Tablet wars – WIll anyone other than Apple and Amazon survive?

Though we usually focus on Facebook, community engagement and gamification rather than hardware platforms, we are tracking the rapid growth of the tablet computers and shaping our strategy accordingly.

According to IDC, tablet shipments in 2011 reached 18% of PC sales.  That’s already a big number but, in the consumer space, the effective tablet share is probably even higher.  True, these numbers don’t reflect the installed base figures, but tablets are clearly already something that should be factored into any engagement strategy. So where is this market going?

An old colleague of mine at both Apple and PalmSource, Michal Mace recently posted on his excellent blog that the tablet market would become a two horse race between Apple and Amazon.  He claimed that the market breaks down into two segments;

• Ultra-functional tablets that try to deliver the best and most flexible experience at higher price-points; Apple iPad pretty much defines this category,
• More affordable but less functional tablets optimized for consuming media and focused on integration with online media distribution channels; you guessed it; the Kindle family.

Michael goes on to argue that all other tablet makers would get squeezed between these two product offerings.  High end buyers looking for functionality will continue to favor the iPad while those looking for a lower cost alternative may well be seduced by the affordable Kindle Fire.  There is space in between for alternatives, often based on Android, but with not one but two 1.000 pound gorilla’s in the room, it will be hard for competitors to build the ecosystem essential to making these products work.  Sure the Kindle Fire uses Android but its a highly proprietary implementation that is hardwired to Amazon’s content distribution infrastructure.  Early casualties seem to include HP’s discontinued Touchpad and RIM’s beleaguered Playbook.  To further reinforce the point, Techcrunch today announced that Kindle’s share of app-generated traffic had overtaken the Galaxy Tab’s.

Could this mean that everyone is underestimating the potential of the Kindle as a major player in the tablet space and overestimating the influence of Android as a tablet O/S?