-commented-on dimensions for iPad 2. Given the

2011 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com

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qualitative data (the specific text), we conclude that Apps are assumed for the iPad 2, especially since there are increasing numbers of iPad-specific apps. For competitors, Apps is still an interesting characteristic; for some tablets that perception is more positive than for others. Most are shifted toward positive sentiment, with the lone exception (at present) being the Motorola Xoom. (That tablet is very new and the sentiment is likely to shift over time as increasing numbers of users review it.) For Operating System, there is relatively lower volume of feedback for the Apple products compared to the competitors. Apple positions the overall device experience over the OS. The competition is typically a partnership between an OS supplier (Microsoft or Google) and a device manufacturer (Dell or Samsung). Both sides of the partnership are aggressively positioning their contributions to the experience, which means that the OS is closer to top of mind for these devices than for the iPad. From the qualitative data Argus Insights shows that users stratify into two basic tablet usage models: those that want to use the tablet for business, potentially as an extension or more mobile version of their computer; and those that use the tablet primarily as a media consumption device, such as games, movies, and web surfing. The ASUS Eee Slate users that are delighted with their tablet tend to espouse the ability to work in a very portable fashion, and commented negatively on the ability of competing tablets to support that. Within the iPad and iPad 2 user communities, there is also negative sentiment regarding the ability of the iPad family to support extension of the business environment. A deeper dive into the raw data reveals key reasons behind the sentiment that the iPad 2 is not considered well-suited for professional use, indicating that the lack of office applications, incompatibilities with MS Office for the existing apps, lack of ports for file transfer, and difficulty printing. In contrast, those whose expectations for the iPad 2 center around entertainment rather than work are much more likely to be thrilled by the experience in fact, entertainment appears to be the over-riding usage model. There is one stand-out exception to the love of the entertainment experience: lack of support for Flash content. Adobe Flash powers a significant portion of the web, and perhaps because the iPad usage tends toward entertainment, the negative sentiment around lack of Flash support becomes more of an issue than it might otherwise have been. On another note, one usage model included in user commentary is the use of a tablet to read e-books. That usage appears to be less common as yet, and the commentary is fairly mixed, but we are going to do a focused follow-up study on e-readers, with tablets included. Note:contact us if you would like to be included in the distribution of the e-reader report.

Predictions
Customer Experience Analytics can have predictive value. The following are the early trends emerging in the tablet market based on the initial user responses: We will see growth, both in overalls sales and SKUs, of enterprise-focused tablets o With the delight heaped on the ASUS Windows-based tablet, and with RIM and HP planning to enter the tablet market soon, we expect that there will be increased focus on application of tablet devices to workplace use or workplace extension o RIM Blackberry Playbook (Blackberry OS) is targeted for April 2011 o HP Touchpad (webOS) is scheduled for June 2011 o In addition, Windows 8 will be designed with tablets in mind and is scheduled to be released in 2012 Paralleling the shift to Android in the smartphone market, we will see increasing market penetration for Android tablets. Upcoming launches for Android-based tablets include:

2011 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com

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LG G-Slate, unconfirmed date, rumored to be late April 2011 In addition, the HTC Flyer is on the horizon, although we have no specific launch window for this tablet o Smaller tablet manufacturers are also entering the market using the Android platform, including Acer and Archos The iPad family will continue to shine, and Apple will keep the lead on style and design o The industrial design and product engineering feats of the iPad 2 set a new standard in product design. Users notice and appreciate the changes, though the afterglow of these innovations is short lived as the user experience deepens. o Argus Insights expects that camera improvements, no matter how the specific feature is perceived, will not have much of an effect on overall delight as users see little extra value in the existing camera applications o The user-perceived gap between the iPads and non-Apple devices with regard to its integration into other ecosystems outside of the Apple/iTunes/AppStore environs needs to be addressed by Apple or they stand the risk of ceding market share to Android, as they did in the smartphone market o o

Stay tuned for the update reports to see how accurate our foresight is and how long it takes to get to the future we predict.

Conclusions: State of the iPad Experience Landscape

The original iPad was a world-changing experience and is still the gold standard for a tablet. The iPad 2 is a solid upgrade and is well-liked, as was the iPad 1. People really like the style of the iPad 2 in particular (sleek was a commonly-used description), and those that also used the iPad indicate that the iPad 2 performance is a clear improvement. User data supports Apples claims, at least in these areas: its thinner, its faster, and it looks cool. However, some users also felt that the iPad 2 really is not all that much better than the original and at least in the minds of some not much of an upgrade at all. If you are in the market for a tablet and your key criterion is application availability, then Apple is still the leader at least for now. As far as making a choice between the two iPads, user sentiment is divided as to whether people would be better served to save money by purchasing the almost-as-good iPad or spend more to get the sleek, new iPad 2. Android appears to have a growing number of adherents, for both smartphones and tablets. (We also have a smartphone report; contact us if you would like a copy.) We will see how the Android tablets do over time. We do not have an analysis yet on the use of tablets as e-readers, but we see emerging commentary on that usage model. We will follow up on the e-reader market segment and let you know what we find out. Moving forward, Argus Insights will be producing a biweekly Tablet Market report. We will also be doing additional LaunchWindow reports for future high profile products, such as the RIM Playbook and the HP Touchpad. If you are interested in follow-on reports, you may subscribe to the updates at www.argusinsights.com. We hope this information has been helpful to you, whether you are in the market for a tablet, responsible in some way for tablet product creation, an industry pundit, or just interested in the data we have. Please let us know what you thought of the report, as well as what you would like to see whether it is additional data on the tablet market, or a similar analysis of another industry. Cheers! - The Argus Insights Team

2011 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com

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References
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Feland, J., Product Capital Model: Measuring the Impact of Design on Corporate Performance, PhD Dissertation, Stanford University, March 2005.

Feland, J., Leifer, L., " Product Social Capital: Measuring the Impact of Design Innovation on th Corporate Performance," Proceedings of the 15 International Conference on Engineering Design, Paris, Aug 2007.

2011 Argus Insights, Inc. All Rights Reserved. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Argus Insights disclaims all warranties as to the accuracy, completeness, or adequacy of such information. Argus Insights shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice. The data contained in this report is current as of the publication date.

2011 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com