Special Report: Webpads

The next big thing or just a fad? (January 2002 issue)

by Geoff Walker

The logical place to start this article is by defining "Webpad." The best definition I've seen is on chip-vendor Xilinx's website: "A Webpad is a wireless, portable, low-cost, easy-to-use, tablet-shaped, consumer-focused information appliance with a touch screen and a browser-based interface to simplify and enhance the internet experience." The only adjective that Xilinx left off the list is "flash-based". Some of the vendors in the Webpad business refer to the product more simply as "a browser in a box."

A Webpad is often called an information appliance. What's that? It's what's created by marrying the ubiquity of information with the convenience of an appliance. Some market research firms (such as the Carmel Group) define information appliances as one of only three things: a wireless Webpad with Internet access, a set-top box with Internet access, or a standalone device with a monitor and keyboard that isn't a PC. Other market research firms include PDAs, digital audio devices, ebooks, digital picture frames, personal TVs, Internet telephones and any wearable computer in the information appliance category. An agreed-upon definition of "information appliance" is therefore still quite elusive, rather like Sasquatch.

A Webpad is frequently confused with other types of tablet devices, particularly with CE Tablets and (Windows) Pen Tablets. The "Tablet Taxonomy" sidebar, along with Table 1, is intended to help clear up this confusion.

The genesis of the Webpad
Who started the whole Webpad thing? National Semiconductor. On November 13, 1998 Cyrix (a division of National Semiconductor at the time) announced and demonstrated the first prototype of a Webpad "Internet access device" at Comdex in Las Vegas. Although it looked like a real product, it was really a reference design intended to stimulate consumer electronics manufacturers into developing their own version of the device using Cyrix chips. With the exception of the memory chips and the display, every component in the device was a National Semiconductor product.

National Semiconductor further stoked Webpad fever by showing the Geode Webpad in February 2000 at CeBIT. Prototype Webpads were on display at the same show from Acer, Boundless, Qubit, RS Cordless Technology (RSC), Samsung, Screen Media, Tatung and Vestel. It's significant that now, a year and two thirds later, only three of those eight companies still have a Webpad on the market.

From the viewpoint of the ODM suppliers in Taiwan (several of whom I have visited recently), 2000 was "the year of the Webpad." Now, near the end of 2001, the high level of interest during 2000 in Webpads as a potential consumer product is seen in retrospect as a "bubble". Many of the Webpads that were created during 2000 are no longer on their creator's website.

John Dvorak (my favorite curmudgeon), writing in PC Magazine in January of this year, aptly expressed his opinion of Webpads heading into 2001:

"I first saw the first one of these things [Webpads] a couple of years ago at Comdex, where Cyrix was promoting the idea. Everyone was jazzed about a wireless tablet that people could use to surf the web while sitting on the couch. Who wants to surf the web while sitting on the couch? I can see using such a device as an inventory control mechanism or a wireless notepad for a coach at a basketball game (the sport would have to be indoors, no thanks to display technology). But these things are not mass market items...these tablets are designed specifically for surfing the web, as though we all want to spend $500 or more for wireless networking to go surf the web from all over tarnation. Give me a break. A few early-adopter nutballs will buy this thing, and that will be the end of it."

About the term "Webpad"
National Semiconductor trademarked the name "WebPAD" in 1998, where "PAD" stood for Personal Access Device. That's why you'll sometimes see "WebPAD" instead of "Webpad" used by companies building Webpads based on National Semiconductor's CPU. The term "Webpad" quickly became highly descriptive of the device, which in effect rendered the trademark moot (the same thing happened to "Aspirin"). However, to avoid using the trademarked name during 1999 and 2000, many writers referring to Webpads other than National Semiconductor's reference design used either "web pad" or "web tablet", which further confused the terminology. In this article, I stick with "Webpad", which seems to be the most common usage on the Internet today.
The Webpad bubble
As noted above, the high level of interest in Webpads during 2000 is now seen in retrospect as a bubble. What caused the bubble? My theory is that there were five key steps, as follows:

  • 1. Demand for a new product concept is hypothesized. Analysts, commentators and pundits see the demand for existing portable devices such as cellphones, PDAs, cordless phones and MP3 players, and they jump to the conclusion that a similar demand should exist for some new portable product concept (in this case, the Webpad). Typically this happens without any serious consideration of the value proposition for the new product concept, and without any market research to support the hypothetical demand. Even when research is done, sometimes it's flawed. For example, in the spring of 1999 Intel studied ten families in Oregon for six weeks to determine if using Webpads would increase a family's frequency and duration of Internet usage. The study showed that having a Webpad in the home would triple the family's Internet usage (not exactly a surprise). What Intel apparently didn't ask, however, was how much the family was willing to pay for the Webpad.
  • 2. Forecasts appear for the hypothetical demand. Market research firms read about the hypothetical demand for the new product concept and start creating Excel spreadsheets to project the demand five years into the future. These numbers are widely publicized and everyone starts believing them because reputable firms such as Gartner Group or IDC published them.
  • 3. The media amplifies everything almost instantaneously. The trade press picks up the news of a new product category and literally overnight turns it into a "hot new trend". This is a side effect of living in the "information age". A few years ago a company could count on having six to nine months to build the "buzz" for a new product; now, the buzz builds in two months. With the exception of curmudgeons like John Dvorak (quoted previously in this article), the media is generally unwilling to write a strongly negative piece about an entire new product category, even if that's what they're actually thinking.
  • 4. ODM companies begin creating products based on the buzz. Much of the computer business is shifting to an ODM model (see the sidebar on OEM and ODM terminology). ODM companies are not marketing companies; they're engineering and manufacturing companies that know how to build products. They see the "hot new trend" and start developing prototype products. To the rest of the world, these look like "real" products, but they're really not. ODM prototype products and chip-vendor reference designs flood CES, CeBIT or Comdex. Often the media (and most of the public) doesn't understand that these products aren't "real" products and that nobody's signed up to distribute them.
  • 5. And so a bubble is born. All of the above looks and feels like reality -- but it isn't. The bubble is mostly full of air, built on a hypothetical foundation. However, there is usually some element of reality somewhere in the depths of a bubble. In the case of Webpads, it's the fact that they really do make sense in some categories of vertical applications. A few companies will be successful with this product category in vertical markets. But for sure the majority of the 28 products listed in Tables 2 and 3 won't be around at this time next year.
State of the Webpad market
Instead of asking "What's Up with Webpads," perhaps I should be asking "What's Down with Webpads". The answer is nearly everything. The state of the Webpad market can be summarized as follows:
  • Consumer sales of Webpads are in four-digit numbers or low five-digit numbers.
  • Consumer-focused Webpad vendors such as Qubit are dying off rapidly.
  • Survival-minded Webpad vendors such as SONICblue and ViewSonic are focusing exclusively on vertical markets.
  • There are still lots of OEM/ODM Webpad companies showing products, but few customers are signing up.
  • The media is negative about Internet Appliances in general and Webpads in specific.
  • New Webpads are surprisingly under-publicized (the buzz is over).
  • Trade press articles about successful vertical Webpad applications are few and far between.
Forget the consumer for now
It seems clear from the above that Webpads are unlikely to be adopted by mainstream consumers in any quantity anytime in the near future. I believe that there are some underlying basic reasons for this, as follows:
  • 1. Mainstream consumers aren't interested in gadgets like a Webpad. Consumers are only interested in a new device if the value of the device exceeds its cost in time and money. MP3 players and digital cameras are examples of devices that haven't fully made this transition yet. Consumers are risk-adverse and won't buy a new device unless it feels like a safe bet. Webpads aren't even on the typical consumer's radar screen yet.
  • 2. There is no consumer sales and distribution channel for Webpads. Retail stores do a notoriously poor job of educating consumers about new devices; they do best when consumers come into the store already knowing what they want. There are surprisingly few stories written about Webpads in the trade press magazines, and even fewer in mainstream consumer magazines, so it's difficult for a consumer to become educated about them. And when stories do appear, basic information such as the difference between a Webpad and a Pen Tablet is often reported incorrectly.
  • 3. Webpads cost too much to sell at mainstream prices. Truly high-volume consumer products at prices above $300 are rare. It's not that the Webpad isn't a compelling device, it's that the price is far too high to achieve success with mainstream consumers. A typical Webpad today sells for at least $1,000. Adding the cost of a wireless LAN base station with a broadband interface/router ($300), the cost of a wireless LAN PC card ($150), and the cost of broadband access ($50 per month), the total cost of ownership for the first year is over $2,000! A story on ZDNet News reported the director of product marketing at SONICblue as saying that "he and his colleagues spent a month trying to find a business model [for the ProGear Webpad] that would appeal to consumers, but to no avail. These [Webpads] are going to be expensive just by their nature."
  • 4. A company making and selling Webpads must have really deep pockets to stay in business long enough to make a profit. It typically takes many years for the volume of a new type of device to reach a profitable level, and financing is difficult to find in markets where there is likely to be intense competition.
  • 5. Big consumer electronics companies with the most motivation to create a new class of product such as a Webpad seem to be incapable of creating truly simple and intuitive user interfaces. Look at the typical VCR -- can you program all of its functions without referring to the manual? Or take your cellphone -- how many of its myriad functions do you actually know how to use?
  • 6. Relatively few successful information-oriented devices were initially created as consumer devices. Most started as devices for business and then migrated to consumers. PDAs are an example of a device that's on this path. Webpads (either in their native form or in the form of a Thin Client or CE Tablet) are just beginning to appear on business radar screens, so they're a long way from even starting the transition to consumer devices. It may be that the first successful consumer tablet devices are more likely to evolve from Microsoft's Tablet PC initiative (three to five years from now), leveraging tablet-oriented PC software to create a more functional product than the simpler, cheaper, single-function Webpad.
[Credit must be given to Michael Slater for his critical thinking in a column on the adoption process of new consumer electronics devices, published in the September issue of Computer Shopper.]
Competition with the PC
Does the Webpad compete with the PC? Yes and no. It competes in the sense that it's an alternative to the PC for accessing the Internet or email. In that limited comparison, it loses miserably because it is less capable yet costs about the same as a PC (this is the main argument against Webpads that is seen frequently in the media). If the Webpad is seen as an addition to (or extension of) the PC rather than as an alternative, then it's less of a loser. In that comparison, the value of a Webpad is in its portability. The Webpad allows a user to "snack on data" (a term used by Janet Leising, the VP of Marketing for the ProGear Webpad at SONICblue). A Webpad clearly makes access to data such as email more of a casual, random activity than sitting down at the PC, booting up and starting Outlook. The problem is, just how much is that portability worth?

Anecdotal reports from current Webpad users (such as Conrad Blickenstorfer, the editor of Pen Computing) indicate that "snacking on data" can be really addictive. The ability to grab a two-pound device off the coffee table as you walk past and retrieve a new email at broadband speed puts a whole new face on the email experience. Is that ability worth $2,000? Only for technology hobbyists and geeks. Otherwise neither the content nor the user interface is compelling enough to justify the cost. And if you're a serious email user with 90 wpm typing skills (such as the author), the lack of a keyboard on a Webpad can cause instant frustration.

Onscreen keyboards are much too slow, handwriting recognition is still much too inaccurate (not to mention that handwriting itself is much slower than typing), and putting the Webpad in a keyboard dock or using an wireless keyboard on your lap changes the "snack" into more of a sit-down dinner. What's the answer? Voice recognition seems like a natural. The major difficulties are well known: (1) recognition accuracy is still relatively low, (2) current recognition software typically requires at least a 600 MHz Pentium III CPU for decent response (that's not a Webpad!), and (3) privacy issues are significant (do you want your family to hear every email you write?).

Eventual consumer market
It's possible that as the cost of LCDs drop and the penetration of broadband and wireless networking increase in the home, Webpads may eventually evolve into a consumer product. "Eventually" could be as long as five or more years, however. The top four factors that I think will cause the development of a Webpad consumer market include the following:
  • Broadband. The spread of broadband is long term, expensive and reliant on up-front investment by big players, but it's required for a successful Webpad consumer market. Interviews with SONICblue, ViewSonic, DT Research and Honeywell executives confirmed this viewpoint -- they all named broadband as the first or second most important factor in the development of a consumer market for Webpads.
  • Wireless home networking. Broadband by itself won't have much effect on the Webpad market (since Webpads are portable devices), but broadband combined with 802.11b wireless home networking becomes compelling. Honeywell has absolutely zeroed in on the right approach by offering a bundle of Webpad and wireless home networking hardware (see more information on Honeywell later in this article).
  • Content, applications and services. A Webpad is a portable Internet access device. If there are compelling content, applications and services available on the Internet, consumers should be more interesting in taking advantage of the mobility of a Webpad to access them. Exactly what the content, applications and services will be is a matter for conjecture. Even after 8+ years of steadily growing Internet usage, it's still not clear what the "killer content/application/service" is for the Internet. SONICblue, with their MP3 player product line and entertainment orientation, believes that music will be the key content that attracts volumes of Webpad users. Others believe that interactive TV may be the key (e.g., playing interactive "Who Wants to Be a Millionaire" on a Webpad while watching TV), or "video convergence" (watching TV on a Webpad wherever you are in the house or yard). Whatever the answer is, without compelling content, applications and services, only email junkies will want Webpads.
  • Lower cost and higher volume products. If Webpads are ever going to break into mainstream consumer market, there must be a relentless pursuit of lower cost and higher volume products by everyone in the food chain.
Categories of players
It's tough to tell the players in the Webpad business without a scorecard. There are four main categories of companies making and selling Webpads, as follows:
  • 1. Companies making Webpad reference designs (recipes) for other companies to follow in creating real products. Don't confuse a reference design with a real product -- it may look like a real product and have what seems to be a retail product sales sheet, but companies making reference designs are rarely in the business of making and selling complete computers to end users. More typically they're in the chip business. Examples of these companies include National Semiconductor, Philips and VIA Technologies.
  • 2. Companies who design and build Webpads that are intended to be branded and resold by other companies. These companies are known as OEM and ODM companies (see the sidebar on OEM and ODM terminology). Many of the OEM/ODM companies are located in Taiwan. Examples of Webpad OEM/ODM companies include AboCom Systems, FIC, Palmax, RSC, Tatung and ViewTech.
  • 3. Companies who brand and resell Webpads designed and built by other companies, on either an OEM or ODM basis. The most prominent of these in the Webpad business are ViewSonic, who brands and resells AboCom System's X-Pilot MA 1000, and Honeywell, who brands and resells DT Research's WebDT 325. There are many less visible examples, such as Hitachi -- their "Flora" Webpad is designed and built by Quanta, one of the big Taiwanese notebook ODMs.
  • 4. Companies who (apparently) design, build, brand and sell Webpads themselves -- "the old-fashioned way of doing business". (Note that I say "apparently" because it's often very hard to determine the actual source of a product. Some of the Webpad vendors listed in Tables 2 and 3 are likely to actually be customers of ODMs -- some companies guard information about their ODM relationships very closely.) Companies that seem to be in the "do-it-themselves" category include AirSpeak, NEC, Siemens and SONICblue. Many (if not most) of these companies use contract manufacturers to actually build the product -- but a contract manufacturer is not an ODM or an OEM. A few companies play in both category (3) and (4). For example, DT Research sells one of their Webpads on an OEM basis to Honeywell, and sells the same Webpad under the "WebDT" brand into specific vertical markets.
Tables 2 and 3 list all the currently active Webpad vendors I could find, along with information on their products' CPU, O/S and LCD. Table 4 lists the URLs of all the vendors in Tables 2 and 3, as well as a few additional vendors mentioned only in the text.
Stillborn Webpads
During 2000-2001 there have been a number of stillborn Webpads. Here are five of the more notable ones:
  • Acer showed a Webpad at CES 2001 but never took it beyond a prototype (it's still on the Acer website).
  • Gateway announced a Webpad in 2000 (to be built by Quanta, the ODM supplier of their notebooks), then announced they were "rethinking" the product.
  • Intel announced a Webpad -- apparently a real consumer product, not just a reference design -- at CES 2001, updated the media on it in February and March, and then suddenly stopped any further development without any announcement. The Webpad is still on the Intel website, but the Intel PR people didn't respond to my email inquiry.
  • LG Electronics announced the Digital iPad at CeBIT 2001, but the product never saw the light of day.
  • Samsung announced the IZZI Webpad at CES 2001, then apparently transformed it into a convertible CE Tablet called the IZZI-Pro Swivel.
Vertical markets for Webpads
According to a report published by Cahners In-Stat in May of 2001, hospitality (automation of hotels, restaurants and casinos), healthcare, financial services and education are expected to be the leading vertical markets for Internet Appliances. (In-Stat's definition of the Internet Appliance category includes Webpads, wired web terminals, web phones and set-top boxes.) Market growth rate for sales into vertical applications between 2000 and 2005 is forecasted to be 81%. During that period, In-Stat forecasts that vertical market sales will increase from 10% to 28% of total Internet Appliance sales.

As little faith as I have in Excel spreadsheet projections such as these, there's no doubt in my mind that vertical markets are one of the two things that will keep Webpads alive as a product category in the next couple of years. (The other is the combination of broadband access and wireless home networking, as noted above.) The key vertical markets for Webpads are those where access to data via wireless LAN is important. Since generally available, high-speed, wide-area wireless is still at least five years away (regardless of what all the hype about 3G says), Webpads are irrelevant in vertical markets that require wide-area wireless such as field service. In addition to the four markets enumerated by In-Stat above, the following six vertical markets are seen as good targets for Webpads:

  • Market Research -- Surveys can be tabulated in real time
  • In-Store Retail Support -- Use by sales people to support the sales effort with product information and videos; use by managers and staff to access corporate systems wirelessly from the sales floor
  • Manufacturing -- Production control, documentation access, training, inventory management, quality surveys, etc.
  • Service Businesses -- Auto dealers and repair shops; drive-in auto insurance claims processing
  • Air Transportation -- Servicing or inspecting airplanes on the ramp; use by roving customer service agents in the terminal
  • Home Automation -- Acting as the user interface on home control systems
Webpads and home automation
Earlier in this article, I suggested that "Consumers are only interested in a new device if the value of the device exceeds its cost in time and money." Honeywell's approach to selling a Webpad provides the highest value I've seen from any Webpad vendor. Honeywell sells their Webpad (an OEM version of DT Research's WebDT 325) as both the in-home user interface for Honeywell's home control system, and as a general purpose in-home Internet access device.

Honeywell's "Home and Away" system allows the homeowner to control every aspect of their home's lighting, security, and heating, ventilation and air conditioning (HVAC) system from a browser. For example, if the doorbell rings while the family is watching TV, they can use the Webpad to connect to a webcam covering the front door without getting up from the couch.

The Home and Away system requires a broadband connection. Once the local cable or DSL provider installs the broadband modem, Honeywell installs an Ethernet 802.11b router/firewall/access point, and wireless interface cards in every existing PC in the house (Honeywell uses D-link networking hardware). Honeywell sells, installs and supports the Home and Away product (including the Webpad) through a network of home systems dealers throughout the US. By bundling the Webpad as the user interface for the home control system, including wireless home networking in the bundle, and supporting use of the Webpad at home for surfing the web, doing email, listening to audio, doing word processing with Pocket Word, etc., Honeywell is maximizing the value of the Webpad. This is a recipe for serious success!

In addition to all of the above, Honeywell also markets their Webpad into the manufacturing & process control markets as a portable user interface to software that improves yields and throughput. Honeywell's PR office told me that they are receiving a steady stream of inquiries about the applicability of their webpad in most of the vertical markets listed above.

According to Tom Rosback, Vice President and General Manager of Honeywell Home Systems, Honeywell's experience with their Webpad validates the basic concept of an Internet Appliance, that of an easy-to-use Internet access device without the complexity and instability of a PC. Some buyers of the Honeywell Home and Away system don't have (and don't want) home PCs, but after using the Webpad for a period of time, they find that they really like the ability to send email to their children and grandchildren, access websites containing recipes, research holiday gift ideas online, and do other similar activities without the hassle of a PC.

Other companies to watch
I believe that the top four companies to watch in the Webpad space are Honeywell, SONICblue, ViewSonic, and DT Research. Honeywell's direction has already been described above; the other three are all heading towards various subsets of the 10 vertical markets listed above. As Fujitsu knows well, building a vertical pen computer business isn't easy. It requires (a) developing a strong vertical sales channel with access to lots of vertical application software, (b) a margin structure sufficient to support the sales channel, (c) patience and deep enough pockets to live through 6-18 month sales cycles, (d) enough flexibility in the product to address multiple markets in order to avoid depending on total success in a single market, and (e) application-specific peripherals that allow building real "systems solutions".
  • SONICblue is using the "hybrid" nature of their Webpad to move up the tablet taxonomy and compete directly with Fujitsu in the Pen Tablet area (Janet Leising, their VP of Marketing, told me that they expect 80% of their future sales to be with Windows rather than Linux). They have a big job ahead of them as they develop a vertical channel more or less from scratch.
  • ViewSonic is positioning their product as a "Super PDA" in order to catch the wave of enthusiasm for selling PDAs into enterprise vertical applications. Their Webpad can then be seen as a PDA on steroids; a highly portable device with enough screen real estate for serious applications. Tom Offutt, ViewSonic's General Manager of Mobile and Wireless Products, told me that about 10% of their 6,000 monitor VARs also sell focused vertical solutions, so ViewSonic has a serious headstart on developing a vertical channel.
  • DT Research is different than the other four Webpad vendors in that their core business is developing OEM/ODM Webpads and related products. DT Research's effort in vertical markets (described as "low profile" by Dr. Soon Poh, executive vice president at DT Research) represents an expansion of their business beyond OEM/ODM.

Based in Silicon Valley, Geoff Walker is a consultant with Walker Mobile. Geoff has worked on the engineering and marketing of pen computers since 1990 at GRiD Systems, Fujitsu Personal Systems (now Fujitsu PC) and Handspring. He can be contacted at geoff.walker@att.net.

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