What Google search activity can tell us about iPad demand

Tomorrow, Apple will start accepting pre-orders for their highly anticipated iPad tablet.  How many iPads Apple will sell in this year and beyond is a subject that has proven quite controversial amongst investors, analysts and the general public and in my capacity as Consumer Technology analyst, I’ve been asked many times by clients how many units I think Apple might sell.  My answer has consistently been that I thought Apple could sell 5 million units in calendar year 2010, and I always added the following caveat: “this is just my opinion based upon my thoughts around the affordable entry price-point, the halo effect from the iPhone, and a general sense that the time has come for convergent media devices in a tablet form.  All that said, I have no hard data to support my thoughts and we look forward to ultimately tracking actual sales through the same proprietary data we use to track iPhone and iPod Touch sales”.

When I wrote my Apple update note last week, I wanted to include some notes on the iPad in addition to our estimates of CPU sales, iPod sales and iPhone sales which are all tracked by triangulating across various proprietary data sets that we’ve acquired.  I lamented the fact that we had no hard data to include as part of a forecast, since we are after all a data-driven research firm and decided to see how well searches on Google in the couple of month prior to release had been able to predict the first 9 months of sales of other consumer electronics’ devices.   I would like to thank my friend and fraternity brother Jack Krawczyk for making me aware of the ways to use Google trends as a real-time predictor of consumption by pointing me here and here some time ago.  I decided to look at the Kindle (Since Amazon doesn’t break out Kindle sales explicitly, I used our Credit Cards transaction-level data to estimate 450,000 units sold in the 9 months subsequent to its release in November, 2007), Zune, PS3, Xbox 360, Wii, DS, and iPhone and as it turned out there was a pretty good correlation between the searching activity and subsequent sales.

Google provides a very nice interface for tracking relative query volume across multiple search terms at their Insights for Search beta site that also lets you look by geography and/or category.  You can even download to a .csv file if you are logged into your Google account.  By looking at a group of searches around each product related to intent to buy the product or learn about the product (such as “buy Wii”), I created relative search query indexes for each product.  The correlation coefficient was 84% and based upon the number of searches for the iPad relative to the other products, the data would suggest iPad global unit sales of 6 million units in 2010.  Here is a chart illustrating the results:

So with Google search trends suggesting 6 million units will be sold in 2010, I feel a bit better to have some empirical data in line with my own personal estimate of 5 million units which is well ahead of most analysts’ estimates.  Time will tell – all I know for certain is that they will be selling 1 – it’s nearly midnight – let me get my credit card….

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