The Apple iPhone Launch: Great Excitement Notwithstanding A Glitch or Two
The Business of Apple Inc.
Apple Inc. has always been the epitome of “cool”. From the time it was launched almost 30 years ago in Cupertino, the company founded by the twin Steve’s, Jobs and Wozniak, has perennially been at the cutting edge of consumer-friendly computing and personal entertainment electronics.
The 1970s ushered in the modern IT era. The transition from vacuum tubes to miniaturized transistors and solid-state semiconductors enabled IBM to launch the IBM PC, Bill Gates to write Microsoft DOS, and Apple Computer to launch the Apple and Apple II. Being an open system that was licensed to other manufacturers, the PC (and DOS that ran it) eventually garnered the lion’s share of the personal computing market. Nonetheless, Apple Computer pioneered the graphic user interface, boasted the speedier chip and OS, and, by virtue of highly-creative TV commercials by Chiat/Day that ran on the Super Bowl broadcasts, captured the imagination of America. Consistently and in many vibrant ways, Apple demystified the use of computers with such whimsical brands as Apple and Macintosh., As well, the company proclaimed itself as offering a computing experience distinct from the grayness of the corporate world.
To its legion of loyal followers, Apple products speak for themselves. For the sake of press and investor relations, nonetheless, Apple Corp. articulates its mission statement as “Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.”
Apple Computer may claim just 5% to 15% of total desktop sales but the fanatical following it has always enjoyed ensured that virtually all software aimed at families and small businessmen (including Microsoft Office) were offered in both PC and Mac versions.
This emphasis rests on the fact that the bulk of company revenue has always been from computing hardware and software that appealed to graphics professionals, home users, educators and, in recent years, college students. The complete product range:
Mac Pro servers
Mac Mini desktop
Mac Book and MacBook Pro laptops, notebooks
Cinema Displays monitors
xServe, xServe RAID servers
Final Cut Studio
Final Cut Express
Entertainment and Personal Electronics
iPod Classic, iPod Shuffle, iPod Touch
iMusic music, video and TV shows
The iPhone Launch Strategy
The early success of the iPhone – 500,000 units sold the first weekend, CNN reported from analysts’ estimates – can be attributed chiefly to three factors: Apple’s long-established emphasis on ease of use, its successful foray into portable electronics with the iPod, and excellent marketing.
Innovation and Product Features
Certainly, innovation had very little to do with it. Korea’s LG jumped the gun on Apple with the January 2007 launch of the co-branded, completely touch screen mobile phone for Italian fashion house Prada. The KE850 model was slim (12 mm. thick) and featured a video player, music player, document viewer and a 2-megapixel camera. Though the touch screen icons were monochrome, the PRADA name and €600 suggested retail price (about $800 at the exchange rate prevailing then) would have guaranteed great attraction at the high end, status-conscious market segment.
Since then, other mobile phone makers like Samsung, Motorola and Taiwan’s HTC have scrambled to market their own completely touch-screen phone models.
In another market that is likely to converge with mobile telephony very soon, pure touch screen controls have long been a feature of car-mounted, handheld and clip-on personal navigation systems.
Of course, the iPhone screen is full color. This makes it a delight to view a thumbnail gallery of friends’ pictures, caller line ID information complete with name and associated picture or even the initial desktop screen with numerous functions representing different functions.
The key “innovations” really have to do with ease of use and ready access to the Internet.
Nokia, Sony-Ericsson, Motorola and other brands have made function icons a familiar sight in mid- and high-end mobile phone models for at least two years now. The difference is that all these stop at the primary interface. Select the messaging icon, for instance, and all the other menus that follow are the usual plain lists. On the iPhone, Apple maintains its familiar emphasis on an intuitive GUI all the way. This is what Apple means when they tout the iPhone as “…a revolutionary new mobile phone that allows you to make a call by simply tapping a name or number in your address book, a favorites list, or a call log.”
The second key innovation is that Apple placed shortcuts to many popular uses of the Web right on the primary desktop screen. These include one-tap access to Google search and YouTube. Other “web apps” (really bookmarks but Apple, as always, spares non-techie users the fuss of logging in and copying web site URL’s) for the iPhone enable users to effortlessly browse lists of news articles on social networking sites like Digg, play games like Sudoku and Bejeweled, view movie times, train schedules, and blogs.
Like the PDA’s businessmen and status-conscious consumers are used to, the iPhone also effortlessly synchronizes contact lists with those on one’s PC, Mac, or Internet service.
The iPhone extends visual delight and entertainment with a 2-megapixel camera and a photo management application, iPhone goes beyond anything on a phone today. Just like the iPod that emphasizes convenience, the iPod automatically synchronizes photos with PC or Mac albums when one docks it (bought separately). And youthful users enamored with photo-sharing services like Flickr and other online albums can post their pictures directly to the Mac Web Gallery.
On the face of it, the iPhone launch on June-29, 2007 was a bold venture into an entirely new business category, that of mobile telephony. After all, there was no synergy to be had in product development, acknowledged expertise, or distribution network vis-à-vis the main Mac computer lines.
On closer examination, Apple had simply expanded the iPod franchise and redefined that end of the business as “personal communications and entertainment”. The iPod was launched in 2001 as a fashionable way to carry around up to 1,000 favorite music tracks on a super-slim, shock-protected 5Gb hard drive. By 2005, the iPod Nano offered video capability as well. This effectively validated the competence of Apple in higher end portable and lifestyle-keyed entertainment.
A Mass Market
In launching the iPhone and clearly going after a global market with the recent launch in London, Apple seeks a fair share of the massive user base of cellular phones. By one estimate, there were no less than 2.6 billion mobile communication users worldwide in 2006, up by a robust 26.3% over 2005. Gartner’s Dataquest put annual sales last year at 990.8 million units, a 21% from 2005.
By comparison, units sold for the much pricier desktop or portable computer had taken over 20 years to reach a cumulative volume of one billion units, Microsoft’s Bill Gates declared in 2004. Increasing penetration of laptops, notebooks and handheld were expected to doubled the total base to 2 billion by 2010, however.
These twin markets are important because they have merged, as in the case of the Blackberry.
Technological Trends and Market Development
By no means a technological breakthrough, the iPhone is quite simply the culmination of developments that added a great deal of functionality to the cellular phone of today even as prices continued to drop.
How often, for example, have people wanted to capture a happy, memorable or poignant scene and regretted having left their bulky SLR or sleek digital cameras at home? The answer, as it turned out, was to equip the mobile phone with an embedded camera because owners invariably brought theirs everywhere. Not surprisingly, The camera phone now has the lion’s share of mid- and high-end mobile phone sales.
Other features that have become standard – Internet browsing, music (MP3) playback, memo recording, personal organizer functions, e-mail, instant messaging, camcorders, ringtone downloads, games, radio, Push-to-Talk (PTT), infrared and Bluetooth connectivity, call registers, ability to watch streaming video or download video for later viewing, video calling – are clearly designed for personal entertainment or for social activity.
Launch Activities and Marketing Effectiveness
Judging by the amount of press coverage, stories about people waiting 100 hours in line to be among the first to get their hands on this new icon of “cool” and “hip”, the iPhone has to have been the most-covered technological launch of the year. This is explained by a marketing, advertising and publicity plan that rivaled the Harry Potter series for sheer hype.
Fully six months before the first units would be available, steve Jobs went public with a detailed description of the two models in the works. Media, tech web sites and blogger communities discussed many of the known features and kept expectations alive. It did not hurt, of course that Apple and AT&T kept dropping tantalizing hints as the months rolled by.
In June, Apple announced a firm availability date and built up excitement yet again. Then the multi-media advertising campaign came on in the usual grand style of Apple TV commercials and print advertising.
The week after the launch, the PR machinery decided to leak the rare problems about hooking up, presumably to feed speculation about AT&T’s ability to cope with “massive” demand.
In subsequent weeks and months, publicity included Steve Jobs proclaiming his satisfaction with early sales and expectation that iPhone would hit the 1-million mark after just three months on the market. Then came, of course, that deep price cut in September, fueling yet more demand.
A Hiccup or Two
Three issues came to the fore during the early months after launch. The first was that, in order to assure reasonably wide service availability, Apple enlisted AT&T/Cingular Wireless as the exclusive nationwide system operator. There was some resistance to this, with some hackers succeeding in “unlocking” the proprietary code and subscribing to other networks. Apple stood its ground and strengthened the security feature. To assuage users, especially those who griped that they could not do video or multi-media messaging, AT&T announced that they would begin to offer 3G services by early 2008.
Early on, there was some adverse publicity about users who could not hook up to the AT&T network and required technical support assistance for workarounds. Apparently, this affected just 2% of early adopters.
To soften price resistance, thirdly, Apple dropped the price to $399 just 68 days after launch. Speculation was rife that the company did this because sales had slowed down drastically after the early adopters had rushed to be the first to buy (and show off) the colorful iPhone. As well, it was thought that Apple had already recouped development and fixed costs with the first million or so units sold. The most telling fact, however, was that the company had just launched the iPod Nano Touch, an enhancement that did not only run videos, it also downloaded them off the Internet with no necessity for a monthly subscription fee.
Early in the product life cycle of the iPhone, demand has been brisk. The move to a UK launch suggests that Apple has done its homework and found demand for the iPhone in Europe as well. Corollarily, Apple should roll out to the rest of Europe and Asia more rapidly. The hype created by the launch PR has also created demand that is currently being filled by cheap Chinese knock-off’s.
There may be more technological advancements available in the future. For the moment, I would recommend that Apple hasten the introduction of 3G services or find itself beaten to the draw by Nokia which already offers that capability on all current models (except the stripped-down, low-price units to be sold in India and China). As well, there is an opportunity in spearheading the integration with personal navigator devices, for which all that is really needed is to license maps.