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Mobile Marketing

App Developer Conversations: What Does the iPad Mini Mean for the App Economy?

Robi Ganguly  //  October 27, 2012  //  8 min read

In this week’s App Developer Conversations we discussed Apple’s new iPad Mini, which was just released this week and what it means for the app economy, in addition to talking about other new devices.

We had a couple key observations:

  • The new iMac is really sexy – we all want one
  • The iPad mini is a cool form factor and should sell a ton, but the price point feels a bit steep at the moment.

Watch to find out more and be sure to see the other segment from this week:

App Developer Conversations is a weekly video series with Ian Sefferman of MobileDevHQ and Ryan Morel of PlacePlay covering current topics of interest for app developers. If you have suggestions for future conversations, please let us know!

The Transcript

Robi: Hello and welcome to another episode of App Developer Conversations.
As usual, I’m here with Ryan Morel of PlacePlay and Ian
Sefferman of MobileDevHQ, and I’m Robi Ganguly of Apptentive.
So, we’re going to kick this off by talking about yesterday’s
announcements out of Apple. There were sort of three key things.
The first is the long-awaited iPad Mini, the seven-inch tablet
from Apple is out and people are excited about it.

The second is the new iMac, which looks awesome, and I kind of
want. Then the third is that Apple told us that they paid $6.5
billion to app developers, so that’s pretty impressive. Let’s
kick it off. Which one is most interesting to you?

Ryan: From personal perspective, it’s the iMac. It’s not like – none of
these things are about rational decisions, right? You just see
it and you’re just like, “I have to have that.” It was kind of
the same with the iPad Mini. Even though I a new iPad, I was
like “I really want that.” But ultimately for us in the
ecosystem, it’s the $6.5 billion paid out to app developers.
That is such a mind-boggling, huge number for an ecosystem and a
market that essentially didn’t exist four years ago.

So, as a result of some hardware which is really beautiful and
some software that works, we’ve now created $6.5 billion of
income that just didn’t exist. It’s unbelievable.

Ian: Especially when you think that that number is low-balling it, because
it certainly doesn’t include how you’ve helped developers,
right?

Ryan: Yep.

Ian: You’re missing out on all of the ads except for iAd in there. It’s
essentially just purchased apps and in-app purchases, right?

Ryan: Yeah.

Ian: So I’m sure the number, call it 50%, 100% higher, right?

Robi: Yeah.

Ryan: Well, that’s not even – so you guys get paid, right? You guys get
paid. That doesn’t include the 30% on the top that Apple takes,
so are we talking about a $20 billion ecosystem, maybe, all
those things combined?

Ian: Yeah. It’s as you were saying earlier. It doesn’t include [inaudible
00:01:57].

Robi: It doesn’t include Starbucks, right? Millions of dollars of coffee
spent every month through their mobile app. Nordstrom’s, selling
furniture through their apps. Things like this are just
incredible, and they’re not accounted for.

Ryan: Yeah. That’s my point. I don’t even think we could get to a real
number in there. It’s in the tens of billions of dollars, I
think.

Robi: Yeah. I guess we’re onto something.

Ryan: Maybe it’s here to stay?

Robi: So let’s dig in on the iPad Mini. I think we’ve been talking about
this a little bit. It’s been assumed that it’s going to happen
for a while. Now that it’s here, underwhelmed or overwhelmed? Or
just whelmed?

Ryan: I’m overwhelmed by how good of a job they seem to have done with the
hardware, and making the software work on that size. I’m a
little underwhelmed by the price, about at $249, $299, it’s game
over for everybody else. I think they’ve left the door slightly
open.

But seeing what they’ve done over the last two years with the
reduction of price on MacBook Air, maintaining margins and low
price on iPads as they’ve upgraded it, is it unrealistic to
think that a year from now or 18 months from now that iPad Mini
is not going to be $249, while Apple maintains their 42% margins
or whatever else? It’s not crazy.

Robi: Right.

Ryan: For developers, I think it’s a no-brainer, right? They’re going to
sell tens of millions of these, and it’s the same screen
resolution as iPad2. It’s great for everybody, I think.

Ian: I was totally underwhelmed, I would say. The price sucks. The form
factor of it to me felt like Apple was following competition,
and that’s not Apple’s M.O. That’s not where they excel. So they
were like, “Oh, everybody has a seven-inch tablet. We need to
have a seven-inch tablet.” Then they were like, “But you know
what? We’re going to play a little game of penis envy and we’re
going to make a 7.9-inch tablet,” right?

Ryan: Yeah.

Ian: So to me it was just kind of a little bit of [inaudible 00:03:59] and
that’s not Apple’s style.

Robi: I feel like the fact that they spent about five minutes talking about
the Nexus 7, and how that’s a worse device than the iPad Mini
was uncharacteristic. I say that remembering of course that
Steve Jobs decided to join one of the Apple calls like three
years ago and bash Android for a good ten minutes. So maybe it’s
not that uncharacteristic.

But it just seemed like we’ve known this is coming. If you want
to differentiate yourself, why are you spending so much time
talking about the competition instead of talking about the
benefit of what this is for consumer and for developer. Like you
guys, I thought the price – the price is high. I think it’s
great for their business. They’re managing margins. We know that
they are really like a device company, first and foremost, so
they’re not going to do this at a loss.

But doesn’t this leave room for the other tablets in the space?
Doesn’t this make the story around the Nexus 7 and the Kindle
Fire, in particular those two devices, much better for at least
the next, let’s call it, nine to 12 months?

Ryan: Maybe. So, I thought the reasons for pointing out the differences
between the iPad Mini and the Nexus 7, those were consumer-
oriented. Apple, I am, admittedly, a [inaudible 00:05:17] to
some extent. But they do such a good job with equating features
to releasable things that you can understand, like, “Hey, this
is as thin as a pencil,” right? “Hey, look at how iPad Mini
displays a webpage versus Nexus 7.”

So any review of Nexus 7 versus iPad Mini versus Kindle Fire,
people are going to see those things, and that’s what resonates
with people. I mean, I think there will still be a market for
the Google tablets, and clearly Amazon says they have
distribution and all the cool shit. But I don’t see how the mass
market is going to choose a Nexus 7 or a Kindle Fire, over an
iPad Mini.

Ian: I think it might be the opposite. I think it validates the market for
the Kindle Fire, especially, and the Nexus 7. I use my
grandmother as an example, because one day I randomly went home
and my grandmother was sitting there with her Kindle Fire, and I
was like “What? How did you get a Kindle Fire?” She’s like “Oh,
well, I heard about it and it’s cheap.” I was like “All right.”

So, she was like “Then I went to the Apple store, and it was so
much more expensive for an iPad, and why would I spend that
money?” Now if she sees it, she’ll be like, “Wait. These two
things are exactly the same. Even down to the size. But this
one’s cheaper. Yeah, definitely going to get this one.” So, I
actually feel like it validates those other guys for a little
bit longer.

Robi: Yeah.

Ryan: Sorry for jumping in, but doesn’t that to some extent invalidate the
product strategy? The Kindle Fire and the Nexus 7, those are
content plays. If the people buying those devices are super
price sensitive and not content consumers, then they make no
money on content.

Ian: Well maybe, but I’m not convinced that the people who won’t spend
$200 are going to be thinking about it all the time to not spend
a dollar at a time, right?

Ryan: Yeah, maybe.

Ian: I feel like those are two separate price elasticity curves, where a
dollar is a little bit easier to get over that hump of that
$200.

Robi: Yeah. Especially, and we talk about this a lot, you come back to the
simplicity, especially with the Kindle Fire because you have the
Amazon account, and so you’re all set up. You’re good. You’re
like, “Oh, well yeah, I do want to watch this show.” Does your
grandma watch as much TV as she used to, or is she on her Kindle
Fire more? I would be curious.

Ian: Yeah. I don’t know the answer. But certainly when I went home, she
was playing on the Kindle Fire a lot.

Robi: See. So that’s where dollars are coming from. The television is
dormant. It’s getting dust and here you are just immersed, and
you’re like, “Well, yeah. I’m going to buy my content here.” I
think that’s a big opportunity, and that lower price point…
Especially, so you go to the Apple store, you’re not seeing the
competition. You go to Radio Shack or Best Buy or Walmart or the
places that people shop you’re seeing the competition and it
looks pretty good and it’s $140 less.

Ryan: Yeah.

Robi: It’s kind of hard to envision most people making that decision
simply. That’s a pretty tough call, $140. That’s almost double
the price of the Nexus 7 or the Kindle Fire or something like
that.

Ryan: Yep.

Ian: All of this said, I still think Apple is going to sell a gazillion of
these things.

Robi: Oh for sure.

Ryan: Yeah. I think it’s a no-brainer. Because, even, the thing that I
thought was a mistake was that they didn’t make pre-order
available at 11:05 a.m. yesterday, because immediately I was
like, “I need one.” Then at 10:00 last night, I was like, “Eh,
I’m okay.” Clearly maybe I’m in the minority here.

So I think one of the questions I would have was given, and
we’ve talked about this before, Apple and Amazon have some clear
advantages over Google and the Nexus 7. So do you think, that
this is ultimately – is it going to be a two horse race between
Apple and Amazon [inaudible 00:09:15]?

Robi: Yeah. If I had to bet, I’d say yes. It seems like they’re clearly
certain of who they are and what they’re doing, and the rest of
the competitors don’t have that focus, and I think that
determines a lot of success.

Ian: Both Apple and Amazon, it feels like they have a “why” as to what
they’re doing, and the rest of the guys, it’s just sort of,
they’re ticking off features, right?

Ryan: Yeah.

Robi: Yep.

Ryan: Yeah. Every time I hear about Google and what they’re doing, I don’t
think they know. I know the Nexus 7, you have it and you love
it. But how are they going to get all the content? Payment is
all screwy.

Robi: Big challenges. So the one last thing is there’s a new iPad out.
Like, that got lost, almost, yesterday. I think that all three
of us were like, “Oh, yeah, there is.” So it’s got the lightning
connector, a couple other things. Does this change anything for
developers? Is it going to make your life harder or easier? Or
are you just going to have to buy a new device if you’re on the
cutting edge?

Ryan: The latter. I think maybe the interesting opportunity here is for the
developers of high-end games, because the 2X CPU, that’s really
meaningful, especially when you’re talking about some 3D
content. For everybody else, eh.

Ian: Yeah. It’s a little bit of a non-issue until you start thinking about
the hardware gamers and how this can continue to cut away the
market share of console gaming, right?

Robi: Yeah, that’s true. That’s really true.

Ryan: So I guess that’s another conversation we could have around whether
or not the iPad Mini is intended to be a controller, and running
on either Apple TV hardware, or full iPad or MacBook hardware,
because that’s about the right size. Because it’s clear they’re
going to go down that path, right? They want people doing stuff
with AirPlay [inaudible 00:11:11].

Robi: To me, it seems like the quote from Jobs in the biography, that he
finally figured out the solution on the TV. Increasingly, it’s
looking like you have to have an iPad plus your TV, don’t you
think?

Ryan: Yeah.

Robi: That’s the solution.

Ryan: Yeah. I think the more we hear about, oh, Apple doing a TV – well,
maybe. But really it’s about the iPad or your iPhone and some
software.

Robi: Yeah. All right. So. That’s this installment of this week’s App
Developer Conversations. Stay tuned for the next one. Thanks.

The Mobile Marketer's Guide to App Store Ratings and Reviews

About Robi Ganguly

Robi Ganguly is the Co-founder and CEO at Apptentive. He is passionate about giving customers a voice via mobile. Follow Robi on Twitter @rganguly.
View all posts by Robi Ganguly >

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