RSSiPhone's global success is more marketing myth than reality
By Joe Wilcox | Published October 1, 2009, 12:15 AM
American business history almost certainly will recall Apple as one of the most successful marketers ever. With iPhone, the company has performed a remarkable magic trick: Making the late-starting mobile seem ready to take over the world. But the hard reality of facts -- not the torrent of glowing emotions coming from American and European financial analysts, journalists or Mac loyalists -- show something else. Apple's smartphone is by no means the roaring success everyone here claims it to be.
Let me preface by reminding that I'm on record as calling Microsoft's mobile strategy a train wreck and asserting that the cell phone is poised to replace the PC. I've also called Apple's mobile platform -- iPhone, iPod touch and App Store -- as leading contender to become the next-generation computing platform.
But hard mobile phone data and analysis raises doubts about whether Apple has got a sure winner. After being an early App Store cheerleader, I'm increasingly of the opinion that Apple's mobile platform may not reach escape velocity after all. Emerging markets and Apple's flawed strategy in India and Russia top my reasons for questioning how high the platform will ascend before falling back to earth. Other factors, such as device pricing and emerging market trends around mobile money, also work against Apple's present iPhone strategy.
Some iPhone fans might ask: Surely Apple's global reach -- more than 70 countries -- is enough to bring the iPhone/App Store platform everywhere? But there's more to selling handsets than having presence. I contacted IDC Worldwide Mobile Phone Tracker senior research analyst Ryan Reith about Apple's global reach. He explained:
The 70+ countries is something that looks good on paper, but in terms of volume it doesn't address the regional dynamics. One of the reasons why Nokia and Samsung are so good in developing markets is because they have mastered the art of effective manufacturing and distribution. They can make devices/services that suit the market. Apple is clearly not that type of company, nor do I think they are going in that direction. Having handsets readily available in 70+ countries is good for brand awareness, but it won't necessarily drive market share.
Another BRIC in the Wall
What is iPhone's real marketshare? In the United States, during second quarter 2009, Apple ranked No. 6 in handset unit marketshare, behind Nokia in one of its three weakest markets, according to IDC. Apple's share: 5.9 percent. By comparison, leaders Samsung and LG had 24.8 percent and 22.1 percent unit share, respectively.
But Apple's global showing is more revealing, and the numbers fall far behind US hype about iPhone and App Store. For example, combined, four emerging markets known as BRIC -- Brazil, Russia, India and China -- account for more than 40 percent of world population. There, iPhone's largest unit marketshare in any one country was 1 percent -- in Russia during second quarter, according to IDC (That's actually good enough for rank of No. 7). Marketshare is too small to even register in the other three countries. That's three goose eggs for iPhone. By comparison, Nokia unit marketshare ranged from 38 percent to 56.1 percent in these same four countries during second quarter.
China isn't so surprising a non-showing considering that only in August did Apple cut a distribution deal with second largest wireless carrier China Unicom. But that doesn't explain iPhone's tiny share in Brazil, India and Russia. The reasons are actually many, and on closer analysis they don't bode well for iPhone gaining significant unit marketshare any time soon -- perhaps not unless Apple just gives away handsets (Please jump to next subhead for further analysis).
During this month's new iPod launch event, Apple CEO Steve Jobs said the company had sold 30 million iPhones -- a number that is sure to increase when third calendar quarter shipments are officially announced in a few weeks. Thirty million is a remarkable number in just two years, but from another perspective it's paltry. In just the second quarter, Nokia sold three-and-a-half times more handsets as Apple did in more than two years, according to Gartner and IDC.
I've read the comments and commentary; iPhone defenders try to dispute numbers like these by insisting on only counting smartphones. They claim the comparisons are unfair, because iPhone is in a different category. OK, let's do that. Globally, during second quarter, Nokia sold more than three times as many smartphones as Apple, according to Gartner. Nokia's smartphone market share was 45 percent, while Apple's was only 13.3 percent.
There is another measure of success. Defenders of iPhone are all hung up on the applications, as is Apple, which uses App Store like a marketing club. This week, Apple announced that there have been 2 billion downloads from the App Store, which now has more than 85,000 applications. The number is humongous and quite simply unbelievable. Apple has shipped about 50 million App Store capable devices (including iPod touch). Assuming they're all in use, that works out to 40 applications per device.
A World Apart
There are still more ways to put into broader context iPhone's 30 million units. Global annual handset sales exceed 1 billion units a year, according to combined analyst reports. In about the time Apple shipped 30 million iPhones, all manufacturers shipped about 2 billion handsets.
Combined analyst estimates put the number of cell phones currently in use at about 4 billion units, with as many as three quarters in emerging markets. Exactly how does 30 million in use (presumably) compare to 4 billion? Apple's reach is small, but Americans would never know that from all the noise here about iPhone (Jump to the next subhead for scorching indictment of the American media).
Apple's challenge then is to gain more share, more rapidly. "Apple has had great success in North America, but quite a bit of struggle remains in other regions, especially developing markets," Reith said.
The reasons for iPhone's rest-of-the-world struggles are many and too many for this already overlong post. I picked two, the latter being big enough for a series of blog posts.
Carriers operate differently in many emerging markets than here. For starters, there are many state-sponsored carriers. More significantly, in some markets there are many smaller carriers -- and these are not the ones distributing iPhone. It's not uncommon in markets like India for phone users to switch carriers by swapping SIM cards. Small carrier competition creates more consumer choice, but not for iPhone.
Earlier this year, Anshul Gupta, Gartner's principal analyst for mobile devices, discussed some of Apple's emerging market missteps: "In India, iPhone was launched at $650, and it was locked to operator for life. At first, price was high and secondly phone was locked in a market where consumers are not used to such condition, and" where people "change operator[s] frequently."
But iPhone is different. "You cannot [swap] SIM cards," he emphasized, "because it is locked onto [the] operator you bought the device from. An iPhone bought from Airtel will not work on Vodafone and visa versa. Phone is not subsidized as well in India."
The perspective is about the same there in India as viewed from afar by the Gartner analyst. "Apple bungled up big time with the iPhone in India," said Rohit Mishra, a student studying mobile technologies at VIT University in Vellore, Tamil Nadu, India. "It still has a solid brand and created the touchscreen crave that has resulted in the success of Nokia [XpressMusic] 5800 and Samsung Star." Nokia is India's market leader, with 56.1 percent unit marketshare in second quarter, according to IDC. Samsung was No. 2 and Apple No. 22.
Rohit continued: "By pricing iPhone at Rs 31,000 ($600 approximately), Apple turned away a huge bunch of people who were waiting for the iPhone. There is another issue here -- we don't have 3G here. It's been launched by the state carrier in select cities, but that doesn't count for much now."
Most of the world doesn't yet share the American obsession with smartphones. In many emerging markets, mobile telephony needs are more basic: connectivity and commerce. Governments and industry struggle to just get citizens connected with any mobile phone. Something as sophisticated as iPhone isn't a consideration.
According to data presented during the GSMA Mobile Money Conference, held in Barcelona, Spain, from June 22-29, 2009, mobile phone access is as little as 2 percent in rural areas of Afghanistan, in a country where 75 percent of the population is illiterate. Increasing mobile penetration is a primary goal there and among other emerging market countries. The benefits can be substantial. According to GSMA: "A 10 percent increase in mobile phone penetration can boost GDP growth by 0.6 percent."
Beyond connectivity, in many of these same countries, governments and industry are looking at ways to enable commerce. Mobile money is a primary goal. While the concept has several forms, basically, mobile money allows residents to pay for goods using their cell phones and to receive money, too. Where banks can't reach, mobile phones can. Rather than store bills and coins under the mattress (if there is one), people carry digital currency attached to their mobile accounts.
In October 2008, Visa launched a mobile payment network in India. A similar network launched in Malaysia in April 2009, in cooperation with Maybank, Maxis and Nokia. Three days ago, in Awareness Times, Aruna Turay wrote about a new mobile money system opening in Sierra Leone.
The point: The majority of the world's cell phone markets have needs that the iPhone isn't ready to meet -- even with App Store as a huge asset. By the way, even Nokia is moving into the mobile money business, announcing its own network in August. One line from the press release makes the point: "4 billion mobile phones but only 1.6 billion bank accounts."
Before writing this analysis, I took the position that mobile payments would overshadow applications. Apple has the one, but not the other. Reith disagreed. "My opinion is that mobile payments will coexist on current OS/platforms, and will play a role alongside of applications," he said. "I don't think one will overshadow the other."
He added: "Mobile payments will interact with a lot of apps that are made for emerging markets." That's good news for Apple and its powerful App Store. By number of devices, Apple is puny. By number of mobile applications, Apple is a world-class leader. Additionally, App Store offers a limited mobile payments system -- limited meaning its dedicated to application purchases. An Apple bank, so to the speak, could actually increase the iPhone/App Store platform's appeal in emerging markets.
Misguided Reporting
I'm not trying to demean or even diminish Apple's success with iPhone or App Store but to create perspective too often lacking in US reporting. Many of my journalist peers are themselves obsessed about iPhone and App Store. The number of blogs in any given week just dedicated to new App Store applications is evidence enough. There is informational obsession with the device that defies reality.
IDC's Ryan Reith agrees. "The view about American journalist obsession with the iPhone couldn't be more true," he said.
It's that misguided obsession as expressed in two separate blog entries posted yesterday that prompted my writing about iPhone. At the Apple 2.0 blog, reporter Philip Elmer-DeWitt asserts that "iPhone's share of the smartphone market hits a record 40 percent." Really? In what alternate universe? He writes:
Apple now has a substantial -- if not the largest -- share of the smartphone market in every region of the world except Asia and Africa, according to a report issued Wednesday by AdMob. Overall, the iPhone's worldwide share grew to 40 percent from 33 perent over the last six months. In North America, its share of the smartphone market is 52 percent, as measured by hits on AdMob's ads.
This data -- based on advertising measurements -- doesn't even remotely jive with Gartner or IDC smartphone unit shipments, nor even Apple's figures. According to Gartner, Nokia has 45 percent smartphone marketshare in the United States. But the data makes sense perhaps looking at AdMob's share on different handsets. This kind of persistent reporting makes iPhone appear larger than what it really is. It's wonderful for Apple's Stock price.
Now for the other blog: I disagree with Silicon Alley Insider writer Dan Frommer's assertion that "Microsoft must make more spps for the iPhone." That's a simply crazy idea from yet another member of the iPhone-obsessed American Press. If you're living in one of two glass houses -- geekdom or the United States -- this kind of thinking makes sense (Sadly, many technology bloggers or journalists live in both).
Microsoft's mobile strategy may be total disaster, but Apple's platform is no sure thing. Frommer makes a short-sighted recommendation. That's OK, he gets plenty of other stuff right.
As for me, I expect many iPhone and Mac fanboys to call me out-and-out wrong. Feel free, that's what comments are for. I look forward to the engaging debate.
I'll have some of what you're smoking Joe! So Nokia has 45% of the smartphone market in the U.S.? Really? The United States of Finland? I guess if you (and Gartner) define "smartphone" as a mobile phone with a chip in it perhaps. But smartphones like the iPhone and Android OS handsets are a different beast and Nokia doesn't have a dog in the fight here in the U.S. Which carrier sells a subsidized Nokia touch-screen smartphone? Oh that would be none. Which sell an unsubsidized one? None. Definitions matter.
Although there's plenty of misleading data (and misuse of good data) in this piece as well as many that sing the iPhone's praises, the hard fact is companies like RIM and Apple have done pretty well for themselves operating in the high-end Western markets. They rightly don't fear Nokia and it's sad rejiggered relaunch of the Ovi store but rather Android. Remember, Joe, not every company needs or wants to be the worldwide market leader. Being the premium market leader in premium markets is good enough (and very profitable) for some.
I know you haters are just dying for Apple to collapse. It could happen. You're free to bet against them. Enjoy!
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|I don't hate Apple, but I still predict its collapse, since anyone with an IQ of approx 72 and above can see it coming (AGAIN). And anyone with an IQ of approx 57 and above can see nothing special in Apple already today to justify the buzz around it...
Apple's way of competing with rock-solid-ready-for-future-Win2000-core: build upon someone else's work hehehehe UNIX. How lame...
It's in Apple's genes to shoot themselves in the head. They CANNOT change their modus operandi which currently forces their users to jailbreak and jump through other hoops like dogs in the circus. For what? To do stuff their "creator" deemed unholy? F-- that...
I've never met an extremely technical Mac user. They are all spoon-fed retardants who are impressed by idiotic crap that third-party software does way better any day.
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|you can say anything, apple will continue getting richer and better. And what ****s you is that you know that.
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|iphone is the best phone ever, how many models have been necessary for nokia to have 45%? ("Nokia's smartphone market share was 45 percent, while Apple's was only 13.3 percent.") and how many apple? We can't forget that apple is new in the market, nokia is since the time of the cell phones with the snake's game. And apple market is just getting bigger, just like me, i think anyone have already had an iphone don't want anyone else, and i will buy a 32gb 3gs, the only problem is that iphone is still to expensive here in Brasil, but, there is always a price, and everything is too expensive here in Brasil(including nokia phones) and what nokia phone is better? anyone of the big nseries(n95 etc..)i know, i prefer a small phone with 3mp, than a big with 5mp.
Here in Brasil, everybody prefers the iphone, and anyone wants to have one.
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|"And apple market is just getting bigger, just like me"
Hmmmm... You...fatty... I begin to wonder if Apple should start offering a free buffet with every iPhone purchase... It could make the event ever so memorable.
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|that's not what i mean. "just like me, i think anyone have already had an iphone don't want anyone else"
sorry, i am from Brasil, i don't speak english very well.
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|iPhone better??? Better than what??? The Apple Geniuses just released another iphone s/w update. Ver 3.2 is advertised to fix all the bugs introduced in 3.1. Damn, I'm sure glad I bought one of these things! If only I could keep it running with out rebooting or restoring on a daily/weekly basis. Worse than Windows 3.1!
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|Ahhh God..how can you not see that Apple is doing what Apple has been doing, and their competitors are doing what they'll continue to do. Even *if* Apple continues to make "better" smartphones, they could never make them so much better to justify the price difference between them and the competition. Apple competitors will copy 99% of the things people really love about their iPhone and offer it for 50% less.
Apple must always spend much more on marketing to convince people that paying 50% more to get just 5% more is the cool thing to do. Naturally, fewer and fewer people fall for that BS hehehe
As can be seen with MacOS vs. Windows, slowly all of Apple's arguments against its competitors disappear. In the early 90's it was "user interface", then after Win95 it was clearly "stability", then with WinXP when interface was beautiful and stability rock solid, it was now "security" (mass attack of the toolbars from hell), which was completely annihilated by Vista (highly secure and includes AV mechanisms). Windows Vista core complaint was "senseless security measures" (User Access Control madness). With Windows 7, Apple is almost completely out of ammo. Now security comes together with comfortability... Apple can only start showing irrelevant benefits such as better backup and other BS that has nothing to do with an OS. Now, do you REALLY think MS cannot outspend Apple with their gay Time Machine and gay AT&T Natural Voices Text-to-Speech licensing? You've got to be the most retarded person in the world if you think MS cannot throw in everything AND the kitchen sink in future OSs... Something that'll put Picasa, True Image, Babylon etc to shame... Any of these products ain't worh more than a few dozen million bucks to completely clone within 6 months with MS army of coders. WAKE THE F-- UP!
Apple will continue to be a bully and prevent users like ME, who MUST HAVE A QWERTY KEYBOARD from integrating bluetooth keyboard to an iPhone, or some other new limitation, cuz Apple wants some cash for those hardware "extras". Apple's control freakness will continue to hurt users as the conflicts of interest between Apple's gaylords (AT&T) and other services (Google Voice, Vonage, Skype) exhibit themselves. Apple's MOST PAINFUL weakness will be revealed by a lame walking mobile OS that will ALWAYS be 20 steps behind Windows Mobile technically and in ease-of-programming (Visual Studio style). Apple will never ever be able to please developers like Microsoft can.
Apple is doomed for failure, again, and again. There is no way Apple survives ON ITS OWN the next 10 years. I'll wager my left testicle on that. ;)
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|I thought you had said 5 years previously... now it's 10? =)
At any rate, I agree. Well said.
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|I said iPhone sales will totally tank within 5 years. The Apple bubble will burst soon after that, as soon as the last remaining Apple soldier is killed -- the Mac desktop/laptop market... It'll still take a few years for Apple to gasp for air..in vain. They'll die or lose autonomy (merged/bought by someone) in max 10 years. No doubt about that.
Besides, when you make the stakes so high, you wanna be 100% sure you're gonna win hehehehe ;)
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|wow thou dost protest too much -- are you a top or bottom?
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|In your case you know I'm gonna have to be a top.
BTW, have they found Osama in one of your folds yet?? hehehehe
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|I have been using mobile phones since 1989, my first bring the Moto brick phone. Over the years, I have owned over 25 different phones and about 12 different PDAs, including the palm and newton. Every one of these devices had flawed interfaces, that prevented me from utilizing the device fully. While I am a geek by nature, and had the time in the past to fsck around the device to make them usable by customizing/hacking/configuring them, the turning point came when I bought a HP WM based rw6828. This was HP's umpteenth smartphone, but the device was utter crap. The phone would hang while talking, vpn/internet settings menus were redmond's worst programming feat, the user interface with the damned stylus was a horror, updating the firmware/rom was an exercise in playing russian roulette, apps were of mediocre quality and prone to making your phone crash, multiple apps being run would slow down the phone to a unusuable state...the list went on. Sure i could have trawled the net to look for patches and fixes, to make it all work, but at some point in your life, you just want something that just works...it has to pass the toaster test. Somewhere along the line, the mainstream/established phone makers started getting more focused on marketing/carrier bundling/marketshare growth, instead of truly addressing the concerns of the regular joe who wants a connected device that can be used as a phone and internet device/game/mp3/small factor pc. Apple was the first company to really re-examine the concept of the smart phone and truly cleaned up a lot of mess out there, and came out with a phone that is simple to use, functional and extendable. They didn't just deliver a phone, but a extensible platform. Sure the damn iphone doesn't have the latest bluetooth ADP2 this, and 100 megapixel that, or 1080p HD video with tivo built-in. But you know, most folks who buy the iphone are not looking at the best specced phone out there. They are only looking for the most usable smartphone, which just so happens to be an iphone.
Sure the iphone will not appeal to all and sell like another faceless cheap nokia candybar, but I hardly see anyone writing a thesis stating that Lexus/porsche/maserati are all failures because they didn't sell billions and that the afghan sheep shaver or the chinese chicken feather plucker doesn't own one.
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|@jnaina You're right that you don't "hardly see anyone writing a thesis stating that Lexus/porsche/maserati are all failures because they didn't sell billions and that the afghan sheep shaver or the chinese chicken feather plucker doesn't own one." But you do, in America, see people writing about iPhone like it will sell to everyone and is selling to everyone, which is so far from the truth. That was the whole point of writing this post -- to put forth some facts about iPhone's global presence.
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|Huh? that is funny, anyone who knows anything would tell you the iPhone is not for everyone; not everyone needs a smart phone. That is an absurd statement. Tell us the real reason you wrote this nonsense....set yourself free Joe....
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|I think the whole thesis above fails to acknowledge a few key points:
Firstly 4bn phone users worlwide? At first I started to agree, 6bn people on the planet, living in an affluent western society 2/3rds of the people I know have 'em - no, wait, 2/3rds of the adults I know have 'em (maybe more) but the global population stats include under 10s & over 65s. This means less about half the people I know actually own a phone. 4bn phones has to be fiction, Joe, you're not immune.
Secondly, regardless of population the wealth dynamic is vastly different. My wife comes from a modest, South American country & no, they won't be affording iPhones. The US on the other hand is probably the model of capitalism/materialism so of course the disposable wealth for Apple gadgetry is going to be higher.
Thirdly, low-end consumer phones are just that - consumable, high-volume, sort life-span products. In the same way Apple Notebooks/Desktops happily deliver a 5-year life-span the proliferation of NetBooks is dropping the average PC life-span giving the false effect of increased marketshare. Smartphones won't be changed every 6-months so of course the marketshare (by volume of sales) will be lower & decreasing.
McD
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|Once in ten years Apple comes up with some market hit and you ppl are creaming your pants. Listen, with or without the iPhone, we would STILL have touch screens, maybe one finger only for next X years, but we'd have the same nice interfaces.. We just didn't have the CPU power to do it well, and Apple came in and did a few things "efficiently" by effectively KILLING the most basic concept of QUALITY WORK which is multitasking. So they beat the market with some clever idea. NO BIG DEAL.
They . will . lose . it . all. They CANNOT continue to innovate better than 200,000 just-as-smart developers/designers/scientists around the world with just as many PHDs... Apple does not have a monopoly on creativity. Apple actually sucks by solving one problem ("make the damn thing sexy, man!") and creating another ("forget about multitasking and powerful IDE for devs -- just get it to market fast, man!"). The iPhone OS is the lamest thing in the f'king world and will FOREVER remain gay in comparison to Windows Mobile.
iPhone sales are gonna TANK BAD within 5 years, and the APPLE STOCK BUBBLE WILL BURST, taking with it the entire company. Maybe Microsoft will keep them alive again for their own benefit ("I? Monopoly? Noooo") and maybe Google will buy them out. Either way Apple will lose its indepenence in a few short years BECAUSE THEY ARE A MYTH OF GREATNESS AND ALL MARKETING LIES EVENTUALLY COLLAPSE LIKE A DECK OF CARDS.
You will have to be the dumbest person in the world to buy a Mac in 5 years when by EVERY MEASURE a Windows machine will be the better pick. You'd likewise have to be retarded to get an iPhone compared to the better and cheaper (again) alternatives for future mobile OSs.
Don't tell me Apple are so damn unique and special. They ain't. They were about to die once and they're gonna do it AGAIN. The only way they can survive is if they go out and say "we are so damn special that we want you to spend $5,000 on a laptop that is only 5% better than a $700 laptop of our competitors, and you will pay because you have the cash you rich bas****". Now *that*, is a rather unlikely scenario and we all know it hehehehehehe
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|Hmm, do I detect a bit of teen angst leaking out there? ;-)
So the iPhone has no hope against the massed opposition of dozens of other companies?
I guess just like the iPod and the iTunes Store just couldn't compete against all those just-as-smart PhDs behind the massed opposition of Microsoft, Sony, Creative, Dell, Toshiba, Mitsubishi, Real, the "Plays For Sure" platform, the Zune, EMI, Universal etc etc etc... ... oh wait...
-Mart
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|@mrrt
Mart, iPod was very different. Back in 2002 and 2003, I started asking in blog posts why no other company marketed a music player. By the advertising -- and there was lots of it -- you would have thought Apple made the only one. Marketing works, which is one reason Apple is pumping so much into advertising App Store to promote iPhone.
Something else: Apple got the most important attribute right on Day 1: Synchronization. The iPod/iTunes sync worked really well, even for all that DRM content. No other competitor did sync nearly as well, and PlaysForSure sync was a complete mess.
iPhone's appeal isn't the device but the software and user experience. Sync was one kind of user interface that worked well for iPod. Multitouch is another, and it works well for iPhone/iPod touch. It makes people feel good about using iPhone, which is good product marketing.
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|Okay so if marketing is the main reason for the iPod's success then by your own argument the iPhone/App Store will be a shoe-in for the same dominance the iPod/iTunes music store enjoys as iPhone advertising has well and truly carried on the same tradition.
Also by your own admission the iPhone enjoys spectacular levels of exposure in the press and the public consciousness so again your argument is leading us to conclude the iPhone is destined for the same success as the iPod. :-)
In point of fact, the App Store is accelerating far faster than the iTunes Music Store in terms of sales and awareness - yet another engine for the iPhone growth story.
Synchronisation was the other reason? In that case check for the iPhone - it has the same industry-leading synching of music, movies, TV shows, podcasts as the iPod (and of course add Apps to that as well).
Then there is the iPod ecosystem with over 75% of cars coming with iPod integration and of course the thousands of other peripherals such as dock-equipped sound systems, cases, etc etc which all work with the iPhone.
As you say, multi-touch and the amazing iPhone GUI is another driver.
Basically Joe, everything you have said supports the thesis that the iPhone is on the same trajectory as the iPod – is that not the case?
-Mart
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|$5000? The last time I saw a laptop computer costing that much, it came from IBM, not Apple.
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|"iPhone's appeal isn't the device but the software and user experience."
For me, the appeal of the iPhone always has been the device. The hardware is what makes the pleasant user experience possible in the first place through software. It's quite simply an elegant and beautifully designed piece of hardware (not so much with their latest cheap looking and feeling incarnation).
It's the limitations and restrictions placed on it by Apple and AT&T for over 2 years that have been choking the device, and robbing consumers of the experience they truly deserve for that amount of money. Unlocked iPhones show just exactly what that device is (and should have always been) capable of doing since launch.
For the rest of Apple's products, I would agree with that statement though.
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|Joe, one important issue you fail to mention is growth rates. The iPhone's smartphone marketshare has grown 625% year-over-year while according to Gartner, Nokia's has decreased from 47.4% in Q2 2008 to 45% in Q2 2009. You need to look where the market is heading to get a real picture of how large an impact the iPhone has had and continues to have. http://www.gartner.com/it/page.jsp?id=1126812
RIM took 10 years to hit 50 million Blackberry devices sold this year - Apple has sold 50 million iPhone OS devices in only 2 and a bit years. RIM only has a current subscriber base of 30 million devices and most of those are older, low-res, non-touchscreen devices many of which not only lack 3G but wifi as well.
Then there is Microsoft who has been well and truly knocked to the ground having dropped from 14.3% share of the smartphone market in Q2 2008 to 9% in Q2 2009 http://www.canalys.com/pr/2009/r2009081.htm
As far as profitshare is concerned, I got the figure wrong – it’s even larger! The WSJ reports analysts at Deutsche Bank have estimated that despite only having 1% unit marketshare in 2008, Apple captured 20% of the profitshare of the *entire* mobile phone market (with RIM capturing 15%). This year they estimate Apple and RIM combined will rake in a staggering 58% of total operating profits over the entire mobile phone industry.
http://arstechnica.com/g...r-iphone-blackberry.ars
Joe, the 13.7% figure from Canalys does not include the iPod Touch. The 20% is a rough extrapolation once the latter is added to the mix. It's not about just the phone anymore - it's about the platform – the OS and the apps.
The 75% of developer-share figure should have been 74% and comes from the Mobile Application Analytics firm Flurry which indicates that in terms of developers by platform the iPhone went from 72% in March 2009 to 74% in June 2009: http://blog.flurry.com/?month=7&year=2009
You highlight the Mac as an example of Apple failing to establish a market-leading dominance but fail to acknowledge a much more recent example. The iPod/iTunes ecosystem where Apple owns 70% or more marketshare of media players and music stores says you should never say never. Will the iPhone/iPod touch capture the same overwhelming share of the smartphone/pocket computer market? Who knows, but at its current growth rate and consumer and developer mindshare I wouldn't want to bet against it particularly as Apple still has plenty of countries (such as China) and carriers to expand into. The iPhone is in 70 countries, RIM and Nokia are already saturated in ~300 countries.
With all these data points, it seems fairly evident that the hype around the iPhone OS is in large part justified whether supporters of other platforms want to acknowledge it or not.
-Mart
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|@mrrt
Mart, see response to above about iPod/iTunes.
I checked the Flurry site and couldn't find the 74-percent figure. But I did find that all the data was specifically about games and that the developer comparisons are to carriers stroes like AT&T's. No disrespect, but by my reading you took the data out of context. I do believe that gaming is the future of the iPod touch platform.
The Flurry data also shows that new developer starts are much higher for Android than for iPhone/App Store. Quote: "Though iPhone still commands the majority of developer interest, Android is beginning to close the gap in an undeniable way."
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|The 74% of developers on the iPhone figure is shown in the pie chart three-quarters of the way down the page which shows that as Developer interest in the iPhone grew from 72% to 74%, it stayed the same on 22% for Android.
Some of the charts and text talk about games (which is not surprising as they are such an important driver for consumer interest), but plenty of the data on that page talks about general dev issues as well.
-Mart
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|Joe, any comment you'd like to make on the huge growth rate of the iPhone vs other platforms or the enormous profit-share of the iPhone vs everyone else? These are pretty important issues that bear heavily against your arguments.
-Mart
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|Android-based phones are likely to be successful because Google is another very creative company. They are not to be taken lightly. However, Apple has an inherent advantage in this competition because they design the hardware and software and can optimize both to create an unmatched user experience. So far we have only seen early generation iPhone technology. Future generations will leverage increasingly powerful hardware and more sophisticated software. The product will increasingly be seen as the fusion of computer/telephone/video/audio devices. Steve Jobs' vision of the mobile future has no peer.
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|new feature of icrapone-MMS lol, what a crap
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|Joe you really just don't get it do you?
You spend so much time on explaining why Afghan goat herders and Chinese rice farmers won't be buying iPhones that you miss out real, relevant facts concerning the sales and success of the product.
You may have tried to look at the different needs of various regions but in the end your argument simply comes down to numbers. Bigger numbers.
Samsung sells more phones. LG sells more phones. Nokia sells more phones.
Therefore iPhone is not successful.
The single biggest reason these companies sell so many more phones than Apple is they have hundreds (that's hundreds) of different models. Is a product not successful because it only comes in a couple of different flavours?
Another reason. The vast majority of phones sold by Apple's competitors are not designed to be used with expensive data plans. Apple appears to be trying to build an ultra mobile computing platform here... you know, just like Nokia, Microsoft, Rim and Google are trying to do. You can quote your big numbers all day long, but a candybar camera phone is just not in the same league.
These 'platform' phones will get cheaper... so will the data plans. Goat Herders WILL be buying them. It's the fastest growing segment of the market but you choose to diminish it's importance. Did you not get Balmer's memo? One day all cell phones will be "smart".
Another reason. Apple has been selling iPhones outside the US for a little over a year. 14 months! For comparison Nokia has been in the business for over two decades. Nokia is the global leader in cell phones. It has hundreds of different models, sells them in virtually every country in the world (via nearly every carrier). Is it really such a shock that they have bigger numbers than a rookie? Does the size of Nokia's mobile business, built up over 20 years somehow prove that iPhone's success (in just a couple of years) is just a "marketing myth"?
Finally... in your last para you set up the inevitable strawman. If you don't agree with Joe then you are just an Apple fanboy. Sigh!
I'm a fan of reasoned argument. A fan of recognising, and not ignoring, tech trends and directions. A fan of putting facts (all the facts) into some kind of real world context.
Score: 0
|hahahaha you are recognizing tech trends, huh? hehehehehehe
I AM THE ONE AND ONLY TRUE TECH PROPHET WHO HAS *NEVER* BEEN WRONG. BOOKMARK THIS PAGE AND LET'S COME BACK HERE IN 5 YEARS TIME ONCE THE APPLE BUBBLE HAS BURST, OKIE??
Apple sucks and they shall collapse. Windows 7 and Windows Mobile 8-9 will make everyone in the world know who the true master is: Microsoft and Microsoft ONLY!
BTW, how many billions of dollars does Steve Jobs have to donate to reach just 1% of what Bill Gates has donated so far? And another question, was Steve Jobs registered as an organ donor after starting Apple or was he of the 2/3rd who decline? Inquiring minds would like to know...
MAY GOD CONTINUE TO BLESS MICROSOFT. AMEN.
Score: -6
|Joe has no logic. He just tries to add his fluff around the Microsoft talking points slide decks their marketing droids send out. Some of the other paid shills out there do a much better job of trying to disguise their anti-anything-apple/google, everything Microsoft does is amazing/wonderful/fast/exciting/etc...
The facts are simple....Apple killed Microsoft in the mp3 market, and now Apple is killing Microsoft in the smart phone market. Last quarter the iPhone outsold all Microsoft Winmo devices put together.
Score: -4
|Tell it like it is: Apple don't make throwaway phones and, other than Blackberry and Bang and Olufsen, the rest do.
Nokia's N9x series probably doesn't sell any better than iPhone does, so that's not how Nokia has a huge share of the market. They sell more throwaway phones than almost anyone else.
When smart phones come down to the US$50 level en masse, we'll see if Apple care to compete and whether they sink, but until then, they're doing the same thing in phones that they do in computers and it's working, regardless of whether they have, want, or need world dominance.
Score: 2
|um dude, the N95, yeah, well, this is old news:
"Nokia is Connecting People indeed. Today the Finnish giant has released their numbers from the final quarter of what has been a phenomenal year. Most notably, Nokia has officially obtained a 40% global market share as of Q4 which is quite an accomplishment. They shipped an impressive 133.5 million handsets in Q4, bringing the 2007 total to 437.1 million. In terms of smartphone sales, Q4 Nseries sales were up 48% compared to Q4 2006 whereas Eseries sales ballooned with a 102% increase. As much exposure as the Nseries gets, it’s pretty remarkable that the enterprise sales increase was more than double that of the Nseries. Granted there is plenty more room for growth in Eseries sales; Nokia unloaded 2 million of them in Q4 2007 compared to 11 million Nseries devices"
But that's old news and I'm sure you already knew that.
Score: -2
|Joe, I just read your article and I you kindof surprised me with this one. In a good way! Thanks for interesting perspective and facts, all put together with a good thesis. I am european and travel a lot, also in the US, and I totally agree with what you are saying in this article about the incredible hype going on in the US these days.
Glad you are trying to put things in perspective!
Score: -2
|Joe, you're comparing Apples and oranges.
Apple is not competing against the millions of dumbphones out there - in fact they're not even solely aiming at the smartphone market - they are establishing the "Next Big Thing": The Mobile Computer Platform.
When you compare the iPhone OS (which includes iPod Touches) vs the Blackberry OS and Symbian etc, you find that Apple has 20% of the global market, beating RIM and second only to Symbian in global mobile OS share. (figures from Canalys)
Add to that the fact that Apple has captured 75% of mobile developers, and 75% of the mobile App market and you realise that the iPhone obsession is justified.
Heck, even if you do look at the global dumbphone market Apple has captured 15% of the profitshare on only 2% of the unit marketshare. Which business would you rather be in?
This in fact is a VERY big deal. You're too focused on the dumbphone market.
-Mart
Score: 2
|@mrrt
Mart, that's not the Canalys data I see. For smartphones, iPhone OS share is 13.7 percent, behind BlackBerry OS at 20.9 percent and Symbian OS at 50.3 percent, in Q2: http://www.canalys.com/pr/2009/r2009081.htm
The market is much bigger than smartphones.
Where does that 75 percent figure come from? Based on what? And the profitshare figure, where does that come from?
Apple created Macintosh to be the next-generation computing platform, too. It wasn't. I agree that iPhone potentially is the next-generation computing platform. But positioning it as such doesn't make it such. Apple has a long way yet to go.
Score: -4
|Joe see my post further up where I address the points in your reply and give links to the sources of my data.
-Mart
Score: 1
|You have stated it well. Steve Jobs' vision is not to make a better mousetrap but to build a new and different platform with unmatched capabilities. We are not looking at the finished product but rather at a work in progress.
Score: 0
|Joe Wilcox writes: "Many of my journalist peers are themselves obsessed about iPhone and App Store. The number of blogs in any given week just dedicated to new App Store applications is evidence enough. There is informational obsession with the device that defies reality."
Absolutely true. In fact, I started an iPhone blog four weeks ago -- two days after I bought an iPhone 3GS. My reason for doing the blog was to learn how content is ported to the iPhone and why more companies are not optimizing for the smaller screen. Plus, I'm retired, living in Mexico and had nothing better to do.
I used WordPress for the publishing engine and found a plug-in by BraveNewCode that detects the iPhone and then delivers an optimized page. The WordPress theme and the plug-in are both free. In a few hours, the site was up and running on the web and the iPhone (also the Android, but I haven't tested that yet). I tinkered a bit with the code, but mostly it's off-the-shelf. I'm a former journalist and salesman, not a coder.
For content, I look for press releases, which I then edit and re-write -- cutting out the hyperbole and superlatives. (Really now, have you ever heard a CEO say he was "thrilled" about anything?)
In searching for material for daily postings, I have been struck by the amount of trash-talking about the iPhone. It's almost as though the detractors see the iPhone as some sort of threat to their way of life.
The blog is not a serious long-term project, and I will likely drop it in a few weeks. But, even though traffic is quite low, I have been struck that almost half of the visitors are from outside the US, particularly India and also Scandinavian countries.
Take a look on the web and on your iPhone. Comments and suggestions are welcome.
http://iphonetoday.mobi
Score: 1
|http://macdailynews.com/...p/weblog/comments/22597/
"Apple iPhone takes record 40% share of worldwide smartphone OS market"
Score: 0
|Did you read the fine print?
""For those new to the report, the AdMob Mobile Metrics report is a reflection of the data flowing through our network each month. The statistics do not represent handset sales or unique devices in the market, rather they represent the relative mobile usage we see from the sites and apps in our network. This means that devices with heavy mobile usage (like the iPhone) have higher share than other devices."
Score: -8
|If you read my post to the end, you'll see that the misquoted AdMob data prompted my writing and to use real data from real analysts to provide real perspective.
Score: -1
|Is Apple selling iPhones like hotcakes? YES
Is the Apple App Store with over 65,000 apps and over two billion apps downloaded wildly successful? YES
Is Apple making extremely large amounts of money off the iPhone + App Store? YES
Is Apple selling more Macs because of the iPhone halo effect? YES
By those measures I would say Apple has a huge global success on their hands, hardly a myth.
Score: -6
|Are millions of people in each of the four countries representing 40 percent of the world's population buying millions of iPhones? No.
Are people in most other African, Americas, Asian or European emerging markets buying millions of iPhones? No.
Are millions of people in each of these same countries buying from the App Store. No, they don't have iPhones.
There are plenty of companies with niche products that make "extremely large amounts of money." For Apple the company, iPhone and App Store are successful. As measured on the global scale, iPhone's success is more about branding and marketing than meaningful sales -- by comparison.
Better carrier subsidies would help, but much more would a better device. I should have mentioned that in the post. What? Are you going to carry around breakable glass-screen iPhone in the mountainous regions of Afghanistan? Or a rugged Nokia handset? Use your noggin.
Score: -1
|I know you are just parroting the Microsoft talking points as Microsoft is using every trick in the book to try to diminish the success Apple is having. Are MILLIONS worldwide buying the iPhone? YES. Are dirt poor farmers on a mountainside in Afghanistan buying iPhones? probably not. if they buy a cell phone, they are going to buy some cheapo phone which does what they need it to do...make calls, not surf the web, play movies, play games, do work, send email, IM, etc...
Face the facts...the iPhone is kicking butt and taking names right now. When people spend their own money, they overwhelmingly choose the iPhone because it is the best phone out there right now.
Score: -6
|Fatty, whatever dude. You sound like more of the isheep spewing forth the same rhetoric. And yeah, they recently announced they have 85, 000 apps. Mind you there are over 130 Fart apps, so how many of them are of actual use to anyone? And the top selling apps, the programmers have said they "can't give up their day jobs" on the paltry funds they have received for their efforts. Apple used to be an innovative company, but these days they are more like the big brother they labeled IBM in January of 1984 during the Super Bowl in the very first MAC add. Look at how they control everything they make, and they do make nice bricks, just saying is all.
Score: -2
|well put joewilcox, bang on the money!
Score: -3
|Fatty, best phone out there? Not by a country mile dude. Do yourself a favour and actually check out the Nokia N900. the Palm Pre, and the HTC TP2. All exceptional and 100% customizable! But hey, continue to buy into the isheep mentality and believe everything Steve Jobs tells you, or you could always watch the brilliant Simpson's episode when Lisa gets a mypod.
Score: -2
|I was actually looking forward to the TP2 but I might go for the LEO HD2 or if they ever release a Tegra based one go for it. Then I can use it on any carrier I choose. (travel lots europe and usa)
Score: 0
|Well Joe, for the most part I'd have to agree. There's a few bits and pieces I don't totally agree with but fairly on mark. It's fairly obvious the established market leaders are still kicking the Apple smartphone markets butt all over the map. As someone below me pointed out the plans are fairly spendy, the phones are also pretty expensive (I imagine those prices hurt even more in emerging countries), and this carrier lock-in problem is a real deal buster for many (although in Apple's defense, how would they handle it without the subsidization deals they get with these contracts). I believe this could improve some over time in all 3 of those categories (price reductions on plans, phones and perhaps more carriers offering the phones as these contracts expire).
That being said I will say Apple has certainly put a serious boot up the cell markets butt here. They got quite a few people interested more in smartphones that were not before. The obsession with alot of other vendors to go the touch route tells me that was another winning aspect. I think it's fairly clear the device itself is seen as a winner.
The carrier ( and man the carrier is a real pain =( ), pricing and relative heavy handed approval process is another matter however. I guess time will tell if any of this changes or if this is their undoing in this market.
Rather than figuring out when/if someone will build a phone (or in some people mind I am sure some have already built it) that rivals the Apple ones, what I am alot more curious about is where could we be going. What does the future hold?
HSDPA is coming, what could it mean? New features and services that we aren't even seeing yet. Could we look forward to video calls as more a standard option on some future phones. Hulu on the run? What, if anything will the various makers bring to the table over the next years.
You can disagree if you like, but I feel Apple got the stagnate ball rolling, if they can stay on the ball is a matter of debate but they got it rolling again which is a good thing.
Score: 2
|Oh damn I agreed with Joe, -1 point for me. If your going to rate down, an explanation would be awesome. =)
Score: -1
|You're right that "Apple got the stagnate ball rolling," and to ask "if they can stay on the ball." Apple didn't invent MP3 players, but came to dominate that market pretty much globally. Apple's online music store got that stagnate market going -- and now iTunes store outsells major CD dealers like Walmart.
But Apple also got the ball rolling with graphical user interfaces, but lost the market to Microsoft. Mother of invention isn't always father of sales. The iPhone will never succeed because of the device -- as cool as it may be. The phone's future -- and that of iPod touch and its successors -- is tied to App Store. That's the rolling ball that either stops at the bottom of the hill or flies to the top of the next one.
Of course, one won't succeed without the other. App Store is nothing without iPhone/iPod touch. I'm convinced that Apple has a winning platform. I just don't yet see where Apple has a winning strategy.
Score: -2
|It'll be fascinating to see how it all plays out. Just happy that it's got the blood pumping out there. I have a similar view on the browser market, I am just glad things are moving out there. Nothing is more boring than a stagnate market.
Score: 1
|Apple definitely lost opportunity to dominate in the OS space, but so did everyone but MS. In the long run, they've maintained higher margins, brand value and stock value than pretty much any other PC maker. That strategy of pricing high and maintaining a premium brand has proven to be very successful. I can't blame them for continuing that as they moved into the mobile phone business. I don't think anyone predicted they'd be this successful, this fast.
In the long run, I hope Apple can stay on the cutting edge and maintain their premium brand. They showed the world what was possible in a mobile platform, and everyone, everywhere will benefit from it.
However, I don't think the iPhone or the MacOS will be the dominant mobile solution worldwide. I hope that will be something open, but you should never count out MS.
Score: 0
|@scott@bn - well said
Score: -5
|Well, Microsoft had no monopoly power in the mobile phone market and when they arrived after Handspring's Treo series, they automatically had the number 2 spot as there was no one else. Now, they have to provide excellence (or something close to that) and they don't know how to do that, as they've spent their time on the mediocre.
Apple, on the other hand in the old days, cared more about satisfying themselves than the public. When you're one of the first two companies to produce more than kit computers, you have to write your own rules. They didn't have a market to follow--they had to create--and they messed up more often than not. Keeping a basic computer (Apple II, Macintosh) at US$2499 for years kept them small and isolated.
I believe that the company could target the low end of each market, perhaps by partnering with other companies, but should Tiffany or Cartier or Apple enter the mass market? (I mention this because Apple's Fifth Avenue NYC store sells more per square foot than Tiffany.) It's not their place or their goal.
Score: 2
|I am more worried about an open carrier to start with. I can just see the carriers blocking "open" network applications or crippling their abilities. If they haven't already, I could see them at some future point lobbying that cell networks should be excluded from net neutrality laws.
As far as domination of mobile solution worldwide, I am thinking there's just too much competition out there for any one platform to end up dominating anytime soon.
Score: -1
|Of course they had a market to follow... it was the one that Commodore created.
It saddens me how much the pioneers are forgotten, no matter how short-lived their success was.
Score: 0
|If a company sells the most phones by far but fails to make much money off them, does it really matter that they sold all these phones...? http://www.google.com/fi...=NYSE:NOK&fstype=ii
And rather than just saying "yes, dumba**" - could you please enlighten me as to why, because it's a genuine question.
Why would selling low-margin crap phones (which is the biggest slice of the emerging market - that's why it's called emerging) be super important and critical, but netbooks are a menace! However $5000 cars are a great idea... I'm seriously confused... :(
Score: 0
|It matters when you trying to cook up numbers which bash Apple
Score: -8
|It's a good Q @Viking369.
1) Nokia is the established leader in most countries. The sales dynamics are different for a company that already has experienced explosive growth and is reselling to people that already purchased its products. Apple has many more potential customers than existing ones. It's on the bottom side of explosive growth where Apple is selling. The same will apply to Google and Android. But initial gains were less because distribution was tied to one device. But as more Android phones come to market, so should the OS growth increase. Of course, the product has to be good -- meaning people want to buy it -- for this to be true.
2) For several reasons -- carrier relationships being one of the most important -- Nokia has limited distribution in the United States. Except for the E71x, Nokia's best phones are available subsidized from carriers almost everywhere but here. The US population may be much smaller than China or India, but there is much greater individual spending power here. BlackBerry outsells iPhone. Perhaps Nokia could do as well with broader US distribution.
3) As an established manufacturer with huge marketshare and distribution, Nokia was more vulnerable to the econolypse than Apple. Gartner reported that carriers and retailers reduced handset orders during Q4 08 and Q1 09 to clear out inventory. As such, Nokia took a hit from this sudden and unexpected decline in orders. Demand has picked up now that many carriers and dealers have cleared out excess inventory. But order volumes are still low.
4) Just because a handset costs less doesn't make it cheap. On the contrary, Nokia succeeds for selling fairly rugged low-cost handsets -- many of which are affordably available unlocked. That allows people in countries like India the flexibility to switch carriers to contain costs or gain better services. Where is the low-cost, unlocked iPhone sold?
Score: 0
|MS did end up making a lot more money (and profits) selling PC related products than Apple. I take Joe's point to be that Apple isn't in position to dominate the mobile market either.
I agree with you, however, that unit shipments are a fairly hollow number. We've learned from PC's that there is a nice, but low margin, business, that will always be a race to the bottom for price, in chasing volume. Nokia, Samsung and LG's phone business model will yield diminishing returns, unless they can move up the value chain into software and services and/or premium products. Apple has done both of those things.
The existing mobile phone companies have been trying to move upstream for years, but with very limited success. Of course, they don't need to worry too much about Apple as they do about open platforms that truly turn their devices into commodity hardware and allow wide, competitive access to the market for creating new apps and services (communications and, especially, financial).
Score: 0
|The advantage of volume shipments is twofold (or more?): The more you ship/produce, the more $$ you make. The more you ship/produce, the cheaper each individual unit is to produce -- the more $$ you make.
If you make $1 on every phone, and ship 1000 phones, thats not a very good business model.
If you ship 1,000,000 phones and in doing so reduce your cost by half (or more) your profit per phone may of just jumped to $2-$5 per phone. Get into the billions... and you see the point?
The race to the bottom is not a problem for the most part, as your profit margin will continue to increase, and if you have competitors and have to cut that margin - then you still have the same margin and multi-fold more sales. Walmart is the master of this, the %3 profit margin and bulk sales.
Score: -1
|Thank you all for the thoughtful replies - much appreciated. :)
Joe, thanks doubly for the detailed info - I understand points 1, 2 and 3 - although lambasting Apple for screwing up Russia / India and excusing Nokia for screwing up the USA seems a little... unbalanced.
Side question - with regards to BRIC - how big is the smartphone market in relation to the overall market?
And why is making low-cost (== low margin..?) rugged handsets for the masses such a good thing, but netbooks are a margin sucking menace-ey vortex of doom?
Score: 0
|@Viking369 You're right that Nokia screwed up in US, but it's a complicated problem that has to do in part with how carriers operate here compared to many other markets. Nokia encountered similar problems in Japan and South Korea. Nokia has now pulled out of Japan.
As for BRIC, I'd need to do a little research for a complete answer. Meanwhile, contemplate this: China's largest mobile carrier has about 500 million subscribers. Apple cut it's deal with No. 2, which has about 140 million. Bharti Airtel, one of the carriers offering iPhone in India, has about 110 million subscribers. In the United States, for some comparison, Verizon has about 90 million subscribers and AT&T about 80 million.
Netbooks suck margins from an existing market. As volumes go up, PC manufacturers actually make less on them. However, netbooks do make sense as light-weight, full featured, connected products offered subsidized by carriers like cell phones. Regarding those lower-cost phones, they aren't necessarily lower margin, particularly when factoring in carrier subsidies. They're lower function and even getting more capabilities per generation. I must point out that many of these lower-cost handsets could do video and MMS when iPhone couldn't.
Score: -2
|Joe – I don’t think anybody has presented a back of the envelope number crunching analysis, so let me respectfully present some details from the last reported quarter that you may not be aware of:
NOKIA (http://phx.corporate-ir....D0tMXxUeXBlPTM=&t=1)
- Net income of $524 million Euros (p.10)
- Total phone sales of 371 million units (p.2)
- Net income per phone of 1.41 Euros (US$ 2.05)
APPLE (http://www.apple.com/pr/.../2009/07/21results.html)
You may not fully understand the accounting for the iPhone, but in brief, revenues and income are recognized over a 2 year period, amortized daily. So for every dollar of iPhone revenue/profit, only a maximum of 12.5 cents can be realized in a given quarter. However, Apple details revenue and income on a non-GAAP basis as well, which informs the reader of what the effect would have been if 100% of iPhone revenue/profit had been recognized upfront – this is the real effect of the iPhone, and the cash is already in Apple’s books. All variable costs are expensed at the time of sale (so 100% of iPhone SG&A is included).
- Apple’s non-GAAP revenue was $1.4 billion higher than GAAP revenue – even though this is not 100% of true iPhone revenue (as up to 12.5% is in the GAAP number), for simplicity’s sake, let’s assume it is 100%.
- Apple’s non-GAAP income was $710 million higher than GAAP income.
- 710 million / 1.4 billion = 51% - This is the iPhones NET profit margin (after taxes)!!!
- 5.2 million iPhones were sold. This works out to revenue of $269 and income of $137 per iPhone sold.
Take a moment and consider this. For every iPhone that Apple sells, Nokia needs to sell 67 phones to generate the same profit. Apple's iPhone business is already generating nearly as much net income (about US$50 million less) than Nokia overall, yet has a fraction of the market share. How does this make Apple unsuccessful in your books? Yes, they don’t cater to the emerging markets, but those markets aren’t profitable. If Apple presents their product as a premium product in those markets, as affluence develops, more of those people will elect to purchase Apple’s product.
The fact that Nokia’s market share is so high, but declining, and margins are dropping, while Apple’s share is so low, and growing, with great profit margins, should support the notion that Apple is actually succeeding greatly at this point, with a great growth trajectory being reasonably forecasted.
Your thoughts are appreciated.
Score: 0
|Thanks Joe, I really appreciate your replies to my questions.
Score: -1
|The article doesn't take into account that Apple has only been on the phone market for two years. Were any of these analysts predicting 11+% share in ~2 years of the phone market in the States, let alone 70-country penetration? Nokia has been in it for decades. Extrapolate, perhaps?
Score: 1
|The article says that Apple sold 30 million iPhones in two years and states US marketshare overall and for smartphones.
The Qs to ask: What is a smartphone? How will smartphones be defined in the future? Apple's growth puts it in position to eventually become market leader for smartphones.
High pricing applies to more than just the device; there is what carriers charge for data. For example, under AT&T's Family Plan, a 3G-connected cell phone data plan is $10/month. For a smartphone, AT&T charges $30. Carriers have incentive to define what is a smartphone, too. The more handsets defined as smartphones, the more AT&T can charge for data per device.
A broadened definition would affect iPhone growth numbers. Apple's smartphone growth (509 percent in Q2, according to Gartner) is much, much higher than the broader handset market.
Score: -3
|This article http://bit.ly/3sO0xy (Symbian Handset Shipments to Reach 180m by 2014, Despite Increasing Popularity of Emerging OS Platforms, says Juniper Research)
and white paper http://bit.ly/w6yGO (Whitepaper: Open Source OS ~ The Future for Mobile?)
by www.juniperresearch.com may be valuable in the context of this article. It covers more detailed figures related to various mobile platforms.
Score: -2
|The iPhone is relatively expensive. It either comes with an overpriced data plan or the phone is unsubsidized. This is keeping the iPhone from being mainstream.
That said, I do think that the eventual future of phones will be the smartphone. Nowadays, every "basic" phone includes a color screen, a camera and rudimentary Internet access. But a few years ago, phones had none of these. I think we're in a period like the switch from DOS to Windows: the next phone for many will be a "smart" phone.
Apple has always offered high-end equipment that comes at a price premium. They are profitable with their niche market share for Mac computers, and they have never taken steps to bring its price closer to the mass market. I wouldn't be surprised if they take the same strategy with the iPhone: keeping it a niche product while Nokia, Samsung and Motorola have cheaper alternatives.
Score: -3
|Just curious...what are AT&T's other data plans priced at? And Verizons?
Score: -4
|Who really cares?
People everyday are being easily influenced by marketing. I bet today someone or something you saw influenced the very next thing you did. That's life and Apple "are playing the game" better than most, but so are Microsoft, Sony and all other companies with the money to feed their marketing machines.
Incidentally, this article influenced me to write this :-) we all care, even if we want to deny someone or something made us do something we wouldn't ordinarily do.
Score: 0
|I'll say it again. AAPL stock is the next bubble. Get ready to say buhbye boobi...
Score: 0
|Why bother with market data when you can see the truth on TV and in the movies every day? According to my own observations, over 80% of "good guys/gals" use Apple products (that includes the entire cast of various CSI clones, depending on which season you watch) and most of the "bad guys" use generic PCs. Since most of them are dead by the end of the episode/movie, it should be clear to even the dullest couch potato that Apple products have a crushing dominance in daily life everywhere (except Asia and Africa, and other countries not specifically mentioned here which amount to over 50% of the World population and phone users).
I take a brief survey of my surroundings (a coffee shop) and see that 50% of the smoking computer users use Apple, the other 50% use Sony (that's a girl over there and myself, in that order). I can't see into the non-smoking section from here, where things may be different (but, now we know that even Apple users do still smoke!).
I carry an iPhone with me, so that adds to the Apple share here but that girl over there is probably using Samsung or LG, this coffee shop being in Korea and all...
The iPhone doesn't work here on account of being 2G only, but it still functions as an iPod Touch and gaming platform - perfectly suited for my 45 minute train ride to work (and back home).
The main reasons I bought the iPhone (in 2007, Thailand) were: (1) I want one! (2) It looks cool (3) My girlfriend had one before me! (4) Touch screen! (5) I had a Nokia N80, HTC Touch, Sony P950 and an older Siemens brick which could be used like real phones in case I wanted to send MMS, have better control over synching with Outlook, use my own ringtones, use Bluetooth the way it was designed to work, use Infrared, use USB standard cables, use normal headphones, use 3G networks... so yes, as long as I carry at least one more real phone with me, I love my iPhone!
Of course you can say: Apple did in 2 years what Nokia and others took over a decade to achieve - only that Nokia and others finally did it some 5 years before Apple :-) But for the touch screen... I would not buy any other touch phone that had anything less pleasing than Apple's, regardless of the other functions!
But really, I love my iPhone! This article, too. What a shame that an author has to declare and prove his/her allegiance and/or neutrality first before getting to the substance of the message.
Score: -2
|LOL! You should write comedy. Or do you?
Score: -2
|"... so yes, as long as I carry at least one more real phone with me, I love my iPhone!"
Well, I found that particularly funny. =)
Score: 0
|Joe,
great article, especially from an emerging/developing markets angle. Am sure the "fanbois" & detractors will come flying in on this one, but I heartily agree with the premise of what you are writing.
iPhone is a great handset, but it is not for everyone & will never be able to hit the required price points to be successful as a mass market device, no matter how many they sell.
Strand Consult also came out with a very interesting white paper on iPhone & it's (non) contribution to operator revenues.
Branding is not everything
Score: 0
|I didn't see the report. Is it available online for free?
Score: -2
|Joe
You know what?
Your website name has even hit it on the head!
Many years ago in a land far away there was a battle.
It was between the forces of VHS and Beta.
Who won?
Who, based on the quality "user experience" part of the deal, who should have won?
Put simply - Apples marketing is brilliant.
After all what retailer would accept a product on their tech store floor-plan at 5-10% Nett GP?
See if Sony, Samsung, LG, HP or Toshiba would could get away/would put up with that!
Gee - - - what ever happened to Palm? I've had Palm for the last 3 years, yes I'll admit I've had 6 of them, 1 on account of it being caught in a car door, but the other 5, lets just say "evolution" - but to this day I still absolutely love them. Dave the Nelsonian (just google Nelsonian)
Score: -3
|I don't necessarily think you're wrong. I just hope they're selling enough iPhones to stay in business for a long time :)
I've previously used WM devices, since the days of Windows CE when HP clamshell monochrome devices were geewhiz. Enjoyed it until the 3GS came out -- more and more my WM devices felt extremely antiquated. I made the switch -- glad I waited and very glad I switched. Gone is that feeling of hoping something more technologically relevant would come out...
Keep on analyzing sales figures and advertising strategies, I'll just enjoy my iPhone ;)
Score: 0
|For Apple, iPhone and App Store are hugely successful. Apple makes lots of money from iPhone and App Store and would continue to do so even if marginalized. Mac marketshare is well below 10 percent in the United States, yet the computers are a profitable line of business. So, please, enjoy your iPhone. Just don't expect that because of the hype here, everyone else in the world is buying one.
Score: -2
|I've used a fairly basic Samsung phone in recent years, but used to love Motorola. Is Motorola's worldwide presence so poor that they don't even get a couple percent in any market?
Score: 0
|It's 5.6 percent in Q2 according to Gartner. That makes Moto a declining #4.
Score: -2
|I think just about everyone had a Moto that they loved at one point. The past tense is the sad bit. They really squandered a strong market position and huge brand value.
Score: 2
|Joe – I don’t think anybody has presented a back of the envelope number crunching analysis, so let me respectfully present some details from the last reported quarter that you may not be aware of:
NOKIA (http://phx.corporate-ir....D0tMXxUeXBlPTM=&t=1)
- Net income of $524 million Euros (p.10)
- Total phone sales of 371 million units (p.2)
- Net income per phone of 1.41 Euros (US$ 2.05)
APPLE (http://www.apple.com/pr/.../2009/07/21results.html)
You may not fully understand the accounting for the iPhone, but in brief, revenues and income are recognized over a 2 year period, amortized daily. So for every dollar of iPhone revenue/profit, only a maximum of 12.5 cents can be realized in a given quarter. However, Apple details revenue and income on a non-GAAP basis as well, which informs the reader of what the effect would have been if 100% of iPhone revenue/profit had been recognized upfront – this is the real effect of the iPhone, and the cash is already in Apple’s books. All variable costs are expensed at the time of sale (so 100% of iPhone SG&A is included).
- Apple’s non-GAAP revenue was $1.4 billion higher than GAAP revenue – even though this is not 100% of true iPhone revenue (as up to 12.5% is in the GAAP number), for simplicity’s sake, let’s assume it is 100%.
- Apple’s non-GAAP income was $710 million higher than GAAP income.
- 710 million / 1.4 billion = 51% - This is the iPhones NET profit margin (after taxes)!!!
- 5.2 million iPhones were sold. This works out to revenue of $269 and income of $137 per iPhone sold.
Take a moment and consider this. For every iPhone that Apple sells, Nokia needs to sell 67 phones to generate the same profit. Apple's iPhone business is already generating nearly as much net income (about US$50 million less) than Nokia overall, yet has a fraction of the market share. How does this make Apple unsuccessful in your books? Yes, they don’t cater to the emerging markets, but those markets aren’t profitable. If Apple presents their product as a premium product in those markets, as affluence develops, more of those people will elect to purchase Apple’s product.
The fact that Nokia’s market share is so high, but declining, and margins are dropping, while Apple’s share is so low, and growing, with great profit margins, should support the notion that Apple is actually succeeding greatly at this point, with a great growth trajectory being reasonably forecasted.
Your thoughts are appreciated.
Score: 0
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