The HP TouchPad fire sale proves something most people should have known: the world wants a great $100 tablet, and what doesn't sell at $400 (or even $300) will go like gangbusters if it's marked down by 75 percent.
There's no down side to buying a TouchPad right now. Even just for Web browsing, even just for email, the TouchPad so thoroughly spanks anything else in its price range that buying one is a no-brainer for anyone into gadgets. It has the specs of a respectable $400 tablet, and rough edges don't seem so rough when you're paying so little. If you're curious about what you'll do with a $99 HP TouchPad, I have 10 suggestions.
The TouchPad 4G fire sale doesn't show a way forward for most other manufacturers, though, because it's unsustainable. HP is taking a major loss on every unit here, and the company doesn't seem to be hoping to make any of that back.
You could argue that HP is seeding a webOS ecosystem so it can let the OS flourish with third-party hardware, but I think that's giving HP too much credit. CEO Leo Apotheker has no real interest in consumer products; he's trying to turn HP into an enterprise services company.
How to Compete With the iPad
The tablet game is pretty miserable when you're playing against the iPad. As others have noted, Apple has created an elegant, efficient and low-cost chain of suppliers that let it sell iPads for less than other competitive tablets. Apple's iOS is also highly refined, at a stage when other tablet OSes still have rough edges.
To compete with the iPad, you either have to have a measurably better experience or a much lower price. It's looking like no Android tablet will have a better experience at least until Ice Cream Sandwich, the next version of the OS, comes out next year. The TouchPad's webOS could have competed, but a bunch of "version 1.0" bugs and its limited app catalog made the going tough.
So that leaves price, and Amazon may show how non-Apple tablets can achieve low prices without sacrificing (much) quality. As our columnist Tim Bajarin speculated a few weeks ago, Amazon may deliver an upcoming Android tablet at a loss, for around $250, while hoping to make its money back selling content.
That $250 barrier could be the level at which non-iPad tablets become popular, but it's a hard hurdle to vault. We've tested some sub-$250 tablets. They're almost all awful. Even at $250, people have some quality standards. The best sub-$250 tablet is the Barnes & Noble Nook Color, which (like the Kindle) is sold by a company with more of an interest in selling content than hardware.
If Amazon and B&N end up dominating the non-Apple tablet market, the result will be oddly like the phone market. Most phones today are sold subsidized by carriers: consumers are insulated from the true prices of the phones (usually $400-500 for a decent smartphone) by the carriers' plans to make money on monthly service.
Google's recent purchase of Motorola could provide another way forward, but I don't think Google is going to take it. Pundits have been talking about ad-supported Google hardware products since before the first Android phone came out, and Google certainly fits the Amazon and B&N model of a company that could take a loss on hardware to make it back on advertising. But Google is right now trying to figure out what it can build itself without crashing Android's market share as its other hardware partners flee.
HP's $99 TouchPads are an anomaly, a black swan, the kind of thing you just have to jump on when you see it. There's a whole lot you can forgive at $99 that you can't forgive at $399 (and especially at $499, that magic iPad price), and HP's great-looking tablet is quite forgivable indeed.
If there's a lesson for the tablet market in all of this, though, it may be that if the non-Apple vendors can't match Apple's price efficiencies in hardware and software, they're going to have to bring down their prices via other revenue sources or sales gimmicks. Look for some very creative tablet schemes in 2012. You can watch the news on your $99 TouchPad.
For more, see PCMag's full review of the TouchPad and the slideshow below, as well as HP's Greatest Hits slideshow above.