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Tablets 2012: As competition abounds, the iPad hangs onto its crown

Non-iPads from Amazon, Google, Microsoft and others are flooding the market, bringing more diverse experiences, often at better prices than the iPad and its little sibling, the iPad Mini.

Doesn’t matter. Odds are, you’ll still ask Santa for an Apple tablet. And new research suggests Apple iPads large and small will dominate this rapidly growing business, at least through 2013.

OK OK, you're thinking, "Thanks for the newsflash, fanboy." But seriously, in a universe where shoppers operate on cold logic and ever-tightening budgets, the iPad should fall under the wheels of Android any minute now, the same thing that happened with smartphones. So how does Apple maintain its grip?

It's not design or ease of use. Although they surely contribute to customer loyalty, they're not enormous differentiators any more. (Don’t believe me? Ask Apple’s patent lawyers.)

So what’s the answer? Tablets aren’t smartphones and they’re not PCs. While the Android camp waited for a bounce from the successful phone business, and Microsoft and the computer vendors groped for a bridge between PCs and tablets, Apple made this middle ground the iPad's kingdom.

Heated competition
In the fall of 2011, when Amazon and Barnes & Noble axed their tablet prices down to under $200, Apple held its $499 starting point.

Logic suggested that the iPad would lose its lead, or at least, its majority. The non-Apple upstarts did see spikes in shipments over the 2011 holiday quarter, according to NPD DisplaySearch, a top global research firm. But by mid-2012, Apple was once again shipping over two thirds of the world’s tablets.

This fall, the non-iPads redoubled their attack. Asus and Samsung teamed up with Google to create Nexus-branded 7-inch and 10-inch tablets (respectively). Amazon multiplied its Kindle Fire by three, and dropped the entry-level 7-inch tablet's price down to $159. Barnes & Noble launched a video service and put out a 9-inch tablet at the unheard-of price of $269.

Meanwhile, Microsoft, the sleeping giant, finally addressed the bite iPad is taking out of PC sales by launching its own tablet. Or is it a PC? Whatever it is — and believe me, the debate still rages — the $499 Surface RT with its clever keyboard add-on and its full version of Microsoft Office was built to challenge the notion that an iPad can satisfy most computerly needs.

Apple's response to the increased competition made sense ... sort of. It jacked up the specs on its flagship 9.7-inch tablet, and addressed the growing interest in 7-inch tablets by popping out the iPad Mini, a 7.9-inch model. But Apple priced the Mini at $329 — well above devices from Amazon, Barnes & Noble and Google. And the screen on the Mini doesn't measure up, resolution-wise, to those same cheaper competitors.

Again, doesn’t matter.

Apple — or at least, the 9.7-inch and 7.9-inch displays unique to Apple — will account for two thirds of tablets shipped through 2013, according to a forecast from NPD DisplaySearch, which uses research from over 140 display component manufacturers around the globe.

A recent study from Nielsen tells a similar story, at least for kids writing letters to Santa. Nearly half of surveyed U.S. kids between the ages of 6 and 12 want an iPad, and 36 percent want an iPad Mini. Even respondents age 13 and up said the iPad was No. 1. (While a “Tablet computer other than iPad” also rated relatively highly, the only specific non-iPad to reach double-digit demand in either survey was the Kindle Fire.)

What tablets aren’t
Unlike smartphones, there is no inherent reason to buy a tablet. (Don’t kid yourself.) People must rationalize their $499 iPad purchase, and here's how they do it: "We just need something to use in the family room and kitchen," or "We just need something to take on trips," or "We just need an extra computer for the kids."

Most if not all tablet households already have a PC, so people don't need to use an iPad to set up their routers, archive their photos or whatever else a full-blown PC might be especially good for. What an iPad does is fulfill the needs of a secondary computer, without the hassle.

While tablets can replace PCs, they aren't PCs, and thank God for that.

Even in the business world, this PC replacement is gaining momentum. This past week, Barclays Bank made news by buying 8,500 iPads for use in branches, what is being called the biggest purchase of the tablets by a financial services firm.

"On the business side — and on the consumer side — it's about the apps,” says Paul Semenza, senior vice president of analyst services for NPD DisplaySearch, whose firm has identified that tablets are eating into PC sales. Enterprise-focused apps by the likes of Salesforce, Cisco and Oracle mean that an iPad can provide a convenient way to do highly specialized work quickly on a touchscreen, "rather than having to crack open the notebook."

In confirming the iPad as “winner and still champ,” Consumer Reports’ Jeffrey Fox also cites apps: "With dozens of Android-based models nipping at its heels, the iPad managed to not only hold its own, but up the ante for performance. When you add to that the breadth and quality of its apps, the iPad is still the tablet to beat."

Apple’s commanding lead in tablet-friendly apps — over 275,000 built specifically for the iPad’s larger screens, versus the underwhelming handful of tablet-specific apps available in the Google Play store — helps keep it on top. A key reason for the App Store’s initial success is that Apple has its customers trained to spend money, something Google has never really been able to do. When developers release iPad apps, they expect to get paid by the download; to spend time and money bringing the same app to another platform, they must first calculate the risks and rewards.

This can be a vicious circle: If nobody's paying for Android tablet apps, new ones won't be quick to show up, and then nobody will buy the tablets ... because of a lack of apps. Google has revamped its Google Play store, combining apps with movies and music, in the hope that at least some customers would start paying for some content.

But there's more to it than just numbers: There’s increasing evidence that iOS users are far more engaged than Android users. NetMarketShare data reported in Fortune last June say that the share of mobile Internet usage for iOS had reached 62 percent, while the far greater population of Android devices hadn’t quite reached 20 percent.

A fresh study by IBM takes it further: Nearly 10 percent of all online shopping over Black Friday was done on iPads, beating "any other tablet or smartphone," says the tech firm. iPhones made up 8.7 percent, while Android was down at 5.5 percent. The so-called “iPad Factor” is even more pronounced when compared to other tablets: It represented 88.3 percent of tablet online shopping, followed by the Barnes & Noble Nook at 3.1 percent, Amazon Kindle at 2.4 percent and the Samsung Galaxy at 1.8 percent, says IBM's press release.

And that's why makers of Android tablets should be afraid, because when it comes to tablets, the desire for engagement must precede the tablet purchase.

Amazon and Barnes & Noble have had more luck than other non-Apple tablets in grabbing market share, at least in short bursts, because their tablets come with a built-in sales argument: Buy this to enjoy books and videos to your heart's content.

Amazon has the added advantage of customers who spend so frequently that they keep their credit cards on file, and enough revenues that it can sell tablets at cost, hoping to see profits through media sales.

But while the $70-per-year Amazon Prime video service is nice, its library is not as nice as the omnipresent Netflix's, and the service itself has a large base of customers who signed up for shipping perks, not streaming TV shows.

Most importantly, Amazon makes most of its digital products available on competing iPads, too. The customer's dilemma becomes: "Do I go cheap and get an Amazon-focused experience? Or do I spend more for a broader platform that includes Amazon's services and a lot more?" Apple may push its own services pretty hard, but the flowering of the App Store means that the iPad has become a crossroads of Internet experiences.

All of these factors mean that the iPad, this expensive-ish not-quite-a-PC that was laughed at when it launched in 2010, will hold onto its crown for the foreseeable future, as alternatives continue to scramble for relevance. In the smartphone world, someone shopping for an iPhone may well settle for a cheaper Android phone. Yet when it comes to tablets, someone who decides not to buy an iPad may simply choose nothing at all.

Wilson Rothman is the Technology & Science editor at NBC News Digital. Catch up with him on Twitter at @wjrothman, and join our conversation on Facebook.