One of the reasons I’ve remained enamoured with the computing space is the potential for software to do amazing things. It’s one of the few subjects in which a single person can formulate a vision, undertake its design, and carry out the implementation of a complete, functional system, a system that can change the way people use technology to solve real world problems. However, the software developer is faced with a pretty big challenge.

Distribution.

How does that developer, with near-zero capital, get his application into the hands of people who might find it useful? In the past, it was nearly impossible to reach more than a handful – you could host the application on your personal webpage, and hope people find it. If you were giving the program away for free, you might get a few nibbles. If you were charging for it, you’d have to think about a secure payment system (PayPal, perhaps?). You’d almost certainly get very few users, unless you were discovered by some larger publication.

In fewer words, it was difficult as hell to make any money from your software development efforts.

And that’s why there were relatively few indie developers making anything decently worthwhile. The distribution method for most successful software has been shiny media in retail stores, or bundled on OEM computers.

Say what you want about Apple’s closed application ecosystem on the iPhone OS, it opened up the floodgates of eager developers who had amazing ideas but no way to show the world their creations. More importantly, the Apple App Store provided these individuals and small organizations a way to effectively monetize their work. If necessity is the mother of all invention, but then (monetary) incentive is probably the father.

It is my firm belief that the App Store is a purveyor of innovation, not in the platform itself, but the applications that are enabled by the model. No longer does a developer question whether they can make some money from a great idea. Don’t read this wrong. The App Store model doesn’t guarantee earnings from just any idea.

Many other software platforms are either in the process of, or have already imitated the App Store model. It’s unreasonable to assume the developer of any platform is going to be able to implement or even determine all the potential use cases for their software system. The centralized application store provides a community that creates its own demand and provides its own supply. It’s a circular effect, and creates new scenarios in which that software system is useful to the masses. The system that emerges is significantly more agile, not relying on a single entity to provide functionality, and even more so than an open platform, with no proper distribution method. Furthermore, many of the applications that come about arise from grass-roots movements, evolving with community input. These new use cases help sell the devices, as Apple has shown.

Whether that application store needs to be the only source of applications is debatable. I contend that it is the small minority of developers that would actually take advantage of 3rd-party distribution, but the possible issues of code quality, security, and dilution of one key characteristics of the application store, singular, centralized repo, outweigh that advantage, for less general-computing platforms such as the iPhone and iPad.

Long story short, the Apple App Store has empowered individuals and small organizations to create software solutions to their problems. These applications were previously undiscoverable, and thus lacked the monetary incentive necessary to foster this sort of interest in development by non-traditional developers. Whether the closed-platform model is the right one is contentious, but it’s hard to argue against the innovation that exists in 140,000 applications in the Apple App Store today.

The next step is to bring the development learning curve and overhead down even further. There are about a billion computer users who have a better way to do something with their computing devices, but can’t turn those ideas to reality.

I’m not certain where news sites have gotten the idea that the lower-end iPads will ship with razor thin margins (or as a loss-leader) for Apple. Let’s do a quick analysis.

Based on what we know about the iPhone 3GS’ components, we can extrapolate a significant portion of the iPad’s hardware cost. ISuppli’s analysis shows that the 16GB iPhone 3GS costs Apple around $178 to source and manufacture. Based on the specifications and feature-set of the iPad, it’s not a giant leap to assume that many of components are shared between the iPad and the iPhone/iPod Touch, such as the NAND and controller, BlueTooth, audio decoder, and more.

Now, the entry-level iPad doesn’t have a camera (-$9.55) or 3G module (-($13+2.80+1.35)). That brings the cost down to close to $150.

Clearly, there are elements which add significant cost to the iPad. The much larger display, touch panel and the chassis material will cost more than their equivalent on the iPhone/iPod Touch.

The display + touch module on the smaller devices cost approximately $35. Looking at area and resolution, the new panel is around 6-7x the size. Yields of panels decrease with increasing sizes, but at the same time, the cost of the display controller doesn’t scale linearly with panel size. Plus, the panel itself probably has pretty high yields, considering there’s a plethora of ~10″ panels out there. The touch overlay may be another story, with its thousand-point multi-touch sensors. Let’s assume overall cost is just about linear with area, which brings us to around $200. That estimate is likely quite high, assuming worst case scenario.

That brings the cost of the iPad to approximately $320. Now, factor in the added cost of the larger battery and casing, plus some additional licensing cost for the ARM A9 core, if that is indeed what the Apple A4 processor is based on, and $350 is a reasonable estimate.

That means Apple is pulling in around 30% margins on the entry-level iPad. Upselling to the 3G models or more storage only increases that number. Most hardware manufacturers would harm small animals for that sort of pricing power.

Of course, this is all a rough back-of-the-envelope calculation, and in particular, my estimation for the panel may be off by quite a bit. However, an analyst at BroadPoint AmTech seems to think along the same lines. Apple is not going to take a huge margin cut on the iPad, even the entry-level model. His $100 estimate for the 9.7″ panel and touch overlay is also far more aggressive than mine.

We’ll see what the component list for the iPad looks like for certain, come late-March. I doubt Apple’s pushing its first loss-leader piece of hardware.

It was impossible for Apple to have created the magical device people were conjuring up in rumors. (No, despite the copious use of the word ‘magical’ in Apple’s marketing campaign for the device, it’s not magical.) Perhaps the iteration they launched here was a bit of a conservative effort. On the other hand, it’s one of the first non-vapourwave entries into the budding ’slate’ market, and Apple will likely get a second version out, not long after the rest of the market catches up with their first salvo. They need to keep some cards to play out then.

So, a bit of a conservative showing by the iPad at first glance then? Sure, there isn’t a revolutionary new interface method – it’s essentially like a big iPod Touch in many ways, but familiarity is a wonderful thing. Keeping a consistent user interface, one that 75 millions users know and love, helps the product, not the opposite. Yeah, the keyboard looks retarded to type on, but this isn’t a content creation device, it’s a consumption device. There’s no multitasking, which sucks for sure, but I’m sure the key features you’ll really care about multitasking with (music, in particular) will be allowed to run in the background. There’s also no Flash support.

There are a ton of areas where a fully-fledged operating system would do a better job, but then I look at the price: $499 for the base model.

Yikes.

Joe Blow is going to walk into BestBuy with his wife, looking for a cheap web browsing machine. They have a desktop computer, but would like something to browse the internet, check some email, and blast through photos around the house. They see an Acer 10.1″ netbook running Windows 7 and, not too far away, an Apple iPad running some sort of iPod Touch-looking operating system.

$349 vs. $499
10.1″ vs. 9.7″
7 hours battery vs. 10 hours battery
regular screen vs. touch screen
Open up Internet Explorer vs. Open up Safari: weird, Safari opened faster

Hmmm, $150 more for a shiny Apple product that seems to be (surprise) faster for browsing the web. Well, they wanted to spend less than $400, but this iPad thing looks really slick. And wow! So light! The Acer gets ignored for a while, and Joe plays with the iPad’s other applications. Hrm, email looks good. Photos look fantastic! Oh, it says there are 100,000+ applications available for the iPad?! That’s a lot.

Joe walks out of BestBuy, ready to try out his first Apple product at home. At this price, Apple will move loads of product.

I’ve already heard from several non-techie types that this is the ‘computer’ they’ve been waiting for. They’d rather surf the web from the comfort of a couch than a desk. The simple interface and operating system is an advantage. I think about my mother’s computer usage scenarios, and I can’t help but think the iPad is better suited. She’d rather not have to sit in front a computer. It simply doesn’t fit into her day. And multitasking? Please, every time I go home, the only thing open on the computer is a Firefox browser window. Most people don’t want crazy feature sets. Most people don’t need a ‘full-fledged’ operating system for their day-to-day activities.

What most web gurus don’t realize is that 99% of the population aren’t like them. They don’t want to web chat with people, while downloading a movie and posting to their blog. They don’t want to pound out page long comments on smarterthanyou.com.

Steve Jobs calls it the best web browsing and email experience available. I don’t think I’m willing to go so far as to agree with him. However, I do believe it provides a better web experience than most netbooks. On the other hand, I feel that it’s the form factor that makes this product work. With the plethora of Android and Windows tablets due to be released later on this year, I feel like the iPad’s market will have really legitimate competitors very soon, something that couldn’t be said for the iPhone until recently. Android will probably work pretty well out-of-box in this form factor. Any Windows tablet will need some serious application interface overhauls to provide a good experience.

With that all said, I have so much faith in this form factor, and in particular Apple’s entry here that I’m planning on jumping head-first into development for the platform. Designing for the significantly larger screen will be very different, and in many ways, more difficult than development for the iPod Touch/iPhone, where the vast majority of applications are simply a list and some buttons. I have numerous ideas that take advantage of the new form factor. Plus, as the App Store has shown, there’s serious money to be made here. That’s just about incentive enough.

I probably won’t be developing for you (or me, for that matter); I’ll be developing for the 99% that the iPad is useful for.