Aided by elements such as its reputation, anticipation-fueled rumors and tight secrecy, Apple Inc.’s iPhone announcement in early January acted much like a Rorschach test, illuminating points of view and exposing insecurities.
Above all, the as-yet unfinished device drew such a wide range and number of reactions-“buzz,” if you will-that one had a sense that a) nothing else of interest is going on in the universe, b) early January must put the hurt on more people than previously thought and c) the announcement was actually a virtual soapbox, an implied invitation to spew one’s pet theories. (Works for this reporter. Thus this article-a reaction to the reactions.)
First, a sampling of the reactions themselves. Then, what do those reactions say about the interest generated by a high-profile player from outside the wireless industry?
From ho-hum to best-seller
Reactions ran a gamut from pundits weighing in on industry implications to small vendors crying “me too!”
There were 30,000-foot harrumphs: the handset market is so segmented that no one can simply crash the party; the closed iTunes model runs counter to a healthy growth strategy for the cellphone industry; the lack of 3G connectivity and the high price dooms the device. Observers are still discussing whether it’s a smartphone or a music phone.
There were 30,000-foot gasps of awe as well: the device is a graver threat to the status quo than anticipated; its user interface is brilliant; 2007 is the year of the touchscreen; Apple doesn’t need a runaway hit, anyway, it can profit handsomely by selling a relatively modest run of, say, 12 million iPhones; demand will outstrip supply.
Handset teardown houses and financial analysts produced lists of winners and losers. Greenpeace campaigned against Apple’s alleged environmental practices (one blogger’s headline: “Apple has toxic core”). Upon hearing that the iPhone’s touchscreen did not provide sensory feedback, one vendor touted its tactile feedback technology. Compete Inc., the consumer research company, found that the public was aware of the device and, though generally unwilling to pay the steep price tag, switching carriers to get it would be no big deal.
(This last item may have rattled Verizon Wireless, whose executives told USA Today that they had turned down a deal with Apple over the device due to the computer maker’s purported demands for control over too many aspects of iPhone-related business. Verizon Wireless’ rival, Cingular, apparently worked things out for an 18-month exclusive deal.)
Reacting to the reactions
The list of reactions could fill this page so what’s going on here?
“Apple did two things that rocked people with the announcement,” said Carl Howe, an analyst at Blackfriars Communications Inc. “They did such a good job of keeping it secret that that fueled speculation and interest. And they threw out all the assumptions the mobile industry is based on as they went about building the iPhone.”
Those assumptions include the subsidy model, Howe said. According to the analyst, Apple has rejected subsidies and subsidies will not play a role in Cingular’s offering. Rejected assumptions also helped Apple meld the two sides of consumer electronics, software and hardware.
“The most interesting thing about the iPhone is that few have started from scratch to build a mobile phone,” Howe said. “Great products are the merger of software and hardware. The iPhone manages to combine software and hardware in a manner that produces the ‘wow’ factor.”
Marketing savvy also helped propel the iPhone buzz, Howe said. Apple CEO Steve Jobs used careful language to describe his benchmark for success-10 million units by the end of 2008-which the analyst said was a “reasonable benchmark” that Apple is likely to outperform, thus bringing luster to the Apple brand. Apple’s “tried and true marketing tactic” of positioning its devices as premium products will help secure the nearly 50-percent margins that the company targets as its “sweet spot,” the analyst said.
“There’s more to success than just technology,” Howe added. “Jobs is the best marketer in all of high tech. One of the reasons that it’s fun to cover Apple is that they keep secrets. You don’t get clues. There’s no ‘inside baseball.'”
Bill Morelli, analyst at IMS Research, said that while details were closely held, the fact that the impending iPhone launch was “the worst-kept secret” in the wireless industry guaranteed publicity.
“That had people pondering,” Morelli said. “It was a question of when, not if. That opened the floodgates for theories and speculation.”
Once the initial rush of excitement rubbed off, a second wave of publicity came in the form of analysts who were under-whelmed by the device’s specifications, according to Morelli. The impact came not just from the device, but from Apple’s outsider status in the wireless industry. Apple builds ease-of-use into products it doesn’t necessarily invent, but essentially re-introduces to the market. Morelli pointed to the digital game console market as an analogy. When Microsoft Corp. announced it was entering the market, Sony Corp. and Nintendo had that market sewed up.
“There was huge skepticism,” Morelli said. “Now Microsoft is a major player in that field.”
Apple will not take over the mobile-phone industry, but it will have an impact, Morelli projected. The degree of impact may depend on what sort of resources Apple devotes to the space. And whether its most touted feature-the touchscreen-holds up under real-world conditions.
Meanwhile, the analyst said that many handset vendors will undoubtedly produce “iPhone killers”-perhaps touchscreen-centric devices without keyboards that provide similar functionality-within six to eight months to dull Apple’s impact.
How will Howe gauge the iPhone’s actual impact on the market?
“The metric I’ll use is, ‘can you get one’?” the analyst said. “My guess is, they’ll sell every single one they make for a year running.”
