success of the iphone (april 2009)

Browsing as the killer app:The success of the iPhone

Joel WestSan José State University

Michael MaceRubicon Consulting

Quello Center forTelecommunication Management & Law

Michigan State UniversityApril 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-iPhoneIn devicesIn use casesIn value network

Apple’s iPhone strategyImpacts

Evolution ofMobile Phones

State-of-the-Art TerminalRadio & Television News, Feb. 1953, p. 32

Terminal Evolution

Firm West. Electric AT&T Nokia

TerminalModel 500Desk phone

AMPS subs. SetCar phone

N-seriesSmartphone

Date 1949-1969 1978 2007

Bill of materials

Handset, rotary dial, wire

Handset, dial,2 MHz Intel 8080

Handset, LCD,200 MHz ARM9, 0.06-4.0 gb RAM

Functions Makes callsReceive calls

Makes callsReceive calls

Phone callsInfo managerSMS/E-mailWeb browserMP3 player

Now a consumer product

1 billion phones sold in 2006vs. 240 million PCsUS: 145m cellphones, 61m PCs

Major vendors seek brand loyaltyNokia alone ad spending $375m/yr

Lots of technology pushMixed results on market driving

The Pre-iPhone“Mobile Internet”

Original conception

“Mobile Internet” vision ca. 2000:

Limited bandwidthNew mobile-specific contentNew value network

Barriers to mobile Internet

From 1996-2000, telecom industry began to plan mobile Internet

What they didn’t have:Device capabilitiesNetwork capabilities

Justified planned 3G buildoutMobile-specific content

Smartphones: then & now

1998 2008

Bandwidth CDPD, i-mode: 5-10 kbps

[GPRS: 50 kbps]

HSDPA, EVDO: 1 mbps

Screen 160x160 B&W 480x320 color

RAM 2 Mb 8 Gb

Keyboard Numeric (T-9) QWERTY : thumb, slideout or virtual

Reach vs. Richness (2001)

Source: Jeffrey L. Funk, The Mobile Internet, 2001

RichMedia

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 datacHMTLPortal, business model

WAPSpecial 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 portalsExport to US, Europe fails

Europe: WAP never catches on

US: walled gardensV Cast video clips, 176x132

15fps

Apple’siPhone

Concept

iPhone value proposition

Relatively large screenEase of use

“Half the people at CTIA can’t send a text message”

PC-like web browsingUnique content &

ecosystem

iPod Ecosystem (2007)

Fox, MGM,Universal,Disney …

Music

Video

Hardware

Performers

Composers

Sony BMGEMI

UniversalWarner“Indies”

Component Makers

iTunesStore

iPod

Producers

Complements Accessory Makers

iPhone Ecosystem (2008)

iPhone 3Gapplications

Video Music

Software

Hardware

iPodcontent

Component Makers

iTunesStore

iPod

Complements Accessory Makers

Success of the iPhone

iPhone 1.0 and 2.0

Network

Apps Countries

iPhone (6/2007)

EDGE, Wi-Fi

Web only 4

iPhone 3G (7/2008)

UMTS,Wi-Fi

App store,

web apps

70

SalesDaily iPhone sales (worldwide)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09

2007: 3.7 million2008: 13.7 million2009: 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: G1BlackBerry StormPalm PreNokia N95, N97, 5800LG, Samsung, …

Most have 320x240 touchscreen

Mobile web via WebKit

WebKit is de facto mobile browser stdSafari (Mac): 2003Symbian S60 (Nokia): 2005Safari (iPhone): 2007Android OS (Google): 2007Chrome (Google): 2008

Open source means available to all

The iPhoneApp Store

iPhone App Store

Available apps

App downloads

July 2008 550 0Sept 2008

3,000 0.1b

Dec 2008 10,000 0.3bJan 2009 15,000 0.5bApril 23 30,000 1.0b

Top 40 apps

Top 20 free apps

Top 20 paid apps

Games 8 14

Entertainment 2 6

Internet services

8

Web 2.0 2

Utilities 2

As reported by Apple April 2009 (may be US only)

Mobile web is wired web

Among the top 20 free appsFacebook, MySpaceGoogle EarthThe Weather ChannelMovies, restaurant websites

Each downloaded by 3-6 million usersout of 37 million iPhone & iPod Touch

Rival app stores

Apple: July 2008Google: Aug. 2008/Feb. 2009Microsoft: Aug. 2008Nokia: Aug. 2008Samsung: Aug. 2008RIM: 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 everythingCan use iPhone instead of PC

Data plan helps enable thisResult: ubiquitous Internet

deviceBegins shift to mobile Internet

There is no mobile Internet“Mobile Internet” value chain in USUtilizes existing Internet

Content: news, weather, etc.Services: search

Adapted & customizedForm factorEase of use (custom app)Location aware, e.g. maps

Future developments

US: iPhone is benchmarkEU: Nokia vs. iPhoneJapan, ROK: extend 2G success?Developing countries: ?

Thank you…

Joel Westhttp://www.JoelWest.org/blogs

Michael Macehttp://mobileopportunity.blogspot.com