How Capitalism Will Make the iPad More Profitable than the iPod

iPad Vs iPod

Was the iPad a mistake?

So asked Rob Enderle of TechNewsWorld on March 1st, echoing a sentiment that even many fans of Apple have had: the iPad is not the leap forward in technology that the iPhone was, and as such will be a huge mistake and usher in the Apocalypse, ending life on earth as we know it.

As an astute reader of sarcasm, you know that not everyone feels that the iPad is actually all that bad of a product. But how much do you really know about the business side of the iPad and, for that matter, how well the iPad will actually end up selling? If you've been a glass-is-half-empty pessimist on the subject of Apple's latest innovation, it's time to consider a new perspective: the iPad may make a lot of people very rich. Consider:

The iPad's profit margins are better than the iPod and the Kindle.

It's no secret that Amazon's Kindle is a money machine and that the iPod was a revolution for Apple. So what would you think about a product that has even higher profit margins and a large potential audience? It would be a gold rush, right?

Well, that's the case with the iPad, as Trefis notes, with a profit margin of about 55%, higher than about 25% for the iPod and about 40% for the Kindle. And what's more? The iPhone's own profit margins have been dropping as of late, as declining prices and competition with other smart phones have cut into Apple's cash cow.

If you were a businessman, wouldn't you want to keep your options open by introducing an entirely new product to a market for e-readers that still seems untapped? After all, the reason Apple has succeeded is because it continually pushes the envelope with its products.

You don't win them all.

Even the consistently-successful James Bond admitted in "Thunderball" that you can't win them all. Apple's 2000s have seen an amazing rise for the company. Why? Because they're continually pushing out fresh products, new generations of its classics, and testing new markets with new, simple, innovative electronics. So what if one of them isn't as popular as the others? So what if the iPad isn't hailed like the iPod was? It still represents a new product - with a high profit margin, no less - that still could potentially see a lot of sales. It's through experimentation and testing the markets that you learn what really works for your company anyway.

Consider that McDonald's, one of the world's most famous brands in any category, has pushed unsuccessful products like the Arch Deluxe. McDonald's still leads the pack in innovation by offering other successful products that wouldn't have made the market if they hadn't been tested in the real world.

It keeps Apple moving.

Even if the iPad leaves a little to be desired for the techno-geeks who are quick to judge its merits, there is still plenty of opportunity for improvement. Since Amazon's Kindle is really the only chief competition, Apple is moving ahead of competitors - like the Zune or the Droid phone - by staying fluid and exploring new markets. Every other company is playing catch-up at this point, and it will only drive the technology to become better, cheaper, and more efficient. Maybe the iPad isn't what you want it to be, but maybe the iPad 2014 edition will be a gadget that you can't live without.

Capitalism means risk and reward, success and failure - and it's that experimentation that keeps technology fresh and improves our lives. Instead of being so unsatisfied with Apple over the iPad, maybe we should applaud its "A+" for effort.