Understanding Apple – Report: iPad Increases Dominance

Malcolm is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Apple (NASDAQ: AAPL) is under intense scrutiny as they prepare to release their FQ3 earnings after market close. Attention is focused most on two areas: iPhone sales and gross margin.

Last quarter, the iPhone provided just over 50% revenue, so this is natural. Gross margin is central since it does not matter if revenues increase if the profit margins drop.

But good news for Apple has just surfaced in another area – the iPad. According to research just released by Chitka Insights, in June the iPad maintained its dominance in the tablet field, actually increasing share.

Chitka runs a series of advertising networks; they gather page data whenever a web page is loaded that contains one of their ads (that is, the user does not need to actually click the ad itself).

To determine the distribution of Web usage among tablet devices for the month of June 2013, Chitika Insights sampled tens of millions of U.S. and Canadian tablet online ad impressions running through the Chitika Ad Network. The data used within the most recent analysis was drawn across the time frame of June 15 to June 21, 2013…

According to the report, Apple’s iPad holds a whopping 84.3% of tablet web traffic, and this is 3 percentage points higher than April’s figures.

In second place is the Kindle Fire by Amazon (NASDAQ: AMZN) at 5.7%. Amazon was touting it as one of their best selling products, but still the Fire has a small representation here. It should be noted that the other products in the Kindle line are simply readers without web browsing capability. They therefore do not register in this survey. The Fire tablets run Amazon’s modified version of the Android operating system by Google (NASDAQ: GOOG).

Most of the non-Apple tablets run some version of Android. Samsung’s (NASDAQOTH: SSNLF) Galaxy tablet line follows Amazon with 4.2% share. Wikipedia notes that:

The first model in the series, the 7-inch Samsung Galaxy Tab, was first introduced on 2 September 2010 at the IFA in Berlin.

This is a very poor showing, given that the line has been available almost three years. In fact, both the Kindle Fire and Galaxy Tab lines have decreased share since April. This holds true for all Android tablets. I have argued elsewhere that the failure of Android to take significant share in tablets may begin to drag on overall device sales, including their phones. While there is no current evidence of this, Android share growth has certainly slowed, and Samsung’s most recent sales have disappointed investors.

Conclusion

We do need to keep a couple of things in mind here.

First, this is a usage measure, not a sales measure. There can be reasons why the data might be skewed in Apple’s favor. It could be that there are many happy tablet users who spend little time browsing the Internet. They might be watching movies, playing games, or reading books, or running other apps instead. Still, these are all uses that iPad owners can do as well, so it is hard to see why there would be a huge difference in usage profiles. Furthermore, web browsing is one of the most popular activities on a tablet, so I cannot see that the data would be greatly skewed.

Secondly, this data is only for the USA and Canada. Adoption of Android is stronger outside of these areas, particularly since some of these hit much lower price points than Apple does.

Still, the new report from Chitka shows that Apple iPad is maintaining an extremely strong dominance in the tablet field. Here is one place for optimism for the share holders.

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Malcolm Manness owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of Amazon.com, Apple, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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