Four Ways Apple's iPad Beat Expectations

Jason Schwarz is the author of The Apple Revolution, an e-book.

Apple's(AAPL) iPad hit all the marks as a reading device, as a gaming device, and even as a touch-screen iWork/media device. We expected Apple would transform the traditional e-reader into a multi-function device and it certainly did that. But it's the elements of the iPad that we didn't expect that have me thinking this product will sell more units than anyone currently anticipates.

Steve Jobs unveils the new Apple iPad

Here are four reasons why the iPad may sell more than 5 million units in 2010.

1. The price points are lower than anybody expected.

Optimistically, we were hoping for $599 to $799. Realistically, we were thinking closer to $899.

We figured that Apple would do what it did with the iPhone and begin with a high price to establish the iPad as an elite product and give developers plenty of time to work out the kinks before lowering the prices for the masses. CEO Steve Jobs isn't getting enough credit for the $499 gift.

As Jobs mentioned in his keynote, there are 85 million owners of Apple mobile products along with 125 million iTunes/App Store credit card accounts. The iPad comes with built-in demand. The real question is how can Apple sell this iPad at $499 without a subsidy? The dirty little secret may be that Apple is subsidizing it itself.

Apple wants immediate market penetration and will allow Quattro's mobile advertising to generate a new source of profits. If Apple turns into the Google(GOOG) of its ecosystem (which is quite likely), it could give these things away for free. Tight-lipped Apple was surprisingly optimistic about Quattro earlier in the week on the earnings call; this low iPad price point speaks even more loudly.