August 19, 2010 US Tablet Buyers Are Multi-PC Consumers

August 19, 2010 US Tablet Buyers Are Multi-PC Consumers by Sarah Rotman Epps for Consumer Product Strategy Professionals Making Leaders Successful Every Day

August 19, 2010 US Tablet Buyers Are Multi-PC Consumers Product Strategists Must Position PCs And Peripherals Within A Multidevice Lifestyle by Sarah Rotman Epps with J.P. Gownder and Laura Wiramihardja Executive Summary The success of the Apple ipad has created a halo around tablets in general: Consumers are interested in these devices, even if they re confused about what they actually are. US online consumers who own or intend to buy ipads and other tablets fit a typical early-adopter profile, and their characteristics have implications for product strategists designing tablets to compete with the ipad. They own multiple PCs and connected devices; they re voracious media consumers; and they have an affinity for other Apple products but aren t exclusively Apple-ites. Product strategists should use these insights both to create would-be ipad competitors and to position other devices and peripherals as complementary to tablets in a multi-pc ecosystem. table of Contents 2 The ipad Has Kicked Off Tablet Mania 3 Contrary To Popular Belief, Grandma Isn t Buying The ipad 7 ipad Buyers Aren t Exclusively Apple-Ites recommendations 11 Pitch Tablets To The Multidevice Consumer 12 Supplemental Material NOTES & RESOURCES Forrester used data from its North American Technographics surveys in this report. Related Research Documents Updated Q3 2010: The US Consumer PC Market In 2015 August 4, 2010 The Windows 7 Tablet Imperative May 27, 2010 Apple s ipad Is A New Kind Of PC May 14, 2010 2010, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. To purchase reprints of this document, please email clientsupport@forrester.com. For additional information, go to www.forrester.com.

2 US Tablet Buyers Are Multi-PC Consumers the ipad has kicked off tablet mania Apple s ipad has been an unqualified success: The company announced in its Q3 2010 earnings call that it had sold 3.27 million ipads worldwide from its launch on April 3 to the end of Apple s fiscal quarter on June 26. The ipad has become a major consumer electronics product category unto itself within one single quarter. Consumer product strategists at competing firms are gearing up to respond. HP has said it plans to release a consumer-focused webos tablet as well as an enterprise-focused Windows 7 tablet. 1 Dell has released an Android OS 5-inch Streak tablet phone in the UK and plans a US release of this and other products later this year. 2 Toshiba, which debuted the DynaPad nearly two decades ago, plans to release a Smart Pad in October 2010. 3 Rumors abound regarding 7-inch Android tablets from Acer and Samsung, and Lenovo has announced that it will release LePad before the end of 2010. 4 Tablets are also attracting new entrants to the consumer device market: Cisco Systems has announced a 7-inch Android tablet, the Cisco Cius, optimized for videoconferencing in an enterprise context. 5 Demand-side interest is growing along with supplier investment: Even though the ipad is the only widely available tablet PC on the market today, tablets have entered consumer consciousness in a very short time frame. Forrester s North American Technographics data reveals: A rapid increase in consumer awareness of the ipad. In online surveys of 4,091 and 3,990 US online consumers fielded in May and June 2010, respectively, the percentage of US online consumers who said that they d never heard of the Apple ipad before the survey dropped from 17% in May to only 5% in June. 6 For context, three years after the Amazon Kindle s release (another entirely new type of product), 25% of US online consumers in the same survey said they d never heard of a Kindle. Growing ownership and intention to buy. In our June survey, 1., or 2.5 million US online consumers, reported already owning an Apple ipad. An additional 3.8% (7.4 million) say they intend to buy one. 7 This ipad interest is fueled by the social influence of its buyers, who are 20% more likely to use Facebook, 40% more likely to use Twitter, and have more friends and followers than US online consumers overall. 8 Confusion about the tablet category in general. At the same time that consumers are tuning in to the ipad, they re getting excited about tablets in general even if they don t know exactly what they are. Only 10% of consumers in our June survey said that they d heard of tablets other than the ipad. But when asked to name them in an open-ended response question, there were a lot of don t know/can t remember responses. We also got responses that reflected confusion about the category, such as iphone, Kindle, or BlackBerry as well as a few responses of obscure tablets, such as ARCHOS and joojoo, and tablets that have been hyped in the media but are not yet for sale like HP or HP Slate, which had the most write-ins with 23 responses. August 19, 2010 2010, Forrester Research, Inc. Reproduction Prohibited

US Tablet Buyers Are Multi-PC Consumers 3 Vast enthusiasm, however, about buying tablets. Despite confusion about what tablets are, 14%, or 27 million US online consumers, say they intend to buy some kind of tablet in the next 12 months (see Figure 1). In contrast, only 4% of US online consumers say they intend to buy a desktop, 8% say they want to buy a netbook, and 1 say they want to buy a laptop. While the confusion that surrounds tablets means that we don t think that this many consumers will actually buy a tablet, we do think that this data is encouraging for Apple s would-be tablet competitors: There s interest in the category that goes beyond the ipad. Figure 1 Consumers Want To Buy A Tablet, Even Though They Don t Know What They Are Which of the following devices do you own, and which do you intend to buy in the next 12 months? Desktop computer 4% 81% Laptop/notebook computer Netbook (small laptop, e.g., ASUS Eee PC, Dell Inspiron Mini, HP Mini-Note) 8% 8% 1 60% Own Intend to buy in the next 12 months 57068 ebook reader/ereader (dedicated reading device, e.g., Amazon Kindle, Sony Reader) Tablet computer (touchscreen multimedia device, e.g., Apple ipad) 4% 11% 1.9% Tablet buyers are more likely than all US online consumers to want to buy a desktop or netbook. Base: 3,990 US online consumers (multiple responses accepted) Source: North American Technographics Consumer Technology Online Benchmark Recontact Survey, Q2 2010 (US) 14% Source: Forrester Research, Inc. contrary to popular belief, Grandma Isn t buying the ipad Product strategists who are developing tablets want to know who is buying and who intends to buy these devices. People love to share anecdotes about two-year-old children and 90-year-old grandmothers using the ipad. 9 But, the reality is that consumers who own or are planning to buy the ipad and other tablets fit an extreme early-adopter profile: They are high-earning, educated, likely to travel for business, and more likely to be male (see Figure 2). Prospective tablet buyers have several characteristics that have important implications for product design and strategy. In particular, prospective tablet buyers: Own multiple PCs, including netbooks. On average, consumers who own or intend to buy an ipad ( ipad buyers ) have 3.6 PCs at home, compared with 3.0 PCs for consumers who own or 2010, Forrester Research, Inc. Reproduction Prohibited August 19, 2010

4 US Tablet Buyers Are Multi-PC Consumers intend to buy a tablet ( tablet buyers ) and 2.3 for all US online consumers. Of particular note is the rate of netbook ownership: 24% of ipad buyers already own a netbook, compared with 16% of tablet buyers and 8% of all US online consumers. It s noteworthy that owning or intending to buy an ipad actually corresponds with being more likely to also want to buy a desktop 9% of ipad buyers say they intend to buy a desktop in the next year (twice the rate of all US online consumers); they also still want to buy netbooks at more than twice the rate of the general US online population, at 18% for ipad buyers versus 8% overall. Live in an ecosystem of connected devices. Tablets take their place in a crowded household of devices (see Figure 3). A whopping 69% of ipad buyers and 57% of tablet buyers also own a latest-generation game console an Xbox 360, PlayStation 3, or Nintendo Wii compared with 37% of all US online consumers. ipad buyers are four times as likely as US online consumers to own a connected TV (9% versus 2%). Connectedness extends beyond livingroom entertainment to peripherals like wireless speakers; 24% of ipad buyers own them versus 6% of all US online consumers. ipad and tablet buyers are more likely to store data in the cloud, too: 3 of ipad buyers say they store files in their email inbox and 12% say they use an online storage service like Windows Live SkyDrive or MobileMe versus 24% and 4%, respectively, of all US online consumers. 10 Consume media like it s air. There will be other use cases for tablets, but Apple was smart to focus on media consumption: Tablet buyers really, really care about media. Compared with all US online consumers, they are more likely to use every type of media from offline radio to online video to Facebook and Skype (see Figure 4). In addition, they spend more hours consuming all types of media than all US online consumers do, with the exception of offline TV. 11 August 19, 2010 2010, Forrester Research, Inc. Reproduction Prohibited

US Tablet Buyers Are Multi-PC Consumers 5 Figure 2 Tablet Buyers Are Socially Connected Device Junkies 57068 All US online consumers (N = 3,990) Base: US online consumers Own or intend to buy any tablet (N = 641) Own or intend to buy an ipad (N = 204) Percentage of US online consumers 100% 16% 5% Female 51% 46% 45% Age (mean) 44 39 36 Household income (mean) $78,100 $99,200 $104,700 College-educated 47% 59% 61% Married/partnered 62% 66% 6 Household size (mean) 2.7 2.8 3.0 Travel for business 21% 38% 44% PCs at home (mean) 2.3 3.0 3.6 Own a netbook 8% 16% 24% Own a game console 37% 57% 69% Own a connected TV 2% 4% 9% Use Facebook 59% 68% 71% Facebook friends* (mean) 122 147 167 Use Twitter 15% 21% 21% Twitter followers* (mean) 54 81 99 Have a blog 11% 24% 32% Comment on other people s blogs 17% 3 41% Share opinions about consumer electronics (in any medium) 18% 27% 28% Source: North American Technographics Consumer Technology Online Benchmark Recontact Survey, Q2 2010 (US) *Who use each social network Source: Forrester Research, Inc. 2010, Forrester Research, Inc. Reproduction Prohibited August 19, 2010

6 US Tablet Buyers Are Multi-PC Consumers Figure 3 Tablets Are A New Addition To The Multi-PC Lifestyle Home office Bedroom Kitchen Living room 57068 Source: Forrester Research, Inc. August 19, 2010 2010, Forrester Research, Inc. Reproduction Prohibited

US Tablet Buyers Are Multi-PC Consumers 7 Figure 4 Tablet Buyers Are Heavy Online Media Consumers Percentage that do the following activities at least monthly Play online games alone 38% 42% 44% Use instant messaging 30% 42% 52% Listen to any kind of audio/ radio on the Internet 30% 42% 47% Download music (e.g., itunes) 22% 37% 51% Watch TV shows (full episodes) on the Internet 21% 35% 44% Play online games with others 14% 2 31% Watch full-length movies on the Internet Use Internet calling (e.g., Skype) Download video/film (e.g., itunes movies, Movielink) 10% 9% 8% 22% 31% 18% 22% 20% 27% All US online consumers (N = 3,990) Own or intend to buy any tablet PC (N = 641) Own or intend to buy an Apple ipad (N = 204) Use peer-to-peer file-sharing apps (e.g., Kazaa) 5% 11% 20% Base: US online consumers Source: North American Technographics Consumer Technology Online Benchmark Recontact Survey, Q2 2010 (US) 57068 Source: Forrester Research, Inc. ipad buyers Aren t exclusively Apple-ites It s true that ipad buyers have an affinity for other Apple products, but it s notable that they also buy other brands of devices. They re more likely to own HP computers than Macs and more likely to own LG phones than iphones. Still, compared with all US online consumers, ipad buyers are: More than three times as likely to own a Mac computer. Apple has enjoyed 17 quarters of Mac growth that has outpaced PC growth overall. 12 Still, only 8% of US online consumers own a Mac, 2010, Forrester Research, Inc. Reproduction Prohibited August 19, 2010

8 US Tablet Buyers Are Multi-PC Consumers but that increases to 18% for tablet buyers and 27% for ipad buyers (see Figure 5). Notably, ipad buyers are also more likely to own HP computers, while they re closer to the norm for owning brands like Dell, Toshiba, Sony, and Lenovo. Nearly three times as likely to own an iphone. Seventeen percent of ipad buyers use an iphone as their primary cell phone, compared with 12% of all tablet buyers and 6% of all US online consumers. They are less likely than all US online consumers to own phones from LG, Samsung, Motorola, and Nokia, but they are more likely to own BlackBerrys and phones that run Windows Mobile or Android (see Figure 6). 13 August 19, 2010 2010, Forrester Research, Inc. Reproduction Prohibited

US Tablet Buyers Are Multi-PC Consumers 9 Figure 5 It s Not Just Mac Owners Who Want An ipad What brand is your home computer? Dell 44% 45% 45% HP 28% 3 39% Compaq 10% 9% 12% Toshiba Gateway Apple/Mac emachines 8% 6% 6% 8% 9% 12% 12% 6% 6% 10% 18% 27% Acer 6% 7% 12% Sony Lenovo ASUS Alienware I built it myself 4% 8% 7% 2% 4% 1% 0% 1% 1% 7% 6% 7% All US online consumers (N = 3,990) Own or intend to buy any tablet PC (N = 641) Own or intend to buy an Apple ipad (N = 204) Don t know 2% 1% Base: US online consumers (multiple responses accepted) Source: North American Technographics Consumer Technology Online Benchmark Recontact Survey, Q2 2010 (US) 57068 Other 6% 4% Source: Forrester Research, Inc. 2010, Forrester Research, Inc. Reproduction Prohibited August 19, 2010

10 US Tablet Buyers Are Multi-PC Consumers Figure 6 Less Than One-Fifth Of ipad Buyers Have An iphone What brand is your primary mobile phone? LG Samsung Motorola 12% 1 18% 16% 17% 22% 21% 19% 21% Nokia 6% 5% 8% BlackBerry 8% 16% 14% Apple iphone 6% 12% 17% Sanyo 2% 1% 2% HTC 2% 2% 4% Sony Ericsson Palm (Treo, Pre) Kyocera The only brand on my phone is my cell provider (e.g., AT&T) 2% 1% 1% 1% 1% 2% 2% 5% All US online consumers (N = 3,990) Own or intend to buy any tablet PC (N = 641) Own or intend to buy an Apple ipad (N = 204) Base: US online consumers (percentages may not total 100 because of rounding) Source: North American Technographics Consumer Technology Online Benchmark Recontact Survey, Q2 2010 (US) 57068 Other Don t know 2% 0% 1% 4% Source: Forrester Research, Inc. August 19, 2010 2010, Forrester Research, Inc. Reproduction Prohibited

US Tablet Buyers Are Multi-PC Consumers 11 Recommendations Pitch tablets to the multidevice consumer The growth of tablets and the characteristics of their buyers have consequences for the product strategy of PC makers like Dell, HP, Samsung, Sony, and Toshiba; for would-be tablet entrants from adjacent industries like Nokia and LG Electronics; and for peripheral manufacturers like Bose and Logitech. Tablets create opportunities for product strategists to: Innovate beyond the PC. Tablet buyers own multiple PCs, so tablets don t have to and shouldn t recreate the complexity of the PC. Consumers demonstrated willingness to use devices that depart from a traditional PC operating system (OS) should boost the confidence of product strategists at HP and Nokia, each of which has an OS webos and MeeGo, respectively that was built for Web-connected, touch-enabled devices. Starting from scratch gives product strategists an opportunity to create a Curated Computing experience that s simple and streamlined, rather than shoe-horning a full PC OS into a tablet form factor. 14 Create tablets that one-up the ipad via new scenarios. Tablet buyers are above-average consumers of media, more than half of them own game consoles, and they re more likely than the average consumer to own connected TVs. And yet the ipad doesn t do all it could to fill in the gaps in the living-room-entertainment scenario. Beyond media, there s an opportunity for product strategists to develop tablets that fulfill other scenarios, such as a device for enterprise use like the Cisco Cius or the rumored HP Windows 7 Slate. 15 Product strategists at firms like Disney, Intel, and LeapFrog could develop tablets for consumers that the ipad doesn t serve as well as it could such as kids, who need a less fragile, less expensive device. Position other devices and peripherals as complementary to tablets. Here s the big to-do for product strategists from manufacturers of other types of devices and peripherals: Create new products and position existing products as specifically complementary to tablets for the multi-pc user. For example, consumers who own tablets will still need computers with keyboards, bigger screens, and more processing power, but they may not need the portability of a laptop anymore so desktops could see some renewed interest if marketed correctly. They ll also need printers and other peripherals that talk tablet; innovations like HP s printers with email addresses will fit well in the tablet ecosystem. 2010, Forrester Research, Inc. Reproduction Prohibited August 19, 2010

12 US Tablet Buyers Are Multi-PC Consumers Supplemental MATERIAL Methodology For its North American Consumer Technology Online Benchmark Recontact Survey, Q2 2010 (US), Forrester conducted an online survey fielded in June 2010 of 4,031 US online users ages 18 to 88 as a subsegment of the North American Technographics Online Benchmark Survey, Q2 2010 population. For results based on a randomly chosen sample of this size (N = 4,031), there is 95% confidence that the results have a statistical precision of plus or minus 1.4% of what they would be if the entire population of US online individuals ages 18 and older had been surveyed. Forrester weighted the data by age, gender, income, broadband adoption, and region to demographically represent the adult US online population. The survey sample size, when weighted, was 3,990. (Note: Weighted sample sizes can be different from the actual number of respondents to account for individuals generally underrepresented in online panels.) Please note that this was an online survey. Respondents who participate in online surveys have in general more experience with the Internet and feel more comfortable transacting online. The data is weighted to be representative for the total online population on the weighting targets mentioned, but this sample bias may produce results that differ from Forrester s offline benchmark survey. The sample was drawn from members of MarketTools online panel, and respondents were motivated by receiving points that could be redeemed for a reward. The sample provided by MarketTools is not a random sample. While individuals have been randomly sampled from MarketTools panel for this particular survey, they have previously chosen to take part in the MarketTools online panel. Endnotes 1 Source: Shelley DuBois, HP Casts A Wide Net To Compete With Apple s Tablets, Fortune, July 22, 2010 (http://tech.fortune.cnn.com/2010/07/22/hp-casts-a-wide-net-to-compete-with-apples-tablets/). 2 As of writing this report, Dell hasn t specified a launch date for the Dell Streak in the US. Source: Dell Web site (http://www.dell.com/content/products/productdetails.aspx/mobile-streak?c=us&l=en&s=corp). 3 Source: Chris Davies, Toshiba Smart Pad Tablet Prototype Shown; Due Before October 2010, SlashGear, July 20, 2010 (http://www.slashgear.com/toshiba-smart-pad-tablet-prototype-shown-due-before-october- 2010-2094731/). 4 Source: Donald Melanson, Acer said to be launching 7-, 10-inch Android tablets before the end of the year, engadget, July 14, 2010 (http://www.engadget.com/2010/07/14/acer-said-to-be-launching-7-10-inchandroid-tablets-before-the/); Thomas Ricker, Samsung Galaxy Tab P1000 Tablet Sports WiFi and 3G Data, About As Thick As An iphone? engadget, June 17, 2010 (http://www.engadget.com/2010/06/17/samsunggalaxy-tab-p1000-tablet-sports-wifi-and-3g-data-about-a/); and Michael Kan, Lenovo To Release Tablet PC At Year s End, PCWorld, July 20, 2010 (http://www.pcworld.com/article/201462/lenovo_to_release_ tablet_pc_at_years_end.html). 5 Source: Cisco Systems Web site (http://www.cisco.com/en/us/products/ps11156/index.html). August 19, 2010 2010, Forrester Research, Inc. Reproduction Prohibited

US Tablet Buyers Are Multi-PC Consumers 13 6 Source: North American Technographics Entertainment And Media Online Benchmark Recontact Survey, Q2 2010 (US) and North American Technographics Consumer Technology Online Benchmark Recontact Survey, Q2 2010 (US). 7 No time frame was specified in the survey question. 8 Source: North American Technographics Consumer Technology Online Benchmark Recontact Survey, Q2 2010 (US). 9 There are 90 video results for ipad grandma on YouTube. Source: YouTube (http://www.youtube.com/ watch?v=bq1-l82iqrg). 10 Source: North American Technographics Consumer Technology Online Benchmark Recontact Survey, Q2 2010 (US). 11 Source: North American Technographics Consumer Technology Online Benchmark Recontact Survey, Q2 2010 (US). 12 Source: Apple Reports Third Quarter Results, Apple press release, July 20, 2010 (http://www.apple.com/pr/ library/2010/07/20results.html). 13 Fifteen percent of tablet buyers say they own a phone that runs Windows Mobile, versus 8% of all US online consumers. Eight percent of tablet buyers report owning a phone that runs Android, versus 5% of all US online consumers. (Likely ownership is higher; this is self-reported data from consumers who are aware they own this type of phone.) Source: North American Technographics Consumer Technology Online Benchmark Recontact Survey, Q2 2010 (US). 14 The ipad ushers in a new era of Curated Computing a mode of computing in which choice is constrained to deliver more relevant, less complex experiences. Curated Computing is necessary to empower alternative form factors, such as touchscreen tablets, wearable and ambient devices, game consoles, and connected TVs. See the May 14, 2010, Apple s ipad Is A New Kind Of PC report. 15 Source: Kyle VanHemert, WebOS 2.0 Coming Later This Year, HP s Windows 7 Slate To Be An Enterprise Product, Gizmodo, July 22, 2010 (http://gizmodo.com/5594153/webos-20-coming-later-this-year-hpswindows-7-slate-to-be-an-enterprise-product). 2010, Forrester Research, Inc. Reproduction Prohibited August 19, 2010

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