As tablet prices continue to trend downward, tablet manufacturers are casting about for revenue-generating strategies in an increasingly commoditized market.

As yesterday?s tablet launches from Apple and Nokia show, tablet device launches these days are more iterative than revolutionary. For the big manufacturers, success in the category will increasingly be based on their ability to drive content sales and advertising revenue as well as push into educational and corporate markets.

?The vendors that have the richest scope ? the ability to generate profit off of hardware, content and advertising ? will continue to grow and get bigger, because that just feeds the revenue stream and they can continue to innovate,? said Rhoda Alexander, senior manager of tablet and monitor research at IHS/iSuppli, Santa Clara, CA

?The vendors that don?t have access to that have a problem in that they are still reliant on making a profit off the hardware,? she said

?What you would expect to see over time is that eventually some of these vendors at the low-end would start to drop out because the profit margin becomes unacceptable to them."

The price is right
It is getting harder all the time for tablet manufacturers to make a profit selling devices to consumers as prices continue to come down.

Apple has historically been the category leader in terms of deriving profit from tablet sales thanks to its high-end positioning.

However, according to recent research from ABI Research, the average selling price for the iPad has declined approximately $20 per quarter every quarter since the second-quarter of 2011.

Yesterday?s introduction of the second generation iPad mini suggests Apple is taking steps to address this drift away from its premium positioning, with the base model for the iPad mini now priced at $399, up from the $329 price tag the iPad mini had when it was first launched last year.

The higher price is also a function of its new retina display and faster processor.

Apple also introduced the new full-sized iPad Air that is much thinner and lighter than previous versions and will sell for $499.

Also yesterday, Nokia introduced its first tablet, the Lumia 2520, a 10-inch tablet that will be priced $499.

The commoditization of tablets
Interestingly, ABI Research also found that the average price for Android tablets has increased this year, thanks to a broader portfolio, with manufacturers coming out with low, medium and higher-priced offerings.

Samsung, which is Apple?s biggest competitor in tablets, is able to absorb the lower profit margins in tablets by bundling them with sales of other devices.

?Apple is rapidly approaching the average selling price of the rest of the market and it may not be the premium supplier much longer if it continues on that path,? said Jeff Orr, senior practice director for mobile devices at ABI Research, Oyster Bay, NY .

?Part of [the new pricing for the iPad mini] is to help stave off the feeling that it is becoming more and more a commoditized type of solution,? he said.

The corporate market
Overall, the prices for tablets are still coming down, per ABI Research?s data.

Which means manufacturers are looking for other ways to derive profit in the tablet space.

With tablet adoption penetration approaching saturation level at the high end and the major players not interested in a race to the bottom, the next big battleground for these manufacturers will be in the educational and corporate markets.

With PC sales declining, tablets have an opportunity to gain a bigger role in office settings. These tablets generally have higher requirements in terms of functionality and durability and therefore have higher average prices.

?If we look at the pc market vs. the tablet market and the changes that have happened there, most of that shift has happened on the consumer side of the market,? IHS? Ms. Alexander said.

?What you are going to see moving forward in the next couple of year is the battleground moving into corporate and educational side of the market,? she said.

?Apple has all the pieces in place to compete in that market. If you look at Samsung, they are also pushing hard into that market."

Content is king
The strongest opportunity for revenue after the hardware sales is most likely to be software, including app purchases and content downloads.

When it comes to content, Apple is already well positioned with iTunes and the App Store as is Google with Google Play.

Samsung is working on developing content but for now their tablets are heavily reliant on Google content.

Sony and Amazon also offer content.

Most of the smaller players do not have content streams developed, which means as prices continue to come down, the facing a harder and harder time making any money in tablets.

?I do think there is an opportunity for content to continue to increase,? ABI Research?s Mr. Orr said. ?Mostly video viewing, where users access to content and programming continues to broaden.

?There is an opportunity for more engaging and more viewing and therefore more advertising to be pushed alongside video content,? he said.

Product innovation
Another way tablet manufacturers are looking to make money is by extending the reach of their product geographically. Many of the bigger players already have a global brand, and Amazon is aggressively investing in the necessary infrastructure for a bigger international presence.

Here again, many of the smaller players are at a disadvantage.

There are still opportunities for manufacturers to innovate in the tablet space and drive differentiation that way. Some of the areas where innovation can still be brought to bear are pressure sensing, haptics and motion sensing.

?Expect to see more context aware gestures and personalization inspired by features like Samsung's eye tracking and the Moto X's buttonless integration of Google Now,? said David Hewitt, Atlanta-based global mobile lead for SapientNitro.

The advertising challenge
One area of revenue for manufacturers that is still in the early stages is advertising.

Google's strategy has been to drive both personalization and targeted advertising across all channels, including tablets.

?Google will continue to innovate in providing consumer utilities free of charge to then drive smarter ad targeting across the customer journey with its evolving ecosystem,? SapientNitro?s Mr. Hewitt said. ?With Google's Moto acquisition struggling with sales, there will be a lot of anticipation of if Moto can regain steam with its pending tablet release.

As users spend increasing amounts of time with their tablet devices, advertising here makes sense. However, fragmentation in the market and the need for better experiences that take advantage of the unique features of tablets is hindering growth here.

?I?m still a little big skeptical about the role that advertising will play in the overall revenue mix for a platform brand such as Apple, Samsung or Google,? ABI Research?s Mr. Orr said. ?There is certainly a component there to be able to get the impressions in front of users and audiences, but I?m not sure that this necessarily seen as a sizable source for revenue.

?I think it is part of the mix but still very experimental in terms of conversions of people acting upon those messages,? he said.

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York