iPad halo effect brightens iPhone prospects

Tablet owners who don't own an iPhone twice as likely to want one, says Nielsen

Apple Inc.'s new iPad casts a "halo" over the older iPhone, with owners of the tablet about twice as likely to want the company's smartphone as consumers who own neither, a Nielsen analyst said today.

"It's the common operating system," said Roger Entner, head of research for Nielsen's telecommunications group. "That, and the ability to share apps between the two. Any investment you make in an app for the iPad, you can leverage on the iPhone, and vice versa."

In a Nielsen survey of more than 64,000 mobile subscribers conducted between April and June, 51% of the respondents who own an iPad but not an iPhone said that their next smartphone would be Apple's. That figure was almost double the 26% who currently own neither an iPad nor an iPhone but said that the latter would be their next smartphone.

Those figures, however, were puny compared to the response rates of respondents who already own iPhones.

Of people who own both an iPhone and an iPad, 91% said that they would buy a new iPhone the next time they purchased a smartphone. And 85% of those who own an iPhone but not an iPad said the same.

"The big thing is that people with an iPhone really don't look anywhere else" for their next smartphone, said Entner. "It's like having the most beautiful woman in the world on your arm. Why would you look anywhere else?"

In a blog post last week, Entner said that Apple has created a "mutually-reinforcing ecosphere" that attracts new customers and retains current customers. The common operating system -- now dubbed iOS -- on all its mobile devices, including the iPhone, the iPad and the iPod Touch, is a primary factor in Apple's ability to keep customers and get owners of one device to purchase other models in its lineup.

But the App Store plays a big part, too.

"Being able to share the same applications they purchased on all their other devices free of charge leads consumers to add more devices from the same universe, and effectively retains them as upgrade customers," said Entner.

Applications purchased for the iPhone can run on the iPad, although they take up only a portion of the tablet's screen; if expanded, they can look pixilated.

Other findings from the Nielsen survey confirmed that people aged 25 to 36 who reported incomes over $100,000 are the most likely to buy Apple, a fact Entner called a "no brainer." Almost 40% of iPad owners reported earning more than $100,000, for example, compared to about 20% of mobile subscribers overall.

But Apple has a solid shot at convincing older consumers to try the iPad, Entner maintained. Currently, just 15% of iPad owners are 56 or older, whereas 33% of mobile phone owners fall into that age group.

"I see this as similar to text messaging, which started out with the under-18 crowd," Entner said. "The 25-to-36 age group will show [the iPad] to their parents and tell them, 'You're always complaining how hard it is to use a PC, look how easy this is.' If iPad owners go out and evangelize, parents are the first segment they'll evangelize."

Other research analysts have argued that an iPad halo exists. In May, for example, consumer spending research firm ChangeWave claimed that, rather than cannibalizing sales of Macs -- especially sales of Apple laptops, the new tablet was actually helping to expand Mac sales because of the publicity it attracted last spring and the traffic it routed into Apple's retail stores.

According to Apple's latest earnings statement, the company sold nearly 3.3 million iPads in the second quarter of 2010, along with 8.4 million iPhones and a record 3.5 million Macs.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@ix.netcom.com.

Copyright © 2010 IDG Communications, Inc.

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