Be smart, don't buy into the iPad hype

The state of the news media is this: Gossip and rumors are rapidly replacing factual reporting -- in large part driven by the Google economy. No company is benefitting more than Apple, and most recently with the launch of iPad. But rumors are no surefire way to sales success. Big hype will energize early iPad sales, but can it sustain them? I wonder, and perhaps you have the answer. I'm not looking for a scientific answer, just your story to tell -- more on that in at the end of this post.

The Mac-obsessed blogosphere, news media and social crowd is a frightening but  exhilarating phenomenon. Marketers and public relations companies across the globe are watching the Apple-hype phenomenon and trying to guess how they can imitate it. They can't. There is inherit bias in the products bloggers, journalists and socialwebites are using, or the companies that they invest in.

The pattern follows Microsoft in the late 1980s and early 1990s, when so much tech reporting was one-sided in favor of the company cofounded by Bill Gates. I remember when Corel released its first major WordPerfect suite (late May 1996) after buying the product from Novell. Microsoft countered (two weeks later) with a press preview of Office 1997, which release was at least six months away. The hype about Office 1997 overshadowed WordPerfect 7 Suite for Windows 95. Microsoft hype had marketing might. Anything new from Microsoft could overshadow any existing competing product.

How similar the situation is with Apple today. The hype is in part driven by the large number of bloggers and journalists using Macs -- the same kind of inherent bias (from Windows users) benefitting Microsoft a computing generation ago. In the 2000s, many high-profile journalism schools recommend -- or even require -- students to use Mac laptops. Reason: Content creation is supposedly easier on a Mac because of iLife. Microsoft should have released an iLife-equivalent product long ago. Sorry, Microsoft defenders, but Windows Live isn't it. If not using a Mac, who doesn't have an iPod?

Back to inherent bias: There are the investors and Wall Street analysts who recognize how much rumors can lift (or collapse) Apple's share price. In December I asserted that the sudden and large number of Apple tablet rumors were meant to drive up the share price. Hype has share-price might, too. Something else: Like Microsoft in the late 1980s and early 1990s, there is enough reader interest in Apple -- huge chunks of it investor driven, I presume -- for bloggers, journalists and socialwebite gossips to scramble to post anything first; rumors are just fine. Being first with news (gossip or rumor) means higher Google News ranking, more pageviews and so more ad revenue.

If the iPad preorder numbers were truly good, Apple would tout them. Apple loves to use sales numbers for marketing advantage. Thanks to rumors or gossip, Apple gains some marketing punch without revealing how good -- or even bad -- are early iPad preorders.

Just five years ago, Apple frowned on rumors and aggressively discouraged them. Am I the only person who remembers Apple suing several rumor sites, which resulted in the closure of ThinkSecret? Apple worked hard to quash rumor sites. No more. There are too many, and they are too beneficial. Apple-obsessed bloggers and journalists amplify Steve Jobs' "reality distortion field."

Some of the gossiping seems oh-so factually based. There was the Apple 2.0 Blog's first-day iPad sales analysis of 124,596 iPads sold. This huge number, which was picked up and re-reported seemingly everywhere, was "based on a sampling of 99 orders (for 110 iPads) over 19.5 hours, and not counting units that were reserved but not ordered, the Sanity team estimates." Say, what? Ninety-nine iPads preordered is basis for estimating unit sales into the hundreds of thousands?

The news media next went wild over another sales estimate -- with some good math, I might add -- from Daniel Tello. To boost his credibility, many blogs and news sites referred to Tello as a "blogger-analyst." To his credit, Tello clearly discloses: "Long AAPL shares." The Apple Blog's March 15 headline about Tello's post was typically misleading: "Analyst Estimate: 150,000 iPads Pre-Ordered Already." Tello actually did a good analysis, which quality wasn't reflected in most of the blog posts or news stories citing the data. They hyped the sales number, which is hugely uncertain.

Apple hype is simply out of control. I could write another post on the ridiculous conclusions made last week about Apple's market capitalization exceeding Walmart's. Missing: Share valuation is Wall Street's measure of public company valuation. Inherent value based on real world fundamentals is something else. Walmart is an inherently more valuable company (based on reach, real estate assets, infrastructure, distribution, number of employees, local tax contribution, etc. etc.) than Apple.

The same can be said of Microsoft, which software is widely used by businesses, governments and non-government organizations across the globe. I laughed at Silicon Alley Insider's March 14 Chart of the Week: "Only a Matter of Time Until Apple's Market Cap is Bigger Than Microsoft." There's still plenty of spread between the valuations to make such an assertion, which also ignores inherent value by other more meaningful measurements.

I want to end by conducting an informal survey, asking simply: Did you buy an iPad?

If you preodered an iPad, please explain why. Were you wowed by the iPad's aspirational marketing or Steve Jobs' product introduction? Do you perhaps feel like you might be left out -- "hey, everyone else I know wants one" -- if you didn't order? Maybe there is some must-have feature that your dumb phone, smartphone, ebook reader or laptop can't do? Perhaps the reason is something else. Given the amount of hype, non-buyers' reasons are just as important. The decision not to buy is more conscious than it might be for some other products. Please leave responses in comments.

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