Can Apple Lead Consumers Down the Yellow Brick Road?

"An oversized iPhone that doesn't call." "Hilarious name." The iPad was revealed last week in a typical Steve Jobs presentation. An interesting article in a technology blog lists "8 things that suck about the iPad." Issues include the keyboard, seconded by Walter Mossberg of the Wall Street Journal, citing the trouble his keyboard-whiz colleague had using it. Negative reviews on the iPad are numerous, overwhelmingly focusing on the need for adapters. The device also lacks HDMI output, USB port and SD card slot, raising an interesting question: Why? To leave these functions off a “computer” is hardly an oversight. Take the lack of the flash player, for instance. Steve Jobs has publicly criticized Adobe for its Flash software, and has made clear his desire for a universal shift to HTML5. Unveiling a device lacking features consumers have come to require will be a test of Apple's market power.

The iPad is linked to iBooks, which will increase current prices of eBooks by $4. Can Apple entice consumers to pay this premium, even during a recession? Macbooks, iPhones and iPods are all successful highly priced products. Over the years, Apple has acquired an innovative position in the market, developing a cult following. During a sluggish economy, strong brands remain attractive thanks to inelastic demand. Apple customers are loyal to the Apple brand; Apple products are indispensable items in young and gadget minded environments. The lack of close substitutes with similar extrinsic characteristics and user experiences, coupled with the preference within budgets and the sex appeal Apple offers will offset technical shortages. Actually, these shortages might benefit Apple; it can rapidly develop second and third generation technologies building upon its customer base, and honoring its reputation as innovator and pioneer. Apple has become aware of its market power and is now exerting it.

- Jim Flanagan, Friso Klok, Kelly Mannix