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Consumer Electronics 2010
The Year in 3DTVs, Tablets, eReaders, and Smartphones
Technology and Entertainment Practice December 2010
Table of Contents
04 Executive Summary
06 3DTVs Interest in 3DTVs is growing, but tepid acceptance of polarized glasses is slowing consumer adoption
09 TabletsIn a developing tablet landscape, the iPad is still king
12 eReadersDespite an onslaught of tablet competitors, eReaders continue to thrive… for now
14 SmartphonesThe “Attack of the Droids” was great news for HTC and Samsung, but came at the expense of more established smartphone brands
17 About Compete’s Technology and Entertainment Practice
19 Contact Information
2010 wAS An EVEnTful and transitional year in consumer electronics,
driven by powerful supply-side and demand-side forces. On the supply side, 2010
was characterized by the establishment of an entirely new device category, by the
release of several new landmark smartphone devices, and by the growing availability
of 3DTV-capable devices and content. On the demand side, 2010 saw a modest return
of consumer spending, as the economic storms of late 2008 and 2009 lifted and US
spending on consumer goods ticked upwards.
Compete looked back on the year to identify the biggest stories in consumer
electronics in 2010, and four categories stood out: 3DTVs, tablets, eReaders and
smartphones. These categories defined consumer electronics in 2010 and will continue
to do so in 2011. This report highlights our most interesting findings in each of these
categories, including:
Online shopper interest in 3DTVs increased ten-fold from January to November,
but the percentage of 3DTV shoppers — relative to overall HDTV shoppers — is
still surprisingly low. Even more problematic for 3DTV manufacturers is the fact
that consumers are not interested in 3D glasses. At BestBuy.com, the number
of unique visitors researching 3D glasses is less than one tenth the number
researching 3DTVs.
The week it was first available for purchase, Apple’s iPad was the most
researched Apple product ever, as nearly 3 million US consumers researched the
iPad online. Even as the tablet landscape grew more complicated in the second
half of 2010 with the introduction of new tablet models, interest in the iPad grew,
suggesting the tablet “pie” continues to expand.
Despite the success of the iPad and other tablet products, “death of the
eReader” headlines are premature: only 13% of online eReader researchers
considered a competing tablet, laptop or netbook product. This suggests that
eReaders are largely complementary to tablets, and that eReader shoppers are
actively shopping for a single-purpose device optimized for reading.
Apple is rightly credited with popularizing the touch-screen smartphone form-
factor, but it was the wide availability of Android devices in 2010 that made
touch-screen mainstream. Across all carriers, interest in devices with touch-
screens increased 23% from Q4 2009 to Q1 2010, while interest in devices with
QWERTY keyboards decreased 16% during the same timeframe. This huge
shift in research behavior (in the first half of the year) was a harbinger of the
smartphone market share shifts in the second half of 2010, shifts that benefited
HTC and Samsung, at the expense of more established smartphone providers
like RIM.
Executive Summary 05
On the demand side, 2010 saw a mOdest return Of cOnsumer spending
JAmES CAmERon was already the self-proclaimed “King of the World”, but
with the release of Avatar, Cameron can add another accolade to his resume: he
reinvigorated the public’s interest in 3D video. Though the movie was released in 2009,
after Avatar grossed over $760 million in US and Canadian theater revenues, 2010
was a year marked by a slew of new 3D films and the release of 3D technology for the
home theater market. Although three-dimensional video has been around since the
1920’s, new advances in high definition and digital broadcasting paved the way for
the technology to enter the home in 2010. 3DTV enjoyed a “coming-out party” at the
January 2010 Consumer Electronics Show and throughout the first quarter of 2010,
with a wide variety of companies announcing 3DTVs and 3D-capable services.
As we can see in Exhibit 1 below, online shopper interest in 3DTV models spiked
in the spring (after a number of these new products and services became available)
and again in November (reflecting a traditional seasonal increase). From April to
September, however, online shopper interest steadily declined, suggesting that interest
in the 3DTV experience — despite significant media hype — was not sustained. More
importantly, Compete found that 3DTV researchers represent just a small portion of
the overall HDTV researcher segment: from January to November of 2010, an average
of only 9% of HDTV shoppers researched a 3DTV model. Put another way, while the
overall volume of 3DTV researchers increased ten-fold, those researchers still only
make up a single-digit percentage of the overall HDTV market.
So while the supply of 3DTV hardware (and to a limited extent, 3D content)
continues to grow, there are a number of barriers keeping consumers from fully
embracing this new technology: high cost, long product-replacement cycles, and
the need for cumbersome accessories like polarized glasses. These first two barriers
— high cost and long replacement cycles — go hand in hand: with the widespread
adoption of HDTV over the last 3 years, a majority of the market is not ready to spend
$1,000 or more on yet another home theater appliance. This barrier should erode
overtime, however. As consumers start replacing or upgrading earlier-generation
HDTV sets in late 2011 and early 2012, we believe the percentage of HDTV shoppers
interested in 3DTV and smart TV technologies (such as Google TV and Apple TV) will
likely increase.
3DTVs 07Interest in 3DTVs is growing, but tepid acceptance of polarized glasses is slowing consumer adoption
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
Jan ‘10 Feb ’10 Mar ’10 Apr ’10 May ’10 Jun ’10 Jul ’10 Aug ’10 Sep ’10 Oct ’10 Nov ’10
Exhibit 1: 3DTV online Interest (Unique Visitors to 3DTV OEM product pages, Jan — Nov 2010)
But it is the third adoption barrier — the fact that separate and expensive
polarized glasses have to be worn to experience 3D imaging — that is the most
problematic for 3DTV manufacturers. Consumers simply are not interested in polarized
glasses. At BestBuy.com, the number of unique visitors researching 3D glasses is less
than one tenth the number researching 3DTVs. Most 3DTVs are currently sold without
any glasses included, or at best with just one pair. Since each viewer requires glasses,
we would expect online interest in 3D glasses to be approximately equal to interest
in 3DTVs. The interest gap suggests that a large percentage of those consumers
researching 3DTVs are not really serious buyers.
Furthermore, online conversion data reveals that an extremely small minority
of buyers are committing to a full, comprehensive 3DTV experience by purchasing a
3DTV console and multiple pairs of glasses. If 3DTV technology is ever going to live
up to its considerable hype (Brian Dunn, CEO of Best Buy, admitted earlier this year
that “sales of 3DTVs had fallen behind industry expectations”), retailers and OEMs
need to address consumer concerns regarding polarized glasses. If they are unable
to do this, we believe consumers will sit on the sideline until autostereoscopic 3DTV
technologies (which don’t require polarized glasses) become more widely available.
wIThouT quESTIon one of the biggest stories in consumer electronics in 2010 was
the launch of the Apple iPad. As we can see in Exhibit 2, the success of the iPad was
apparent its very first week of availability, when Compete observed a massive surge
of online shopper interest. Pre-launch interest in the iPad at Apple.com was relatively
modest; a month after its announcement, US online interest in the iPad fell to below
300,000 unique visitors a week. But the week the iPad was actually available for
purchase (on April 3rd, nine weeks after announcement), online interest in the tablet
was nothing short of exceptional: nearly 3 million US consumers researched the iPad
the week of its launch, making it one of the most researched consumer electronic
products of the year, and, at the time, Apple’s most researched product ever.
Tablets 09
the number Of cOnsumers researching 3d glasses is less than One tenth the number researching 3dtVs
In a developing tablet landscape, the iPad is still king
Exhibit 2: Apple iPad online Interest — Indexed to Product Announcement (Unique Visitors researching the iPad on Apple.com)
A A +1 2 3 4 5 6 7 8 9
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
However, since the launch of the iPad, the tablet landscape has changed
dramatically. Consumers can now choose new Android OS tablets from Dell and
Samsung, and Palm and RIM have announced their plans to release WebOS and
Blackberry 6 tablets, respectively, in 2011. Just as important, Apple’s retail and carrier
partner strategy changed dramatically, when Apple announced in October that the iPad
would be the first Apple product available for purchase through Verizon Wireless. These
changes had many industry observers asking, how will consumer demand for the iPad
change in response to new competitive products and new channels?
As we can see in Exhibit 3, since these developments online shopper interest
in the iPad is on the rise. More importantly for Apple, interest in the Samsung Galaxy
Tab at Samsung.com and interest in the iPad at Verizon Wireless.com is additive to
interest in the iPad at Apple.com. Put another way, these new products and channels
expanded the pool of potential tablet shoppers, rather than stealing shopper interest
away from the iPad’s primary online channel, Apple.com.
It is not surprising that increasing interest in the Galaxy Tab has been
accompanied by increased iPad interest — given the similarity of the two products,
many consumers are wisely researching both. What is more surprising, however, is
the impact Verizon Wireless has had on iPad online shopper interest. Since Verizon
Wireless does not provide integrated network connectivity for the iPad, the only
product available through Verizon Wireless is the Wi-Fi iPad, sold as a bundle with a
MiFi mobile hotspot router. Nonetheless, traffic for the iPad product information page
at VerizonWireless.com is trending upward. We believe that - in the eyes of many
consumers - this iPad/MiFi bundle is viewed as an entirely new product, and therefore
subject to the same comparison shopping behavior as the Galaxy Tab, or any other
competitive tablet.
However, despite Samsung’s early success with the Galaxy Tab (1 million units
sold globally in the first two months of availability), Apple has a fairly large head start
in this market. And while new products (notably RIM’s Playbook and the long-rumored
HP/Palm WebOS tablet) will enter the tablet market, we believe the iPad will remain
the dominant tablet through 2011, or at least until devices with the tablet-specific
‘Honeycomb’ version of the Android operating system are more widely available.
11
Exhibit 3: Apple iPad and Samsung Galaxy Tab Interest — September 26 — november 20, 2010(Unique Visitors to tablet product landing pages on Apple.com, Samsung.com and VerizonWireless.com)
700,000
600,000
500,000
400,000
300,000
200,000
100,000
9/25/10 10/3/10 10/10/10 10/17/10 10/24/10 10/31/10 11/7/10 11/14/10
Apple.com Samsung.com VerizonWireless.com
13
ThE SuCCESS of ThE IPAD in 2010 lead many to speculate that other
CE product categories — including netbook computers, portable gaming systems,
multimedia devices and eReaders — would decline in the face of competition from
multi-purpose, ubiquitously-connected tablets. eReaders in particular were thought
to be vulnerable. Since the introduction of the iconic Amazon Kindle in 2008, eReaders
have been one of the fastest growing CE categories. But the introduction of tablets —
with additional computer-like functionality, web-browsing capabilities and comparable
size/weight/portability dimensions — provided consumers with an extremely
compelling alternative. Amazon seemed to acknowledge the implicit threat from
tablets (and even larger smartphones, like the 4.3 inch DROID X) by making the
Kindle application free and readily available from both Apple’s iTunes store and the
Android Marketplace.
But based on Compete’s analysis of consumer online research behavior,
it is clear that eReaders are not destined for obsolescence — at least not in 2011.
In December 2010, unique visitors to the eReader product category were actually 84%
higher than in December 2009. More importantly, as we can see in Exhibit 4, only 13%
of eReader researchers, on average, also considered a competing device (such as a
tablet, laptop or netbook) in 2010. This modest rate of “cross-shopping” behavior is
especially notable, given much higher rates of netbook and tablet cross-shopping.
The increase in overall eReader interest, combined with low rates of cross-
shopping suggests that eReaders are largely complementary to (rather
than competitive with) tablets. It also suggests that eReader shoppers are actively
shopping for a single-purpose device optimized for reading, and not a multi-purpose
computing device.
In many ways, eReaders should be viewed similarly to devices in the portable
music space: despite the wide availability of affordable, music-capable smartphones
- most consumers prefer to have a separate device for their music needs. (Based on
Compete’s Q2 2010 Smartphone Intelligence survey data, only 35% of smartphone
owners use their phone to listen to music on a weekly basis, while 37% never do so.)
As eReaders become increasingly affordable, we believe eReaders will continue to
thrive as complementary devices (similar to digital music players) throughout 2011.
eReaders
Despite an onslaught of tablet competitors, eReaders continue to thrive… for now Exhibit 4: eReader Cross-shoping with laptops, netbooks and Tablets
(Percentage of consumers researching eReaders who also researched Laptops, Netbooks or Tablets, Oct 2009 — Nov 2010)
15%
12%
8%
4%
0%
Q4’09 Q1’10 Q2’10 Q3’10 Q4’10
15
ThE nEwS In AuGuST that Android was the leading smartphone OS in the
US, surpassing both RIM and Apple, was a potential watershed moment in the wireless
device market. When the first Android phone — the G1 — launched in 2008, the
thought that Android would surpass RIM for smartphone supremacy was outlandish.
There are a number of reasons for Android’s rapid ascent in 2010, but one of the most
important reasons is also one of the simplest: Product adoption begins with consumer
interest, and if you want to maintain consumer interest, it helps to regularly launch new
products. If those new products are very good and meet a wide variety of consumer
needs, consumer interest will dramatically and quickly increase.
There was a steady flow of very good, ‘buzz-worthy’ Android devices throughout
2010: the HTC EVO and Droid Incredible, the Motorola DROID 2, DROID X, and DROID
Pro, and the Samsung Galaxy S phones: Vibrant, Fascinate, Epic and Captivate.
While no one Android device could be considered a ‘blockbuster’ hit on par with the
Apple iPhone 4, collectively they have helped to drive significant, sustained consumer
interest in the Android platform. This interest paid huge dividends for manufacturers
that embraced the Android platform, like HTC and Samsung in 2010, and helped shift
consumer attention away from more established smartphone manufacturers like RIM.
Let’s look first at HTC. In the first half of the year, HTC benefited from a deep
product pipeline of Android devices - releasing at least one new device a month from
February to July. As we see in Exhibit 5, this approach helped HTC steal significant
“interest-share” from RIM. HTC and RIM began 2010 garnering nearly an equal share
of consumer interest, but since the announcement of the EVO 4G in March, HTC’s
share of interest steadily grew.
Or consider Samsung, which has sold more than 4 million Android OS Galaxy
S devices in the US since the line first launched in the summer of 2010. Samsung
hasn’t announced sales by carrier, but by using Compete’s 2010 Device Demand
Measurement data, we analyzed online interest trends for the Vibrant (at T-Mobile),
Captivate (at AT&T) and Fascinate (at Verizon Wireless). We found that the Vibrant at
T-Mobile garnered the highest share of online shopping interest in Q3 2010 — at its
peak, 25% of all T-Mobile handset researchers evaluated the Vibrant — a blockbuster
interest level and a leading indicator of strong Q4 device sales.
As mentioned above, the success of HTC and Samsung in 2010 came largely
at the expense of more established smartphone OEMs, like RIM. RIM’s strength has
always been building email-centric devices with great keyboards, battery life and
durability to appeal to hard-charging corporate executives, but the market is clearly
moving away from email-centric, QWERTY keyboard designs: across all carriers,
Smartphones
The “Attack of the Droids” was great news for hTC and Samsung, but came at the expense of more established smartphone brands
Exhibit 5: hTC and RIm Share of Interest Across Big 4 Carrier websites(Average monthly share of interest for indicated OEM, Jan — June 2010)
30%
25%
20%
15%
10%
5%
0%
HTC Monthly Average RIM Monthly Average
Jan Feb Mar Apr May Jun
interest in devices with touch-screens increased 23% from Q4 2009, to Q1 2010,
while interest in devices with QWERTY keyboards decreased 16% during the same
timeframe. This huge shift in research behavior (in the first half of the year) was a
harbinger of the market share shifts the industry would see in the second half of 2010.
With that in mind, we expect 2011 to be another challenging year for some of
the more established smartphone brands. If 2010 was notable for the entrenchment
of the Android and Apple platforms, 2011 will be defined by the efforts of remaining
smartphone platform providers — including RIM, Nokia, Palm and now Microsoft, with
Windows Phone 7 — fighting for third place.
About Compete’s Technology and Entertainment Practice 17 ComPETE‘S TEChnoloGY AnD EnTERTAInmEnT PRACTICE works with
consumer electronics manufacturers, national retailers, telecommunications carriers,
media companies and their marketing partners to apply digital insights to improve
research and marketing initiatives. Compete, a Kantar Media company, is located in
Boston, MA, with offices throughout the U.S.
Using the largest online panel in the industry, the Technology and Entertainment
team analyzes consumer research and shopping behavior to identify the most
important trends in consumer electronics. Online behavior is critical to consumer
electronics consideration — consumers consistently cite OEM, carrier and third-party
websites as the most important to their research process — and based on the online
behavior of millions of US consumers, Compete can measure:
Unique Visitors: The volume of unique users researching a product or product
category, measured over time to show the growth or decline of consumer
awareness and demand
Conversion: The volume of unique online orders, to measure online
purchase behavior
Share of Interest: The measure of the number of unique visitors researching
a specific device or product category as a percentage of all unique visitors
researching all comparable devices or competitive product categories
Cross-shop: The percentage of researchers of one device or product category
who also research a second device or product category
for more Information, Please Contact 19
The Technology and Entertainment team brings deep industry and online
marketing expertise from their experiences at Apple, AT&T, PRTM, Bearing Point,
Yankee Group Research and Sprint. The team speaks frequently at industry
conferences including CTIA, CES, CTAM, OMMA Mobile and the Cable Show.
This report was prepared by Christopher Collins, Tim Davison, Nathan
Ingraham, Karen Parker and Aniya Zaozerskaya.
Dave Kalil
Sales Director, Technology and Entertainment
Office: 979.694.5318
Mobile: 979.739.1645
Christopher Collins
Director, Technology and Entertainment
Office: 617.933.5641
Mobile: 617.869.6545
compete.com
