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Success of the iPhone (April 2009)

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Joel West
Joel West

The document analyzes the success of the iPhone and what it revealed about the future of mobile phones. It summarizes that the iPhone was very successful due to its large touchscreen, ease of use, and ability to access the full, uncensored internet experience like on a PC. This shifted users away from previous mobile internet experiences that were limited in bandwidth and customized portals, and towards viewing the mobile internet and the iPhone as a ubiquitous internet device.

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Browsing as the killer app: The success of the iPhone Joel West San José State University Michael Mace Rubicon Consulting Quello Center for Telecommunication Management & Law Michigan State University April 24, 2009
Learning from the iPhone Observation The iPhone has been a great success Questions Why? What does it tell us about the future of mobile phones?
Outline Assumptions pre-iPhone In devices In use cases In value network Apple’s iPhone strategy Impacts
Evolution of Mobile Phones
State-of-the-Art Terminal Radio & Television News, Feb. 1953, p. 32
Terminal Evolution N-series Smartphone AMPS subs. Set Car phone Model 500 Desk phone Terminal Phone calls Info manager SMS/E-mail Web browser MP3 player Makes calls Receive calls Makes calls Receive calls Functions Handset, LCD, 200 MHz ARM9, 0.06-4.0 gb RAM Handset, dial, 2 MHz Intel 8080 Handset, rotary dial, wire Bill of materials 2007 1978 1949-1969 Date Nokia AT&T West. Electric Firm
Now a consumer product 1 billion phones sold in 2006 vs. 240 million PCs US: 145m cellphones, 61m PCs Major vendors seek brand loyalty Nokia alone ad spending $375m/yr Lots of technology push Mixed results on market driving
The Pre-iPhone “Mobile Internet”
Original conception “ Mobile Internet” vision ca. 2000: Limited bandwidth New mobile-specific content New value network
Barriers to mobile Internet From 1996-2000, telecom industry began to plan mobile Internet What they didn’t have: Device capabilities Network capabilities Justified planned 3G buildout Mobile-specific content
Smartphones: then & now QWERTY : thumb, slideout or virtual Numeric (T-9) Keyboard 8 Gb 2 Mb RAM 480x320 color 160x160 B&W Screen HSDPA, EVDO: 1 mbps CDPD, i-mode: 5-10 kbps [GPRS: 50 kbps] Bandwidth 2008 1998
Reach vs. Richness (2001) Source: Jeffrey L. Funk, The Mobile Internet, 2001 Rich Media Wide Reach US, EU: full Internet, very expensive Japan: limited Internet, mass market
Early experiments Low-bandwidth mobile web: i-mode (NTT DoCoMo) Slow speed data cHMTL Portal, business model WAP Special dialect of HTML Both require custom content
Mobile value chain (2002) Source: Hermant Sabat, Telecommunications Policy, Oct. 2002.
Mobile web (1996-2005) Japan, Korea: low-bandwidth custom web portals Export to US, Europe fails Europe: WAP never catches on US: walled gardens V Cast video clips, 176x132 15fps
Apple’s iPhone Concept
iPhone value proposition Relatively large screen Ease of use “ Half the people at CTIA can’t send a text message” PC-like web browsing Unique content & ecosystem
iPod Ecosystem (2007) Fox, MGM, Universal, Disney … Music Video Hardware Performers Composers Sony BMG EMI Universal Warner “ Indies” Component Makers iTunes Store iPod Producers Complements Accessory Makers
iPhone Ecosystem (2008) iPhone 3G applications Video Music Software Hardware iPod content Component Makers iTunes Store iPod Complements Accessory Makers
Success of the iPhone
iPhone 1.0 and 2.0 70 App store, web apps UMTS, Wi-Fi iPhone 3G (7/2008) 4 Web only EDGE, Wi-Fi iPhone (6/2007) Countries Apps Network
Sales 2007: 3.7 million 2008: 13.7 million 2009: 3.8 million June 2007 to March 2009: 21 million iPhones Ca. 16 million iPod Touch
Smartphone market share Platform 2006 2007 2008 Symbian 67% 63.5% 52.4% Windows 14% 12.2% 11.8% Blackberry 7% 9.6% 16.6% iPhone - 2.7% 8.2% Source: Canalys (2007), Gartner (2009)
Plethora of “iPhone killers” Google/HTC: G1 BlackBerry Storm Palm Pre Nokia N95, N97, 5800 LG, Samsung, … Most have 320x240 touchscreen
Mobile web via WebKit WebKit is de facto mobile browser std Safari (Mac): 2003 Symbian S60 (Nokia): 2005 Safari (iPhone): 2007 Android OS (Google): 2007 Chrome (Google): 2008 Open source means available to all
The iPhone App Store
iPhone App Store 30,000 15,000 10,000 3,000 550 Available apps 0.1b Sept 2008 1.0b April 23 0.5b Jan 2009 0.3b Dec 2008 0 July 2008 App downloads
Top 40 apps As reported by Apple April 2009 (may be US only) 2 Web 2.0 2 Utilities 8 Internet services 6 2 Entertainment 14 8 Games Top 20 paid apps Top 20 free apps
Mobile web is wired web Among the top 20 free apps Facebook, MySpace Google Earth The Weather Channel Movies, restaurant websites Each downloaded by 3-6 million users out of 37 million iPhone & iPod Touch
Rival app stores Apple: July 2008 Google: Aug. 2008/Feb. 2009 Microsoft: Aug. 2008 Nokia: Aug. 2008 Samsung: Aug. 2008 RIM: April 2009
Discussion
The “Real Internet” “ You’ve used the internet on your phone, it’s terrible! You get the baby internet, or the mobile internet — people want the real internet on their phone. “ We are going to deliver that. We’re going to take advantage of some of these investments in bandwidth.” – Steve Jobs, May 2007
Early success (1) “ Of all the iPhone’s features, none had reviewers gushing more than its Internet browser . It was the first cellphone browser that promised something resembling the experience of surfing the Internet on a PC . … “ On Christmas [2007], traffic to Google from iPhones surged, surpassing incoming traffic from any other type of mobile device …” —  New York Times, 1/14/08
Early success (2) Google “had seen 50 times more searches on Apple‘s iPhone than any other mobile handset, adding weight to the group’s confidence at being able to generate significant revenues from the mobile internet. “‘ We thought it was a mistake and made our engineers check the logs again…’ —  Financial Times, 2/14/08
Users got the real Internet Today they Google everything Can use iPhone instead of PC Data plan helps enable this Result: ubiquitous Internet device Begins shift to mobile Internet
There is no mobile Internet “Mobile Internet” value chain in US Utilizes existing Internet Content: news, weather, etc. Services: search Adapted & customized Form factor Ease of use (custom app) Location aware, e.g. maps
Future developments US: iPhone is benchmark EU: Nokia vs. iPhone Japan, ROK: extend 2G success? Developing countries: ?
Thank you… Joel West http://www.JoelWest.org/blogs Michael Mace http: // mobileopportunity.blogspot.com

More Related Content

Success of the iPhone (April 2009)

  • 1. Browsing as the killer app: The success of the iPhone Joel West San José State University Michael Mace Rubicon Consulting Quello Center for Telecommunication Management & Law Michigan State University April 24, 2009
  • 2. Learning from the iPhone Observation The iPhone has been a great success Questions Why? What does it tell us about the future of mobile phones?
  • 3. Outline Assumptions pre-iPhone In devices In use cases In value network Apple’s iPhone strategy Impacts
  • 5. State-of-the-Art Terminal Radio & Television News, Feb. 1953, p. 32
  • 6. Terminal Evolution N-series Smartphone AMPS subs. Set Car phone Model 500 Desk phone Terminal Phone calls Info manager SMS/E-mail Web browser MP3 player Makes calls Receive calls Makes calls Receive calls Functions Handset, LCD, 200 MHz ARM9, 0.06-4.0 gb RAM Handset, dial, 2 MHz Intel 8080 Handset, rotary dial, wire Bill of materials 2007 1978 1949-1969 Date Nokia AT&T West. Electric Firm
  • 7. Now a consumer product 1 billion phones sold in 2006 vs. 240 million PCs US: 145m cellphones, 61m PCs Major vendors seek brand loyalty Nokia alone ad spending $375m/yr Lots of technology push Mixed results on market driving
  • 9. Original conception “ Mobile Internet” vision ca. 2000: Limited bandwidth New mobile-specific content New value network
  • 10. Barriers to mobile Internet From 1996-2000, telecom industry began to plan mobile Internet What they didn’t have: Device capabilities Network capabilities Justified planned 3G buildout Mobile-specific content
  • 11. Smartphones: then & now QWERTY : thumb, slideout or virtual Numeric (T-9) Keyboard 8 Gb 2 Mb RAM 480x320 color 160x160 B&W Screen HSDPA, EVDO: 1 mbps CDPD, i-mode: 5-10 kbps [GPRS: 50 kbps] Bandwidth 2008 1998
  • 12. Reach vs. Richness (2001) Source: Jeffrey L. Funk, The Mobile Internet, 2001 Rich Media Wide Reach US, EU: full Internet, very expensive Japan: limited Internet, mass market
  • 13. Early experiments Low-bandwidth mobile web: i-mode (NTT DoCoMo) Slow speed data cHMTL Portal, business model WAP Special dialect of HTML Both require custom content
  • 14. Mobile value chain (2002) Source: Hermant Sabat, Telecommunications Policy, Oct. 2002.
  • 15. Mobile web (1996-2005) Japan, Korea: low-bandwidth custom web portals Export to US, Europe fails Europe: WAP never catches on US: walled gardens V Cast video clips, 176x132 15fps
  • 17. iPhone value proposition Relatively large screen Ease of use “ Half the people at CTIA can’t send a text message” PC-like web browsing Unique content & ecosystem
  • 18. iPod Ecosystem (2007) Fox, MGM, Universal, Disney … Music Video Hardware Performers Composers Sony BMG EMI Universal Warner “ Indies” Component Makers iTunes Store iPod Producers Complements Accessory Makers
  • 19. iPhone Ecosystem (2008) iPhone 3G applications Video Music Software Hardware iPod content Component Makers iTunes Store iPod Complements Accessory Makers
  • 20. Success of the iPhone
  • 21. iPhone 1.0 and 2.0 70 App store, web apps UMTS, Wi-Fi iPhone 3G (7/2008) 4 Web only EDGE, Wi-Fi iPhone (6/2007) Countries Apps Network
  • 22. Sales 2007: 3.7 million 2008: 13.7 million 2009: 3.8 million June 2007 to March 2009: 21 million iPhones Ca. 16 million iPod Touch
  • 23. Smartphone market share Platform 2006 2007 2008 Symbian 67% 63.5% 52.4% Windows 14% 12.2% 11.8% Blackberry 7% 9.6% 16.6% iPhone - 2.7% 8.2% Source: Canalys (2007), Gartner (2009)
  • 24. Plethora of “iPhone killers” Google/HTC: G1 BlackBerry Storm Palm Pre Nokia N95, N97, 5800 LG, Samsung, … Most have 320x240 touchscreen
  • 25. Mobile web via WebKit WebKit is de facto mobile browser std Safari (Mac): 2003 Symbian S60 (Nokia): 2005 Safari (iPhone): 2007 Android OS (Google): 2007 Chrome (Google): 2008 Open source means available to all
  • 26. The iPhone App Store
  • 27. iPhone App Store 30,000 15,000 10,000 3,000 550 Available apps 0.1b Sept 2008 1.0b April 23 0.5b Jan 2009 0.3b Dec 2008 0 July 2008 App downloads
  • 28. Top 40 apps As reported by Apple April 2009 (may be US only) 2 Web 2.0 2 Utilities 8 Internet services 6 2 Entertainment 14 8 Games Top 20 paid apps Top 20 free apps
  • 29. Mobile web is wired web Among the top 20 free apps Facebook, MySpace Google Earth The Weather Channel Movies, restaurant websites Each downloaded by 3-6 million users out of 37 million iPhone & iPod Touch
  • 30. Rival app stores Apple: July 2008 Google: Aug. 2008/Feb. 2009 Microsoft: Aug. 2008 Nokia: Aug. 2008 Samsung: Aug. 2008 RIM: April 2009
  • 32. The “Real Internet” “ You’ve used the internet on your phone, it’s terrible! You get the baby internet, or the mobile internet — people want the real internet on their phone. “ We are going to deliver that. We’re going to take advantage of some of these investments in bandwidth.” – Steve Jobs, May 2007
  • 33. Early success (1) “ Of all the iPhone’s features, none had reviewers gushing more than its Internet browser . It was the first cellphone browser that promised something resembling the experience of surfing the Internet on a PC . … “ On Christmas [2007], traffic to Google from iPhones surged, surpassing incoming traffic from any other type of mobile device …” —  New York Times, 1/14/08
  • 34. Early success (2) Google “had seen 50 times more searches on Apple‘s iPhone than any other mobile handset, adding weight to the group’s confidence at being able to generate significant revenues from the mobile internet. “‘ We thought it was a mistake and made our engineers check the logs again…’ —  Financial Times, 2/14/08
  • 35. Users got the real Internet Today they Google everything Can use iPhone instead of PC Data plan helps enable this Result: ubiquitous Internet device Begins shift to mobile Internet
  • 36. There is no mobile Internet “Mobile Internet” value chain in US Utilizes existing Internet Content: news, weather, etc. Services: search Adapted & customized Form factor Ease of use (custom app) Location aware, e.g. maps
  • 37. Future developments US: iPhone is benchmark EU: Nokia vs. iPhone Japan, ROK: extend 2G success? Developing countries: ?
  • 38. Thank you… Joel West http://www.JoelWest.org/blogs Michael Mace http: // mobileopportunity.blogspot.com