By all accounts, the adoption and use of tablet computers has accelerated over the last few months, bringing them to the forefront of the attentions of consumers and marketers alike. After more moderate growth at the beginning of 2011, tablet traffic shot up quickly during the holiday season and it remained elevated through January of this year. RKG research shows tablet ad click share from paid search campaigns was 5 times higher last month than it was in the same period a year ago.
Adding to the buzz around tablets has been Amazon's Kindle Fire, which was released in November, but was the subject of intense speculation long before it was even announced. While Amazon's earnings report last week offered some nuggets of information, it didn't exactly spell out how many units were sold or the impact to Amazon's overall bottom line. According to the release, all Kindle unit sales, including e-readers, were up 177% during the holidays while the Fire, specifically, has been the best-selling product on Amazon.com since its introduction.
Meanwhile though, Amazon's net income fell a whopping 58% year over year in the fourth quarter. With the Fire losing a reported $3 dollars or so on every sale, Amazon is clearly thinking long-term and hoping to draw new users into its larger ecosystem of products and services, including e-books, digital content and the $79-a-year Amazon Prime. That logic is reasonable enough -- although Apple manages to hook users into iTunes quite well with hardware that is highly profitable per unit -- but for it to work, they are going to need to gain traction with the Fire.
The Kindle Fire Jumps to Second Place in Tablet Traffic
As we reported in our Q4 Digital Marketing Report, the Fire is indeed succeeding as a low priced alternative to the iPad and gaining appreciable traffic share where a slew of big name competitors have failed. Shortly after its launch, the Fire became the second biggest tablet in terms of traffic share, generating a little over 4% of tablet ad clicks in late December, before declining a bit to 3.5% at the end of January.
The iPad still generates the overwhelming majority of tablet traffic though, with a commanding 88% share, and it's widely expected that the next iteration will debut within the next couple of months. Still, it's clear that consumers are buying and using the Fire in numbers that no one, but Apple, can claim. Exactly how those consumers appear to be using them may be of particular interest to marketers.
Not All Tablets Convert Equally: Kindle Fire vs iPad and Other Devices
Looking at conversion metrics across tablets, phones and desktop, we found that clicks from shoppers using the Kindle Fire were far less valuable in January than those from users on almost any other device:
In terms of revenue generated per click (RPC), the Kindle Fire ranked worse than all other tablet classes, and even the iPhone. RPC for the Fire was 83% lower than desktop and 84% lower than the iPad. The Fire does run a version of the Android OS, but still fared poorly compared to other Android tablets, which themselves did not hold up well to desktop computers or the iPad.
We see a greater variance in conversion rate than average order value (AOV), which may speak to some potential reasons for our findings here. AOV for the Fire is just 28% lower than that for desktop, but conversion rate is 76% lower. Both metrics put Amazon's tablet closer in league to a typical Android phone than an Android tablet.
Why is Kindle Performance so much Worse than the iPad?
- Demographics: While the iPad is becoming more and more ubiquitous, there's reason to believe that its users skew toward higher income brackets. Last year, comScore found that about half of iPad owners made more than $100,000 a year. With conversion rates and average order size both running above desktop, the iPad owner is not only more likely to make a purchase, but they spend more when they do. Conversely, with the Kindle Fire costing less than half of the cheapest iPad 2, we may be able to assume that it's users fall into lower income brackets, or are at least more price-conscious. Other Android tablets in general are cheaper than the iPad, but more expensive than the Fire, with AOVs and CRs in the middle of the two, pointing to a correlation between product price and conversion potential.
- Smaller screen size: It's an old story at this point, but the tinier the screen on our device, the more challenging it is to go through an online checkout process. So, many users of smartphones may browse for products, but ultimately complete their purchases on a desktop. The Fire has a 7" screen versus the 9.7" screen on the iPad 2, and while that difference doesn't sound huge, it can have a big impact on web browsing. Most of the other Android Tablets in our segment adopt a form factor very similar to the iPad's and, again, their higher conversion metrics may be evidence that smaller tablets simply convert worse.
- Performance issues?: Although Amazon has provided updates along the way, early reviews suggested the Fire was considerably more sluggish than the iPad despite similar-sounding internal specs.
- More Local/Offline Intent: Because of its smaller size and price tag, users may be more inclined to actually take the Fire with them when they're out and about, something traffic patterns suggest isn't as common as you might think for larger tablets like the iPad. Truly-mobile users frequently have different intentions and are more likely to search to aid an offline purchase.
- Users buying online, but buying from Amazon: Lastly, if Amazon is having any luck, the entire ecosystem around the Fire is driving its users to buy products from the online retail giant even if they found those products somewhere else first. The device plays content available from Prime, which also comes with free two day shipping at a sunk cost and it’s already set up for 1 click ordering, etc., etc. This line of thinking has been expressed over and over at this point, but the poor conversion metrics we see may actually be evidence for it working.
What Should Advertisers Do?
For most advertisers, it is probably not worth the trouble to further segment their traffic beyond: tablet combined with or distinct from desktop, and smartphones. The traffic from non-iPad tablet sources likely still comprises less than or around 1% of total traffic for most. RKG pegs it at 0.8% for the month of January.
That said, since last July Google has provided an option in AdWords to target tablets by OS and now even allows segmentation by OS version:
Our figures suggest that the OS distinction makes a significant difference to expected conversion rates and thus the price we are willing to pay for that traffic. If tablet traffic is particularly heavy for a site, that's one line that we might one to draw. It doesn't appear possible to segment or filter out the Kindle Fire specifically at this time, but again, it is still a tiny piece of overall traffic (~0.2%), even if it has a much larger share of the tech world's attention.