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« Walking ads with Donald Trumps Apprentice reality TV show | Main | Bi & Ai »

May 18, 2007



Your post has one "billion" too many, unless in fact "There are 80 billion bloggers." :)

Tomi Ahonen

Thanks Sumocat, yes it should be 80 million not billion. I'll go correct that right away. Thanks !

Tomi :-)

David Smith

This article, while informative, is reminiscent of someone's dream-world; an idyllic local where everything falls into place. That said, I must agree to some degree with most of what is written, however it does become monotonous as the story progresses.


You are absolutely right:

BI = You can do everything on a mobile phone
AI = You can still do the exact same things you did before, but now it feels cooler and it is easier

Thank you Apple for that "I."


"music on mobile phones is already worth 8.8 B dollars last year, with ringing tones, ringback tones and MP3 files sold to musicphones EACH already larger than all of iTunes."

The only reason the music on mobile phones is that large is because of the closed nature of the phones today. The only way most people can get music on their phones is to by it from the phone company, even though they already own the CD or have it on their iPod. I predict that no iPhone user will be buying songs from AT&T any longer. They now have their entire music collection on their phone. Now that their music is on their phone they can make any one of those songs their ring tone. So now they no longer have to buy ring tones either.

The phone companies has had a strangle hold on consumers because they lock people out from using the media they already owned on their computers or mp3 players. Getting data to and from the phone costs dearly. With iPhone and a simple connection to the computer, the cell network is no longer needed for transferring all those files over.

" Yes messaging is a multi-billion dollar business on the web. But messaging is an 80 billion dollar industry on mobile"

It's only that big because there is no other way to send text messages. With the iPhone you can use standard Internet tools. You no longer have to get a text messaging plan. You can use iChat to text message anyone because it uses standard Internet messaging. As the iPhone is moved into an area with Wi-fi, the text messaging app auto switches to WiFi seamlessly. iPhone customers will no longer need text messaging plans. The can use the Internet connection. As this catches on, you will see that phone carriers will start to lose a lot of revenue because there are other ways to move data on smart phones.

I could go on and on but life A.I. is bigger than anyone thinks, and cell phone carriers will look fondly back at the days B.I. when they had a stranglehold on the network and the content that went across it.

Luis Alejandro Masanti

Not that the 50 or 60 year old board members at TimeWarner and Disney and Viacom etc will actually "use" an iPhone,...

Hey, man, Steve Jobs is 52, sits at Disney and WILL ACTUALLY "USE" an iPhone!!!

Tomi Ahonen

Hi David, Infomercials and mxmora,

Thank you for stopping by and posting the comments.

David - thank you (I think). I'm happy if you found it informative and that you partially agree with the blog entry. I didn't attempt any high prose, this is a blog, the good writing and re-writing I leave to my books and "real" articles, so if it got to be predictable and monotonous, I apologise.

Obviously I'd be most interested in what you disagree with "must agree.. with most" - as that would give us the most useful dialogue. Perhaps if you return David, you might tell me where you see reasons to disagree. I'd enjoy that discussion.

Infomercials - yes we agree. The iPhone will make all on the mobile phone more cool. It won't actually give us much of anything we couldn't do before. But suddenly the pocket internet, phone and messaging experiences will be as desirable as the iPod has made music.

mxmora - wow, you seem to be almost hostile about these matters. I would venture to guess you're based in America as you seem so angry at the mobile telecoms players? You might be pleased to hear that there are clear trends toward fair pricing, open internet access and unrestricted cellphones. The concept started in Japan and South Korea (as most current innovations in mobile telecoms tend to). But now already much of Scandinavia and Northern Europe is in similar state. The UK recently saw the launches of unlimited internet access on very modest monthly packages with VoIP access to Skype etc, headed by the newest 3G carrier, Three/Hutchison and its X-Series. The rest of the industry is following.

I'm very sure like all other innovations for this industry, that too will come to America soon (my calculations have America about 4 years behind the mainstream of Europe, ie about 6-7 years behind South Korea and Japan.

But let me address your specific points. I appreciate your view point, however, you might not know this industry quite as well, some of your assumptions are made probably with incomplete information.

Music - you say the only reason music is 8 times larger than iTunes is because it is a closed system controlled by the mobile operators/carriers. That may be a part of the reason, but I would certainly say it is a relatively small part. Certainly iTunes is also closed system, more so than most music services on mobile networks. So just being closed is no reason to think the iTunes/iPhone model would supercede other music offered on mobile phones.

But more precisely, the music industry has already discovered that the various mobile music services - ringing tones, ringback (ie waiting) tones, welcoming songs, background tones, and push ringtones, all serve DIFFERENT needs and have their own market opportunities which are DIFFERENT from the purchase and private consumption of MP3 files.

A large proportion of the first-time buyers of ringing tones buy a ringing tone of a song they already own ! (obviously the heavy users of ringing tones, the youth, will at times buy songs only for the short duration of their popularity as ringing tones, so this does not apply to heavy users of ringing tones once they get into the habit, and that is the majority of the total ringing tone business)

The same is true of waiting tones, welcoming songs, background tunes, push ringtones, mobile karaoke, music video, music streaming etc. So while yes, for the purchase of "basic" MP3 files, yes you may have a point - but then consider this. In South Korea the average price of a song to a mobile phone is 40 cents. Not 99 cents like iTunes. No wonder 45% of all music sold in South Korea is sold directly to musicphones. And South Korea is not alone. The latest figures from IFPI the international federation of phonographic industry - says real music (excluding ringing tones) to mobiles outsells MP3 files sold online such as iTunes from Japan to Italy to Spain. In Sweden the smallest mobile operator/carrier outsells all of iTunes Sweden - and in Sweden you can buy full track MP3 files to your phone for as little as 8 cents (obviously these are older songs, not current chart hits). And the Swedish model lets you copy the same song both onto your phone and your PC.

Yes, some American carriers are still way behind on this, but in the most advanced mobile music countries the services, the prices, the utility and availability are all much better for the consumer than iTunes or buying songs clumsily on credit cards to PCs and then transferring to portable musicplayers. No, just select the song to the musicphone, hit "buy" and its loaded straight, fast - on real 3G networks, not the rubbish on most American networks still today - and its billed straight to your phone bill. Kids can do it - even if they don't have a credit card, etc.

Better, simpler, faster. You'll see those soon in America too.

Also you take issue with messaging and again accuse the carriers. And again, I do admit the carriers (mobile operators) have been greedy at times but in the case of messaging, you don't know the facts. All surveys in every market - including America - have shown that SMS text messaging is the topmost preferred messaging method preferred not only over email, voicemail and IM instant messaging, it is even preferred over voice calls !

You totally don't understand the power of SMS text messaging. There is NO rival in email, not even on a Blackberry. So yes, the iPhone may make it easier to send "traditional internet messaging" communications, and I'll immediately grant you that on the iPhone especially with WiFi this will be easy to do (by the way, my current Nokia is already my fourth smartphone with WiFi - my first one was in 1994 - so that is nothing that dramatic either)

No. You should go read my longer posting on understanding SMS text messaging, why it is not the dumb little brother of e-mail. It is a far superior method to communicate. And yes, we've reported here at this blogsite that not only is SMS preferred over e-mail, it has now been proven to be preferred over voice calls on cellphones by the general public (not only youth) - in the UK (not a bizarre mobile-crazy country like Finland or Sweden or Japan or South Korea).

So you have a good point but don't know the big picture. Messaging is migrating to the most powerful method and that is SMS text messaging. And that won't change with the iPhone.

Thanks for writing

Tomi Ahonen :-)

Wolf Fernlund

Tomi, interesting as always to read your material...

January 10 you wrote the following:

"I would say 10 million iPhones - with prices in the 499 and 599 dollar range, and with only a GSM model and launching with only Cingular in America first - this is a tall order, but it can be done. I would suggest history will find that this is a much bigger drain on Apple's marketing and sales support resources than they can have imagined, but the writing is honestly on the wall."

What do you think about this today? (I get a feeling that you are a little surprised by the volume of iPhone market "hysteria" sofar...)


Tomi, I must say that the article was an interesting read. I loved the Era BI and AI concept.

I would agree with you that the iPhone would infact create the BI and AI feeling in case of the mobile phone industry and we need to thank Apple for it.

Before the iPhone, everyone in the industry was content in following each other, Apple has been brave enough to think out of the box to develop something quite revolutionary.

I have a blog exclusively for the iPhone, and incidentally carried an article on how the iPhone could potentially be a boon for mobile phone advertising.

Article Link -

Let me know your views!!

Alan moore

Hi Wolf,

I am Tomi's co-author at this blog. I am personally not surprised by the huge interest in the iPhone. Apple have been a disruptive technology from day 1. For Apple it is not bravery, it is their DNA. It is the other companies which are driven by technology, not by marketing or a clear view on the end user experience. From their stores to their software, well in fact verything they approach.

There is a very clear vision of purpose. Few if any other companies in this space innovate in the same way.

As i said in my post, start with a laugh and work backwards. Like the Sony Walkman.

Thanks for posting



I'm not a very knowledgeable person in regards of this technologies, but I got caught up by your article and even followed the link and read your posting about Handicapping the iPhone, on doing so, it just hit me and would like to point out something that nobody seems to have thought of.

For what I know, the $500- $600 price point for the iPhone puts Apple already in the profit side (according to some analysis I read on its components). So, why the two years contract? It seems too many people are uneasy with this decision by Apple, so there should be a very good reason behind it. Here is my grain of salt: What could AT&T put into their service worth at lest the cost of the iPhone, which they wont subsidize at all? I think Visual Mail is just a glimpse of what to expect, IMO the other half of the iPhone revolution is in this area, but I’m afraid I just don’t know enough about technologies to speculate here. Do you think we could see some breakthrough implementation here?



I guess its a given that the value chain from manufacture to consumer determines what the end price displays itself as.

If every single part of that chain held precisely the same sociological value (read importance) in new technology then I wonder if prices would look like they do.

I figure not.

You claim your point is something - 'nobody seems to have thought of' - which raises the issue that maybe its the fact that many people take the above value chain assumption 'as read' so then rarely question such pricing models.

Many people would state that the right price (purely commercially speaking) is whatever people will pay for it.

Many people would question whether something with a high (initial) percieved value should be subsidized at all. In fact - they may argue it should be premiumed.

Is it actually a case of trying to equate hardcore commercial 'value' (i.e profitability) with values of a totally different kind (i.e significance to the evolution of socio-technology)?


Tomi Ahonen

Hi Luis, Wolf, iPhonehacks, Alan, jiaritzi and freeformer

Thank you all for visiting and posting comments. I'm very happy you've found this topic worth your while enough to comment.

We've also been rather widely picked up by the IT press such as ZD Net and Gizmodo, the Apple websites such as Macbytes and Macrumors, mobile sites such as Smart Mobs, and various other national sites from Denmark, Sweden, Finland onto India etc. Welcome all !

Now to specific responses as it is our custom here at Communities Dominate Blogs.

Luis - Wonderful catch, thank you so much. We must have been posting at the same time, sorry I didn't see yours at the time I posted my last reply. But yes, I'm sure you'll accept that Steve Jobs is very much the exception among 50 year olds and high technology. But ha-ha, funny coincidence. I was just selecting a couple of major media brands and had no idea Steve Jobs sits on the Disney board (but am not surprised).

I would hope - while we are on Disney - that Steve could bring some of his youthful - and now mobile-enthusiastic - views to Disney, which is almost criminally negligent in not taking advantage of its unique insights into mobile media. Disney was among the first Western brands to be signed up for the launch of NTT DoCoMo's global first launch of a mobile portal service, in 1999, in Japan. So Disney has known about this space literally for MORE than 8 years. I happen to have followed Disney right from the start due to knowing of this from the guy who did the negotiations from NTT DoCoMo's side (NTT DoCoMo being one of my reference customers)

And Disney has been consistently among the most profitable and lucrative mobile internet websites in Japan since that launch. So Disney HQ has had in fact the world's best knowledge, of the international potential (ie not local brands and content) in the world's first and most advanced mobile internet service. They have generated so much money out of Japanese mobile phone users that it has probably paid for all of Disney's "real" websites worldwide. This from Japan alone.

But have they capitalized on this knowhow. NO ! Idiots. And I mean it with the best admiration of Disney. But idiots. How much has that goose been laying golden eggs year after year after year in Japan, and where are Disney products, content and services on any other nation? Only NOW we get Pirates of the Caribbean as a multiplayer online game for mobile. NOW ? Eight years later ? and ESPN mobile ? What moron ran that brilliant money-maker into the ground ? And why terminate the European launch of Disney MVNO ? Disney sits on an absolute goldmine and they are poisoning the opportunity. Yes, idiots is putting it mildly. They sorely need Steve Jobs at their board to see some sense into all this. Disney of all media brands ? And they desperately need to read my 7th Mass Media piece ha-ha

Sorry about the tirade. But yes, you are totally right, Steve Jobs as a 52 year old is the exception to prove my rule ha-ha...

Who's next? Wolf.

So Wolf, you say you think I am a little surprised by the iPhone related hysteria? No - didn't you read fully that January 10th posting, in it I very clearly say to expect an Apple media blitz. I know very well the passionate Apple fans (we've been burned here nearly as heretics with our early iPod forecast that turned out remarkably accurate, but the Apple fans are truly fanatical, we know. Both Alan and I are huge fans of Apple and admire how greatly it connects with the passions of users of its technology. No other tech brand has nearly that loyalty and love.

But no, not at all. That is partly why this blog now. If you think its silly that four books on the iPhone are already taking pre-orders - including by the way one of my two publishers, John Wiley the world's biggest publisher of IT and telecoms and engineering books who also own the "for Dummies" paperback books - has already announced the iPhone for Dummies book ! I kid you not. (and no, I did not ghost-write that book ha-ha, although I've advised the For Dummies division on telecoms related titles etc) - if you think this level of hysteria is outrageous for a phone that hasn't even shipped yet (and remembering at any one time there are 1,500 different new phone models sold in the world), think again.

Yes, think again. This is PRE launch iPhone hysteria. I am telling you the iPhone will be a BI and AI moment. It will get MASSIVELY more loud and excited once the first iPhones hit the stores - and every programme will find an excuse to showcase the phones. The breakfast shows and the cooking shows and the latest episodes of cop shows and lawyers shows and reality TV etc will all somehow start to feature iPhones.

And then there is Apple's OWN PR machine. If this is the device to save the company, it will get the appropriate attention by Apple. The ad agency that created the Orwellian 1984 Macintosh launch Superbowl ad has one of the truly iconic TV ads of all time. You can bet that all major ad agencies begged stealed and borrowed to be allowed to pitch for this iPhone launch campaign. And be certain, it will have the absolute topmost creative team on the project. This is an utmost career-making campaign.

So when Apple's own PR machine gets going with the iPhone launch - only THEN do we see the maximum buzz and hysteria around the iPhone. This today, this is a prelude, and very mild in tone compared to what will come next month. Mark my words. We will be sick of the word iPhone by June 30 ha-ha...

So no, not surprised in the least. I did very clearly state in Jan 10 that the Apple PR machine will be one of Apple's strengths going into this challenging 10 million sales target. And I also add that Apple will gain a boost from the American media and domestic market which is not sophisticated enough to truly evaluate the iPhone compared to the real competitors. Like we can see in all European and Asian reviews, they are only lukewarm to the iPhone outside of America (actually very suspicious in Japan and Korea and advanced Asia).

iPhonehacks - thank you. And yes, we agree. And yes, it is Apple being very brave that in the past (Macintosh, Newton, iPod) has gone totally beyond what conventional wisdom and following the herd behaviour had created. This is what we - as in the mobile telecoms industry - need. Apple will bring innovation, and it will be good for all. It will also force Nokia, Motorola, Samsung, SonyEricsson and LG to raise their games. And obviosly the second and third tier players like the Blackberries etc.

I'll come over and visit your site. Thanks for the invitation. And yes, iPhone will dramatically help the advertising industry which does need to get to grips with mobile - its a favourite theme with Alan and me at our workshops and seminars. I was just with the Slovenian Marketing Association last month to help them get this point.

Alan - hi. Yes I always like your Bill Bailey quote...

jiaritzi and freeformer - you raise the point about the subsidies and it in itself is a long treatise, so let me first save this reply. I'll answer you and the subsidy issues of the iPhone next.

Thanks for writing, come back again

Tomi Ahonen :-)

Tomi Ahonen

Hi jiaritzi and freeformer

First, thank you freeformer for dealing with part of the issue.

But lets do a bit of the basics. Subsidies. American readers may be surprised to find out that in many countries it is illegal to offer handset subsidies - Italy, South Korea, Belgium, a large minority of the world is in this camp, and a mild movement is in that direction (trying to eliminate handset subsidies, such as they did in South Korea and Israel).

So the iPhone 500 dollar and 600 dollar prices (depending on storage size) is subsidised. A real non-subsidised price is not yet known, but is somewhere in the 800/950 to 1000/1200 dollar range.

And yes, lets take the mid-point for those estimates, and then for example in Italy the "cheaper" iPhone would cost the equivalent of about 900 dollars (ie about 700 Euros). No matter how big your monthly spend is with an operator/carrier in Italy, you have to dish out the 900 dollars for this phone.

Does it hurt sales of phones to pay full price. of course not. Italy has consistently been at the top of cellphone sales and subscription penetration in Europe, and literally Italy has twice the penetration that the USA has (meaning of course two or more phones and subscriptions per person, but thats another story - please search our blog about multiple subscriptions or penetrations to read more about it)

Equally there are lots of countries with handset subsidies where MORE expensive phones than the iPhone are offered for "zero dollars" if your monthly spending is enough and you renew your annual contract. The UK is typical of the many countries with full handset subsidies.

My Nokia N-93 (3 megapixel optical zoom Carl Zeiss lens and flash, DVD quality video recording and video-out connector, 3G and WiFi music/internet smartphone) and definitely nearer a Mercedes Benz or Rolls Royce if the iPhone is more of a BMW - by current exchange rates this topmost Nokia phone is about a 1200 dollar phone in its unsubsidised price - is offered by Vodafone for zero UK pounds, provided you are one of those with massive monthly bills to cover this cost of the upgrade.

So, first, on "real cost" or "real value". We don't know until we learn of the iPhone's "SIM free" price, the non-subsidised "street price" for the phone. But it is likely around 900 dollars for the cheaper version.

Then its somewhat straight-forward mathematics on the subsidy. You estimate what is the monthly billing for the customer over the period of time. There is a wholesale cost to our voice minutes and text messages and mobile web browsing etc. After we pay our costs (the wholesale price) we are left with our sales margin. And from that we have money to cover the cost of the subsidy. If we need to subsidise about 400 dollars (difference of 500 dollar subsidised price and 900 dollar unsubsidised price) then we have to get either 33 dollars for a one year contract, or 17 dollars for a two year contract, just to break even. That means a certain minimun contract price level for that period.

So far so good. if I understood your question, jiaritzi, you wanted to offer services to cover part of the subsidy? And make it cheaper to the end-user (and/or more profits for Apple and Cingular). This is like Sony offering the new Playstation 3, but rather than match the price of the Wii or 360, they would give away 3 gaming titles.

Yes, this is theoretically possible. But then we have the problem we've found in mobile telecoms in the post 2G time - that there is no single killer application. (I should know, I wrote the first book on creating killer apps for mobile in 2002 and have been teaching at Oxford University's 3G courses on killer application development since 2003)

So modern mobile servicess are very similar to watching TV. You have your fave programmes. They are probably very different from what your parents like to watch, and also very different from what your kids like to watch, etc. So imagine if you received a TV which has 3 pre-programmed shows, but you like David Letterman and they give you only Jay Leno. Or you like Sopranos but they give you Desperate Housewives. Etc. This is (one of) the problem(s) with trying to give services bundled with the iPhone.

Not that it can't be done. But for example, would you really like to get Pirates of the Caribbean - the videogame, on your iPhone? Only 8% of the total population play multiplayer online games. And some might not particularly care for the Pirates game. What if you received a free subscription to Flirtomatic? But you are happily married, you don't WANT to flirt around with love-sick youngsters? Or what if I give you a free copy of Elven Legends. What IS Elven Legends? (it is a really cool mobile multiplayer game, coming soon)

If Apple try to do something with a well-known brand like Flickr, MySpace, YouTube etc, then they can't get exclusivity. (the projected user numbers are tiny for getting an exclusive deal on any of the honest mass market brands). But if not a known brand, then they are stuck with that killer app problem, few people would really care enough to give it "value" in their decision.

Ok. there is much more about and around subsidies for handsets. But keep in mind, yes, there will be many countries where the locals have to pay almost twice the price for the iPhone. And there will be plenty of countries where the locals will get an iPhone "for free" ie fully subsidised. In every market they have to make the calculations locally into their domestic competitive market.

Thanks for visiting

Tomi Ahonen :-)

Tomi Ahonen

PS - I forgot

Hi, I forgot to mention about the Apple brand premium. Apple is brilliant at this. When the original Macintosh launched, it was "under powered" by some IBM-compatible specifications. Ie comparing "apples to apples" on the IBM related metrics, the Mac seemed "inferior" and thus very expensive. But obviously the Mac had much MORE in its mouse, "windows" ie icons based interface, hypertext, wisywig printing, etc.

So Apple is very competent at changing the game. If you use the old rules, Apple seems expensive and perhaps lesser in specs. But it typically does so much more and better, that it really does create what we call "new market space" in our book Communities Dominate Brands (where the iPod is one of our case studies of how exactly to do that).

And yes, the same is true of the Newton and the iPod. Both were very expensive at launch, compared to their contemporaries, but radically different.

So Apple has a strong track record in getting its customers to pay extra for the Apple experience. And increasngly with the iPod, Apple has become extremely cool and desirable, which helps get more dollars out of the wallets of the paying public.

Ok, that was all I needed to add

Tomi :-)


Time will show this jackass author how wrong he was. If he doesn't delete this to cover his tracks.


>>remembering that Windows is Microsoft's copy of the Mac operating system

And Mac is Apples copy of the PARC operating system.

Steve Jobs: "we have always been shameless about stealing great ideas..."

Dave Zatz

"And yes, the same is true of the Newton and the iPod. Both were very expensive at launch, compared to their contemporaries, but radically different. So Apple has a strong track record in getting its customers to pay extra for the Apple experience."

Remember how successful the Newton was? Yeah, me neither. ;)

Tomi Ahonen

Hi James, GR and Dave

Thank you for visiting and posting comments

James - Of course we won't delete this, nor even your abusive comment. I hope you would have explained WHAT it is you disagree with? Perhaps you might return to explain a bit why you think the "jackass author" is so wrong?

GR - good point. And I've always also advocating rather learning from other successes (so in some way, attempting to copy success, perhaps in a broad definition that could be called stealing too).

Dave - Ok. Newton was not successful. Considering how radically the Macintosh changed all of personal computing and the iPod changed all of portable music consumption, two out of three commercial successes is a success hit rate any CEO would take. You can't win them all.

With that, bear in mind, most PDA experts do admit that the Newton was significantly ahead of its time and truly radical at launch. It has influenced all subsequent PDAs. But yes, Apple was not able to turn it into a commercial success. However, now considering the iPhone being a combination cellphone, music/media player and pocket computer/internet device, it is certainly fair to suggest the iPhone is the grandson of the Newton, a re-incarnation of that concept, with more modern twists.

In some ways the Newton to the iPhone is what the Lisa computer was to the original Macintosh. A kind of proof-of-concept vehicle, with many of the actual components and concepts trialled, but earlier, before the technology was quite there. This I think suggests that Apple has been very well aware of the pocketable computing device concept and opportunity long before its rivals. Too early? in this case, yes. But it also helps give a VERY strong base of knowhow and experience now when they launch the iPhone.

I'm certain that when compared against any stand-alone PDAs, the iPhone will totally crush them as a pocket computer. Similarly taking the iPod music and media knowhow, here too the iPhone will rule. The only area Apple will struggle to get all the parts right, is the cellphone (incidentially by far the most complex part and most expensive part of the convergence in the iPhone).

But there, I'd put my money on Apple getting it enough right to make the iPhone immediately a hit, and I've been saying, Apple is also excellent at maintaining a usability lead - expect the second release of the iPhone to be the ultimate cellphone/smartphone. If I was at Nokia or SonyEricsson or Motorola, Samsung, LG etc - the second iPhone is the phone to fear. This first edition is Apple only entering the market...

Thank you all for writing and posting your comments

Tomi Ahonen :-)


Hi Tomi,
Great thought provoking article, thnks for that...
I'd better boook my Oxford courses quickly :-)
All the best


I like the dream you have - it is a pity reality will soon be faced by both you and Apple.

The biggest problem they have is to get the consumer to use it - and love it so much that it creates a buzz similar to the iPod. Outside of America they are using the same tactic of selling with one operator - this will be a big barrier.

Next is the price - it will cost even when the operator subsidies the cost over 12 months.

Then there is the size - too large for most consumers - no matter how friendly it is.

Then there is the greasy screen which time and time again has been shown to be a complaint of people.

They may get around the screen grease and in 2 years time they may get around the operator lock-in, hopefully they will do as with the iPod and create a iPhone micro and nano to get around the size issues. Then the cost must be dealt with - phones are commodity now - not high price, if you want volume you need to drop the price - or offer something unique for the price - there is nothing that unique apart from the logo. Unfortunately a consumer in a shop will not understand how friendly it is to use - and most of them have now been trained to cope with the unfriendliness of Nokia and Motorola - so they will not "get" it straight away. By the time it picks up a consumer conciousness for friendly it will be copied and no longer unique.

It should try and go for the business market - compete with RIM and microsoft - there is money there - but also a need for email integration. They are going to be a consumer device in a market that is saturated and not valued.

All of these hurdles must be jumped before they can even expect it to become the remarkable achievement the iPod was.

There maybe a BI and AI but no more than there is a BB and AB (blackberry), BN and AN (Nokia) and BM and AM (Microsoft).


I have reading a lot on the iPhone for some time now... Sramana Mitra has been written a series of articles on the iPhone and its impact on the laptop and mobile ecosystem. Read more about the iPhone and the Future by Sramana Mitra.

Tomi Ahonen

Hi Krzysztof, Al and Mehnaz

Thank you for stopping by and posting comments

Krzysztof - hi, thanks !!

Al - good comments and we probably agree to a good degree. I think you are commenting on this story, when you probably would enjoy much my January blog about Handicapping the chances for the iPhone worldwide. I discussed some of your specific points way back then. But I'll briefly comment also here:

On "the dream you have" and you Al think we share Apple's dream, please understand this Communities Dominate blogsite is not an Apple site. We focus on social networking, digital communities, engagement marketing and convergence. Apple is not a major leader in this space (we closely track companies like YouTube, MySpace, Flicrk, World of Warcraft, Habbo Hotel, Cyworld, Ohmy News, Second Life etc). So the dream we have here at this blog is for companies to learn to engage with communities. Apple is not one of the more established companies to do this well, we'd site such companies as MTV, the Guardian newspaper, Three/Hutchison operator and Nokia among equipment makers much more communities-oriented than Apple.

Please re-read the blog entry, we do not in any way "promote" or "hype" the success of the iPhone. We here at this site, recognize there is growing hype around the iPhone, and we examine its impacts to those industries we work closely with, such as media like music and gaming and TV, equipment makers in the converging area, internet and mobile players etc. So while Alan and I are Apple fans, we are not particularly "hoping" or "wishing" for the iPhone to succeed any more than we wish a SonyEricsson or Nokia or Motorola device to succeed or fail. If we like a product or what it brings, we'll celebrate that.

We have been very critical of Apple also in the past, if you search this site on the iPod you'll find hundreds of angered Apple fans accusing us of being heretics.

With all that, no, Al, we don't "share" a dream with Apple. No doubt Apple DOES "dream" or hope that the iPhone will be a hit product like the iPod rather than a failure like an equally impressive technology product, the Newton before the iPod.

So then you Al take a hit at various shortcomings of the iPhone. I think many you state are fair, some more relevant than others. Some you may have missed, which is why I urge you to read my January iPhone Handicapping posting.

Also it is most important at this point - when we are only weeks from launch, to point out that we won't really know until it launches, and the actual manufactured product is in the hands of first reviewers. When it was announced in January, that is a good time to look at the specs and early info, to put it in context, in particular to those who are not experts of the mobile space, to see how it stacks up against the competition. Now, months later and a few weeks to launch, its rather futile to compare a vaporware product to today's rivals until it actually launches and we actually see exactly what the iPhone is like.

But lets look at your points

Create buzz - this is already happening, long before the iPhone is launched and before Apple's own PR machine gets into gear. No doubt they have created an iconic item of design. The buzz will naturally extend through June. Your point that the buzz needs to be sustained is not relevant to our posting here, whether American major media houses, advertising agencies, IT companies and internet players will wake up to mobile as a new channel. So whether the buzz is sustained past the summer is pretty irrelevant to our posting here. I do expect it to continue, time will tell.

Price. Here you probably are an American and not accustomed to modern, high-end smartphones. The Motorola Razr or LG Chocolate or Blackberry etc are very low-end products. Nokia's top products (a cameraphone with optical zoom and DVD quality recording), the Nokia Communicator series superphones, Samsung's top end (10 megapixel cameraphone) and SonyEricsson's top Walkman phones and Cybershot phones etc are not even considered by American customers. 499 dollars (for the cheaper model iPhone) subsidised with 2 year contract, may seem steep in America. Without the subsidy its somewhere near 800 dollars to 900 dollars as an unsubsidised price. Well, phones costing well in excess of 1000 dollars unsubsidised price sell in the millions in South Korea, Japan, Hong Kong, Singapore, UK, Italy, Israel, etc.

Here simply American audiences (and IT experts) have not been exposed to the best that is out there, that is why American reviews of the iPHone tend to be glowing, and the European and Asian reviews only lukewarm.

But on the price, Apple is a past master of creating new market space, of re-setting the rules and price expectations. The Mac was significantly more expensive than its contemporaries, and every successive Mac model has held an Apple price premium over other PCs. Same for the Newton, same for the iPod. Apple is definitely capable of extracting extra dollars for their products. Am certain they will repeat this with the iPhone.

Weight - this is a mid-range phone for its weight, in the smartphone category. Not a valid point. The Nokia N-80 weighs almost exactly the same. Many much heavier smartphones are out there. You need to understand the iPhone won't compete with the tiny simple featurephones out there. It is a very rich mixture of mid to top abilities. Weight, at this weight - Nokia Communicators (always the heaviest cellphone on the market at every release since 1997) have sold more than any PDA every quarter, the ultimate most-sold PDA in the world, and more than twice as expensive as the average price of PDAs, and nearly twice as heavy as the average PDAs (and having no stylus). But yes, the best-selling high end PDA-smartphone year after year, quarter after quarter. And twice as heavy as the iPhone. Weight? this is not an issue.

Greasy screen - you have a point here. But when I had my Nokia 6630 and my 6680 - both which had 2.5 inch screens exposed (not sliders or clamshells) and placed against the face when making calls, it was a problem sometimes on say a hot day, but not a major problem. The iPhone screen is 3.5 inches in size. Its by no means the first phone with such large screen (the LG Prada is nearly identical in outwardly measurements) - this won't deter those who like it otherwise. It won't be returned because the screen gets greasy...

Commodity - ok, the phones at the bottom end are becoming commodities. But cellphones as commodities in 2007 are MUCH LESS SO than PC's as commodities this decade, yet the Mac continued to sustain a loyal customer base to its computer series. And as to commodities. Water is a commodity. Clean water is available from the tap in all industrialized countries. Yet billions of dollars worth of branded expensive water is shipped in as Evian and Perrier from France to all industrialized countries - even countries with their own mountains and glaciers and the world's most clear and clean environments, like Switzerland and Sweden. If you can turn free water into a branded commodity with so little to differentiate as Perrier and Evian, CERTAINLY an Apple can with the excitement around the iPhone, build customer passions to sustain differentiation with iPhone.

Apple logo only differentiator - that is the critical one no doubt. But here look at the Mac and iPod. Again the Apple logo has held the customer loyalty. A logo alone won't do it, the company behind the logo needs to fulfill the promise, and Apple has been truthful to its customers. Expect this to continue with iPhone, don't see a problem.

iPhone micro and nano? Not anytime soon. Apple has to integrate 3G into the phone and at least a 3 megapixel camera and flash and video recording (for the iPhone to have any chance in Europe and Asia where customers are more demanding). All this adds size, more software, more drain on the CPU and battery, more size, and cost. No, you'll get LARGER iPhones with 3G, not smaller.

Saturated? Hold on. Did you say the cellphone market is saturated? You've been reading the wrong (probably American) analysts on telecoms who don't understand cellular. USA has slipped to second-to-last in the industrialized world in cellphone adoption (with Canada dead-last) with only about 75% cellphone penetration (measured per capita, not per household like broadband or PC). One of the world's leading countries in cellphone penetration is Hong Kong. I was chairing at the biggest telecoms event of Japan in Tokyo in January where Hong Kong wireless carrier/mobile operator Peoples presented. Hong Kong has 130% cellphone (subscription) penetration, yes meaning 1.3 cellphones for every living person, babies and great-grandparents all included. And what did Peoples say? They said Hong Kong is STILL growing.

You have nearly TWICE as many cellphones and subscriptions to sell in America before you approach saturation. European AVERAGE penetration is 105% (source Informa) and leading European countries like Italy and UK are at 120%. Sorry, saturation is a total red herring as I've explained in Business Week, Wall Street Journal etc. This one Al you simply had wrong.

Go for business market, attack Blackberry - this also Al you have wrong. You probably think "because iPhone is a smartphone, and Blackberry is a smartphone, iPhone needs to target Blackberry". But now consider rather, the Blackberry is a Hummer, the iPhone is a Ferrari. Perhaps rather than try to convert Hummer users to drive Ferraris, its better for Ferrari to target Porsche, Corvette, Jaguar etc owners.

And they are totally different products with totally different customers and needs and buying patterns. Blackberry is sold as a corporate/enterprise e-mail device and sold with company e-mail integration. The Blackberry is poor at media consumption (music players, cameras, videoplayers, etc) because it is a business tool

The iPhone is a mediaphone, an entertainment phone, with great music and video, modest camera, probably good internet access - but no integrated corporate e-mail system. It is bad for business real needs, and very expensive "executive toy" with too many frills, to satisfy price-conscious corporate communication tool buyers. That is why most early Nokia E-Series business phones did not have built-in cameras or shipped without pre-loaded games etc. It is because the corporate buyer does not want to subsidise its employees with freebie entertainment toys.

Here you have it wrong. Apple can't go against Blackberry just like a current model line Ferrari is hopeless to get Hummer buyers (no ground clearance, no "weight" or heavy "protection" in case of crash, no back seat, no cargo space, etc).
Apple has to go against Nokia N-Series, SonyEricsson Walkman phones (not Cybershot phones), LG Chocolate, etc.

Also Al, what you miss is things such as no 3G, the one carrier per market strategy, a very diverse and complex operator/carrier market outside of North America.

Most of all, Apple has never experienced this market situation. When the Apple 2 launched or the Newton, they had no major branded global players to fight against. When the Mac and iPod launched, they had only one major global rival (IBM and Sony respectively) and in BOTH of those cases, the global rival had decided this market was not strategic, so the global rival was ignoring Apple. With IBM in 1984 when the Mac launched, IBM was still delusional about the relevance of the PC. When the iPod launched in 2001, Sony was focused on the Playstation, its major profit engine, and with portable music players was peddling the minidisk digital recorders.

Never before has Apple had well-entrenched, global players with larger sales volumes, global footprints, established reseller channels. The big five (Nokia, Motorola, Samsung, SonyEricsson and LG) each have seen Apple coming to this space, and the handset makers DEFEATED Apple already in "Round 1" - the battle of the iPod vs the musicphone. Last year Apple sold under 50 million iPods and today have shipped a total of just over 100 million in six years. Last year 309 million musicphones were sold. Nokia, Motorola, Samsung and SonyEricsson each have sold more musicphones - portable MP3 players - than ALL Apple iPods sold last year. Even LG is catching up, the LG Chocolate (a musicphone) is LG's best-selling phone model in Europe and America.

So Apple has never went into this battle before, where it has forewarned its rivals, they are very well entrenched competitors, and they are TOTALLY focused on keeping this market. Sony - the world's largest consumer electronics company - decided it can't compete in cellphones alone anymore, and joined with Ericsson. Before Sony made this decision they were selling nearly 100 million handsets per year. iPhone hopes to sell 10 million. Sony said 100 million made them too small. In this market of almost 1 billion handsets sold worldwide per year, profits are very difficult to come by, with Motorola, LG and Samsung each reporting loss of profits in at least one quarter over the past two years. Nokia diverged its networking business to focus just on its phone market. Siemens, the world's largest engineering company, and ranked 6th largest phone maker, quit the phone business altogether.

Its a rough hard market, Apple will find. That is the toughest part of trying to reach 10 million in sales.

But current Mac owners, and most iPod owners, are sharing the Apple dream, they want the iPhone. And if it delivers on THEIR expectations, even if it is "outrageously" expensive the existing Apple customer base is big enough to get close to the 10 million sales level.

Finally you say "all this needed to become remarkable achievement that the iPod was" - you again miss the whole point of our blog. We are talking of a watershed moment - for industries OUTSIDE telacoms. All major handset makers - Nokia, Motorola, etc - have already said the launch of the iPhone will be a watershed moment in the handset manufacturing business. Future phones will be compared to the iPhone. What we talk about in our blog, is that there is a BIGGER story, the impact to media, advertising, IT and internet industries especially those with headquarters in America (most major media and advertising, many IT and internet players).

For that audience it is irrelevant if the iPhone is a hit or flop. They either will wake up during this summer or they dont. And if the buzz around the iPhone is big enough, they will wake up.

That was our point. Thanks for writing Al

Mehnaz, I think your posting is somewhat an advertisement, but yes since you do say you discuss the iPhone, I'll let it be here.

Thank you for writing

Tomi Ahonen :-)


Trackback: La Era iPhone

Summary: Anda la blogosfera tecnológica tremendamente revuelta a raíz de un artículo del célebre Tomi Ahonen en la que predecía la llegada de una...

Blog: El Observatorio de Internet Móvil

Paul Jardine

Hi Tomi,

I liked the article and I very much hope that things do happen as you predict, however I was interested in mxmora's comments and your response to them.
If, and it's a big if, Apple gets the iPhone right and they are not 'walled in' by their partnerships with the operators, then I think that what we will see is the arrival of the real internet on the mobile platform.
Think about the reasons that SMS is successful. It's because it's easy to use, it works and you can send a message to anyone you can make a call to. Typically the other messaging channels, such as email, IM etc did not meet those criteria, but with the iPhone, maybe they will.
I think one of the biggest effects of AI will be the demise of Symbian (even though it's installed on a lot of handsets), I would expect that Windows & Linux platforms start to become more prevalent on the new AI devices. The services will become more transport-agnostic (e.g. SMS/IM - the distinction will blur, the service will become more similar).
As you rightly said in your response to mxmora, there are plenty examples where mobile is the preferred delivery mode for services, but these are in instances where the price is right. The mobile operators are learning that, but slowly, and the launch of the iPhone will bring increased price pressure on the current mobile content services.
Will AI kill the 'golden goose' and make the internet on mobile the same as the normal internet? I'm not sure, but things will definitely get cheaper and the volumes of users of the 'internet on mobile' (I refuse to call it mobile internet) will go up exponentially. In the end, the mobile operators should be opening up and pulling down the walled garden, because if they don't then people will find other ways to get out, and the iPhone will probably make it easy.
I'm not the first to make this comparison, but it's probably a similar kind of event to the launch of the Apple II computer; the game changed, but in the end Apple were not the major benefactors.

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