The Most Eagerly Awaited Smartphone: the iPhone 4 - Apple increasingly preaching to the choir

There are those who've been around the mobile industry a while longer than Apple, who joke that to see what will be new in the next iPhone, just pull out a 3 year old Nokia.

There is surprisingly much truth to that joke in this, the newest iPhone. But Apple has added new clever bits. How will this iPhone 4 do in the market place? I am afraid Apple is increasingly 'preaching to the choir' and seemingly only offering something for those who already own an iPhone, rather than take on the big rivals who seem to target the iPhone on all fronts.

WHATS NEW IN iPHONE 4

So what is new? This is straight from the Apple website, so please Apple fan-boys, don't crucify me for nitpicking on the meaningless. These are Apple's five big news items in the iPhone 4. Apple's biggest achievement to celebrate is 'FaceTime' video calling. To achieve this, Apple has installed a second VGA camera facing the front (ie on the same side as the display). This is the secondary camera, the primary camera still faces to the back of the iPhone, the same configuration now as has been the format with most other 3G cameraphones.

The second source of celebration by Apple is what they call 'Retina Display' which means a 4 times more sharp display by resolution (in the same size 3.5 inch screen as in all previous iPhones). The new resolution is 940 x 640. The increase in the clarity to the iPhone screen is clearly visible to the naked eye (similar to how early dot matrix printers - with visible 'dots' of 'computer printouts' compared to laser printer outputs that seemed to look like they came from a printer. Visibly more sharp.

The third achievement is multitasking. The fourth improvement is HD quality video recording and editing. And the fifth improvement is a 5 megapixel camera and LED flash.

This is what Apple itself celebrates as the new features of iPhone 4, that Apple claims is the biggest thing to happen to the iPhone since the (original 2G iPhone). I would immediately scream to point out that the difference of the 2G iPhone from 2007 and the iPhone 3G from 2008 is a far more comprehensive upgrade and improvement than this iPhone 4. So while the iPhone 4 is the best iPhone yet, and the changes are significant, the biggest improvement 'ever' to an iPhone was what happened with iPhone 3G in 2008. But yes, Apple are masters of the showmanship, and they want to make big claims.

Those are not the only changes. The new iPhone has clearly visible design matters, a clear 'facelift' in the style of car makers who come to the mid-point of the lifespan of a model, and a few years after the original is released, they do a facelift version. This iPhone 4 does not have the type of iPhone rounded back as we've come accustomed to. It is very square, reactangular, in profile (more like other phones?). The iPhone for the first time comes in two colors, black or white (and isn't that also typical of normal phones, that there are options in the colors of the case). And Apple even now offers colored 'bumpers' in rubber and plastic - hey, thats just like Nokia phones a decade ago! Plastic color hilights.

And yes, the one button design is also now history. Apple finally admits that the user gains a significant advantage out of some dedicated buttons, like standard volume controls for playing music. There are actually several buttons now on the iPhone 4. Its not a QWERTY keypad haha, but Apple has clearly abandoned its 'we only need one button' thinking and now is adding user input methods through dedicated buttons. (I think this is very good). But isn't that yet another way that Apple is going mainstream?

The iPhone adds a third dimension to its sensors, which should make some games even more intuitive to play. The processor is faster, the battery lasts longer. And at least in the USA (and I am guessing therefore most of the world) the price of the new iPhone 4 is exactly what used to be the price of last year's iPhone 3GS. And like last year when the old model, iPhone 3G was sold at a severe price discount in its second year, now the iPhone 3G has been discontinued, but the low price point is taken by the iPhone 3GS. In the USA, that means the cheapest iPhone 4 costs 199 dollars on AT&T 2 year contract with subsidy, and the new price for the iPhone 3GS is 99 dollars with AT&T subsidy.

And its the slimmest smartphone on the market (according to Apple). Isn't this the Razr strategy when Motorola kept giving us an ever slimmer premium phones. Oh, but that was before Apple joined the industry, perhaps they didn't notice that we once went through the slimming contest, whose phone was most like the thickness of a credit card, haha.

APPLE LOYALISTS WILL LOVE IT

This is 'everything you ever loved in your iPhone, but more and better' - Now you get your LED flash and 5 megapixel camera that so many begged for. Now you get multi-tasking, what many more apps and tech oriented geeks were pleading for. Now you get HD quality video recording, and yes, video calling. If your iPhone 3G model is about two years of age and its time to think of an upgrade, this new iPhone 4, adding on features we got in the 3GS model. So anyone who had been living with the original iPhone 2G, now there is so much awesome Apple goodness in the iPhone 4, there is no reason to wait anymore.

And that is I think where the 4 times sharper screen will play a big part. Any existing iPhone owner will of course compare the two screens side-by-side. The iPhone 4 screen size is no bigger. Identical is size. But its incredibly sharp. So any video or any picture or any website etc, will be visibly more crisp and compelling on the iPhone 4 - when comparing to any older iPhone. The comparison is even more obvious and vivid explicitly because the screen size is the same. 

The new OS for the iPhone supports many other advanced smartphone features in addition to multi-tasking. It has folders, and even allows iPhone users to customize the home screen (again, folders and customizable home screens, these are years-old standard fare for such 'old fashioned' smartphone operating systems as Symbian haha). 

Statistics from all markets where we have heard of them into the public domain, including Nielsen just on the US market reported last Friday - Apple iPhone owners are the most loyal repeat buyers of any smartphone brand. They are already pre-disposed to prefer an iPhone. Now Apple gives them even more "iPhone-niness", clearly the iPhone 4 is in many demonstrable ways visibly, concretely, practically better than all previous models including the iPhone 3GS. Existing iPhone owners will find overwhelming reasons to upgrade to the iPhone 4. But... as the smartphone market is in hypergrowth stage, just keeping existing customers is not enough for Apple. They have to grow, and now I think their recipe of keeping Apple loyalists happy, is not enough.

US WILL LOVE iPHONE 4

In the US market, there is no collective consumer memory of a decade of Nokia smartphones with Symbian operating systems, doing almost all these things that Apple is now 'innovating'. In the US market, astonishingly, many smartphones do not offer video calls, so while this is nearly decade-old technology, in the US market, Apple seems to be offering 'leadership' haha. In the US market, 5 megapixels in a camera is considered quite advanced still today (in Japan and South Korea any self-respecting cameraphone has at least 13 megapixels of resolution). The LED flash also has plenty of mileage in the US market, again advanced cameraphones like SonyEricsson's Cybershots, various Samsungs and yes, top end Nokias, have the Xenon type flash which is far more powerful.

But I know that, and you, our regular reader, knows that, but most US consumers don't know that. To them this iPhone 4 is an amazing improvement over what was clearly the 'best smartphone' last year, witnessed by the number of iPhone clones now on the market from the Androids on down. Apple has managed to create an alternate reality for the US market where it is seen as the inventor and innovator, not the copier. And in the US market, I am sure the iPhone 4 will sell well. There is a nice heavy market of iPhone 2G and iPhone 3G models that need to be replaced.

REST OF WORLD UNDERWHELMED

Beyond the USA, it gets more tedious. When Apple said they did the multi-touch and capacitive screen and sensors and app store, that all played well in Europe and Japan etc. But now? They roll out their new phone where the top feature is... video calling? Video calling? The last time videocalling was 'cool' was around year 2000. Just about anyone who has a 3G cameraphone made by European or Asian brands, has had video calling for at least half a decade. Truly underwhelming. And honestly, the service is so low among consumer preferences, that most analysts have stopped reporting video calling feature usage. Stopped reporting its usage. I found stats from the UK regulator for 2007, where only 1% of consumers were using 3G videocalls, even though most UK 3G services included an allowance of 'free' 3G videocalling minutes and the 3G penetration rate per capita in the UK in 2007 is about the level of where the US is right now. This, the biggest change Apple celebrates, is not going to be seen as a big improvement in Europe or Asia.

I was digging through my statistics resources and could not find recent stats on 3G videocalls from any of the advanced markets in 3G like Japan, South Korea, Finland, Sweden, Norway etc... Not even bothering to report them for many years. Literally, the industry lost all attention in videocalls already BEFORE the original iPhone 2G had launched haha..

But the part that will really annoy the carriers/mobile operators of Europe and Asia, is that Apple's video calling is not compatible with standard 3G videocalling. So now we have a weird fight against Metcalfe's Law (the utility of any network increases in the square of the number of the members of that network - ie a telephone network that has 8 users, compared to a network with 4 users, has twice the users, but 4 times the benefit to all members). So we have a 3G consumer market, globally with 600 million paying 3G users, most of whom have a 3G cameraphone that includes video calling ability. And Apple's proprietary FaceTime launches now, not even compatible with the 85+ million population of old iPhones, iPod Touch's and iPads, - FaceTime is only compatible with Apple iPhone 4, the first of which start to ship June 24. This is madness (to Europeans and Asians where literally hundreds of millions can do standard 3G videocalling, and all 3G carriers/operators have set up the 3G videocalling ability - they have even done the international 3G videocalling interconnects! so you can make 3G videocalls across countries and continents)

Then Apple touts multitasking and the LED flash and a paltry 5 megapixel camera resolution. Again years old technology. Apple seems almost to be drawing attention to the fact that it is behind on all these things. Its not that someone else points out that the emperor doesn't have clothes, its the emperor himself who yells, I have no clothes.

Apple celebrates 5 major changes to the iPhone line, and Steve Jobs proclaims this makes it the biggest improvement in the iPhone of all time. Yes, in the US market, each of those 5 changes has merit, because the US consumer has not yet experienced very advanced phones, by and large. But in the rest of the world, Apple is kicking sand in the eyes of its own loyal supporters. How can they now go 'celebrate' years old staples like video calling with the second inward-facing VGA camera, or multitasking, or LED flash with 5 megapixels in camera resolution. Its like suddenly a car manufacturer brags about its newest model having fantastic innovations of windows that roll down, and adustable seats, and an automatic transmission. Sorry, those were innovations in a bygone era. Today any car maker should be able to offer those as standard.

HD quality video recording is more current tech, but not bleeding edge. Many rivals can match that in similarly priced smartphones.

BUT THE DISPLAY IS MAGNIFICENT

So it comes to the ultra-sharp display. Yes, that can be cool, but now rivals offer 4 inch and even 4.5 inch screens - that have far more sharp resolutions than the iPhone 3GS (while not quite as sharp as iPhone 4). Is that really worth it to go iPhone? Again, sorry for bringing up Nokia (but I am ex Nokia and know the Nokia past product line-up and its phone features the best), but lets go back again and see who showed Apple a better resolution screen. The original iPhone 2G (and upgrade 3G and upgrade 3GS all) had a screen resolution of 480 x 320. The new 940 x 480 screen resolution is not quite 4 times as good (technically, its 3.9 times as sharp). Now, what was Nokia's next flagship phone after the original iPhone 2G launched in June 2007? The next Nokia top phone was the E90 Communicator (what I've often called the best Nokia phone ever and by far the best phone of 2008 - and certainly a far better smartphone than the iPhone 3G - something many industry analysts and phone review magazines etc agreed). So how was the E90 screen - it actually has two, as its a palmtop form factor - but the E90 Communicator main screen is a 4 inch screen - larger than the iPhone's 3.5 inch - and had a resolution of 800 x 352 which is 1.8 times more sharp than the any Apple models of that time, or even up to newer Apple models a year later.

So the original iPhone screen resolution was 'not perfect' - says Apple itself, because it has improved the resolution. The screen resolution is a very important factor to smartphones - says Apple as it selects the screen resolution as one of the five big changes to this latest iPhone 4. And who was the smartphone maker, who looked at the original iPhone 2G, and in less than a year, released a phone with nearly twice as sharp a screen? Nokia of course.. To see the future of the iPhone, look at an old top-end Nokia haha..

MILDLY DISAPPOINTING

To the rest of the world (where in Europe, Australia and advanced markets of Asia they have a long history of advanced smartphones) this could have been the 'great' iPhone. And it offers almost nothing. Bug-fixes only. A cosmetic face-lift (plus literal face-lifts and botox with the color bodies and the wacky colorful 'bumpers'). Apple could have gone for a significantly bigger screen, 4 inches to keep up with the Joneses, or push the envelope to 4.5 inches or even beyond. No, the screen seems pedestrian in size now at 3.5 inches. Obviously no cool sporty trimmed-down lower cost 'Nano' model. And no QWERTY. And I know I know, Apple will resist the QWERTY option, but if not a QWERTY-slider model, then give us something to go against the rising tide of Androids. 5 megapixel camera with LED flash? Apple is really not trying its best, when even Nokia's cheaper N8 gives us 12 megapixels and Xenon flash.

It won't mean that "nobody" buys iPhones abroad. But what it does mean - very periolously - that those foreign customers will be very easily tempted to consider a rival - an Android maybe from HTC or Motorola or SonyEricsson or LG. Or to see what the new Samsung Bada is like. Or check out how the Blackberry merges QWERTY with touch screens. Or see Microsoft's new Kin phones. Or go with the trusty Symbian Nokias, which after all offered 3G and MMS and video recording and 2 cameras and video calling (and 3G videocalling) and multitasking and an app store and TV out and folders and user-customizable home screens and 5 megapixels and flash (and on and on and on) - over 3 years ago. And Nokia still gives all those things most of us truly do appreciate - a QWERTY or T9 keypad as an option in addition to touch screen in many models, and the replacable battery, the micro-SD memory card slot, Flash compatible software, etc etc etc.

WAS YESTERDAY'S COOL

Apple was the hot phone in 2008 and 2009. Then came the rush of the Androids. Today over 60 models made by over 20 manufacturers - including 7 of the world's 10 largest dumbphone makers. The first market where the big Android invasion came ashore was the USA in Q1 of this year, and Android shot past the iPhone in the market share of new smartphones sold in Q1. Now in Q2, Android is increasingly invading major other markets vital to Apple, from Japan and China to Europe - and already today Android globally is selling at the same rate as the iPhone. And this while Apple's been around for 3 years and Android only half that. And most Android manufacturers have not had phones out for more than some months.

The iPhone 4 will be loved by Apple loyalists. It will be a very compelling upgrade for most current iPhone users with iPhone 2G or iPhone 3G models. For a short while in June-July-August of 2010, the iPhone 4 will hold its own against rival Androids and other smartphones, but this is nowhere near the great leap forward to keep the iPhone 4 the most desirable phone for the next 12 months.

I do think that Apple is now on a strange path to oblivion. The mobile industry is one where every time a given player has tried to do its own non-standard thing, the global standard version has won. Look at GSM vs all other digital standards like CDMA, iDEN, etc. Look at 3G, again the global standard, UMTS, also known as WCDMA which totally dominates over the rival 3G standards CDMA2000 and TD-SCDMA. Look at the success of SMS text messaging or MMS multimedia messaging etc. There has to be a standard, and it to be offered on an interconnecting principle. Japan has had the world's most advanced mobile phones for more than a decade, but they do them on proprietary standards and they have not been able to turn that leadership into global success.

Yet Apple comes at us with ever more control and limitations. The iPhone App Store has been having more troubles, the iAd platform as well, and now Apple forces video calling to be done on its devices only on its proprietary FaceTime solution. Apple seems to be headed to an ever tinier circle of Apple fanatics with non-standard parts, non-standard apps, non-standard solutions, and annoying all partners along the way. Look at its very public fight with Adobe for example around Flash. What is the hassle now with Admob? (I only saw the headline, it seems like yet another battle, like earlier Jobs saying he wants to be the thought police for the world, to make sure there is no pornography on the iPhone and its family. Imagine the iPad, how obvious it is as the delivery platform for Playboy and other adult magazines. If Apple won't let adult content in, then rival tablets will take giant leaps ahead in market share. Didn't we learn this lesson already with video rentals?) And look at how long Apple fought against MMS - now it lists MMS proudly as a major feature in the 'short list' of top features for both the iPhone 4 and the iPhone 3GS.

AND THE APP STORE

(I am sorry, I accidentially deleted these two sections when moving the article from PC - I was editing this on the plane - to the blog). So lets talk App Store and Videocalls part 2. First App Store. Even here the news is not good for Apple. A year ago they had the space almost all to themselves. Passing a billion downloads - now well past 4 billion cumulative and over 2 billion level annually, the Apple iPhone App Store is the one with the most downloads. Yes. But the others are rapidly catching up.

GetJar has already become the second smartphone app store to pass 1 billion downloads. And Nokia's Ovi store is generating downloads at the level of half a billion downloads per year and ramping up fast. And many who were disillusioned with Apple, have been shifting development to Android, where they have similar types of handsets but not the restrictive Apple rules. So if the App Store was a competitive advantage for Apple, it is finding a ton of strong rivals as most app stores (there are over 30 of them already) are still in early launch stages.

BUT APPLE CAN STUNNINGLY SURPRISE US

The one last thought I had, was back to video calls. I do want to make this observation. Apple has a knack of taking something people thought was hard to use (like PC operating systems, smartphones) or very poorly used (like smartphone apps) or seen to be in decline (like portable musicplayers like the Sony Walkman before the iPod) and turning it into a huge, unanticipated success. Videocalls have been around in 3G for a almost a decade. They have been underwhelming as a market opportunity.

I was quoted in Global Mobile on 26 Feb 2001 which wrote "Tomi T Ahonen, head of 3G business consultancy at Nokia, questions whether video services will be able to deliver anticipated revenues. The biggest service to disappear off the 3G radar screen is video telephony,' he said. Ahonen said that the application had, last summer, been expected to contribute 5% of next-generation revenues. This had since fallen to between 1% and 2% of revenues, he said."

So the industry has felt 3G videocalls are a poor opportunity. Perhaps Apple can revitalize this. I cannot see us all installing FaceTime, but it is possible that Apple manages to convince us to start to use videocalls, and the forward-facing second camera that most of us already have on our 3G phones.. Don't be surprised if Apple achieves this for our industry. But please mark my words, that 3G videocalls will always - ALWAYS - be bigger in total traffic and revenues, than Apple's proprietary FaceTime videocalls..

IN SUM

First, its the best iPhone ever. Clearly. And a big improvement. It will sell very well in America this next year. And it will be the very highly favored smartphone replacement model for any existing iPhone 2G or iPhone 3G user. A big market is 'guaranteed' for Apple, in the 30 million to 40 million range for the next 12 months.

But Android has 60 models by 20 manufacturers. Blackberry is bigger than Apple and once again, Apple yields the bigger QWERTY market to RIM, to Nokia, to Microsoft and to all those Android makers who are smart enough to include at least one QWERTY model in the lineup. Apple? When will you give us a QWERTY slider or folder iPhone? You have already admitted that one button is not enough. When will you go for that market - there are literally millions of Apple fans who want an iPhone with QWERTY but won't buy a non-QWERTY phone, so they now go with Blackberry etc... And Microsoft - a global giant corporation twice the size of Apple in annual sales, is now full steam in the game and has launched its first branded smartphones. And HP, bigger than Microsoft and Apple combined, the industry's biggest player - bought Palm and will turn that around to challenge Apple. And Samsung, the world's second largest dumbphone maker, launched its Bada operating system and has sold more touch screen phones than Apple every year since the iPhone launched. Samsung will soon sell more touch screen Bada based smartphones than all iPhones sold per year - this is inevitable within about two years, due to Samsung's far greater distribution and far lower price points and far wider product range. And then there is the gorilla in the room, Nokia and its Symbian and the best distribution, the best sourcing and of any handset maker, the world's best record for invention and innovation in smartphone design. Still today, inspite of all that tremendous success and hype around Apple (and RIM), Nokia's smartphones alone outsell the total annual output of Apple and RIM - combined. And this is before we get the first 'iPhone killer' from Nokia, its N8, due out shortly.

The US market will love the iPhone 4 and will mistakenly think that is the cutting edge in smartphone design. Because of that, the iPhone 4 will sell very well in America and the local press and analysts will continue to praise Apple. Meanwhile the iPhone market share will continue to be flat for the year, falling towards the end of the year, and Apple's market share growth will indeed have stalled (as I predicted). Apple cannot get out of the market share trap until it spreads its design across more than one new model per year. Expect Apple to make announcements in that direction during the next 12 months. I am very sure the market share performance will be such a disappointment over at Cupertino, that they will finally admit that they have to go into a multiple models strategy (as I have been pleading them to do for nearly 4 years now).

Thats my first impression of iPhone 4.

Comments

[Manu]

@Tomi :- Like you, I don't have analysis but what I have is my experience & understanding of south-east asain markets, which I have acquired being a fairly long mobile phone geek. I'm in agreement to what you say about smartphone bloodbath in general but in relation to Apple, the scenrio can quickly change given -

"If Apple concentrates on China & South-East Asain markets. If it discovers carriers which can subsidize the iPhone4 the way carriers do in U.S and if they can release iPhone4 here too in time, don't miss me when I say - A lot of potential iPhone4 buyers sits closely in these markets. And that lot of buyers considering density of population in given countries can truly prove "Game Changer" for both Apple & smartphone statistics. We already have an example of that surge in shape of China earlier this year."

OR

"If Nokia takes the initiative and launch their smartphones at corresponding time to its west release it can sieze the oppurtunity. But the problem is Nokia seems to have messed up several things during its transition & their strategies remains poor. How can anyone justify the fact that Nokia decided to announce N900 last week here. Come on, you announced that MeeGo wouldn't be commercially launched on N900 two weeks earlier & week later you announce release of a device which is obselete. We all know Nokia gearing itself for bigger and better products & N8 certainly looks promising. However, Nokia needs to get its act together or it should be prepared to bear a dent in its market ratio."

As far as question of Android is concerned, I don't see it doing as good as U.S Market primarily because it is in its infancy here but yes Android models are now coming at a pace. HTC has already released Hero & Legend and will release Desire too. Samsung & SE has also announced their Android based phone's. Yeah I'm among early adopters of Andriod in this part of the world with extremely elegant & show-stopper "HTC Legend".

I'm in agreement with @Kevin (really appreciate your depth of analysis for a given issue) on issues for Andriod. There is urgent need of joint action plan by Google & h/w manufacturers to address long pending issues of Android users before they mount to uncomfortable limits.

[Brad]

Tom,

I don't know about New Zealand, but the numbers I see don't agree with what you are saying for Australia.

"Analyst group IDC has forecast that Apple's iPhone could knock Nokia from its mantle to become the No 1 smartphone in Australia by the end of the year, after quadrupling its share of the market in the year to March (see table below).

IDC said the iPhone's Australian market share increased from 10.2 per cent during the first calendar quarter of 2009 to 40.3 per cent during the same period for 2010, bringing the gap between it and leader Nokia down from 15 per cent to just under 5 per cent." The article goes on to say Apple will pass Nokia this year.

(http://www.theaustralian.com.au/australian-it/surging-iphone-hot-on-the-heels-of-nokia-as-australias-no-1-smartphone/story-e6frgakx-1225879621669)

Remember too that Apple is getting $600 or so per phone in revenue (and has been consistent since it began offering smart phones), Nokia, $175 (and has been falling). I think the announcement today of Nokia downgrading sales and profit estimates is just the continuation of a long fall unless they get their act together. They are like GM obsessed with market share and making less and less money as they cut prices to try and compete with competitors who don't have to sell at a mark down. They are getting squeezed by Apple and Android on the upper end and Chinese and others on the low end.

Like others have said it is not about the hardware, it is about the total ecosystem. Do you realize that when you buy an application, music, movie, etc you can share it with your entire family easily and for no additional cost? You can put it on your teenagers touch, your wife's iPhone and your Ipad? That many of the applications you buy once and they work for both the iPhone/iTouch and the iPad (full screen, natively)? There are roughly 100 million devices that the apps/music/movies work on? That movies and apps work on not only on the phone/Pad/Pod but on the computers and TV's? It is not about hardware.

Nokia seems to be trying. Hence the new push in operating systems. It is not clear though wether they can succeed or not. Take video calling. On one hand you say that Nokia had it a long time ago, on the other hand you say nobody uses it. Doesn't that indicate Nokia's problem? They have the know how to put hardware features in but do they understand it's no longer hardware and just mobile phones?

I would love to be wrong but nothing I see from Nokia leadership seems to indicate they understand this. Apple will let them sell their low end phones, their low end smart phones, and laugh all the way to the bank. I'm with Kevin, but I'll go further and say that Apple's mobile revenue will pass Nokia's by the end of the year.

[Alexei Poliakov aka @yaromir]

Hi, Tony. Great post as usually. I strongly believe it doesn`t matter whether Nokia or likes put this and that feature on mobile phone before, but what really matters is the implementation of that feature. Apple just re-invents things others sucked at.

Being in Japan I can say locals started loving iPhone and recent iPhone 4 pre-order craze here just proves it. Before iPhone, the so-called smartphone market in Japan was miniscule. iPhone is a "black ship" for Japan mobile phone market and Steve Jobs is admiral Perry. Now other foreigners - the Android phones have come to Japan and they continue further cracking the monolithic surface of domestic players` pancir. But back to iPhone, in some recent surveys up to 50% of respondents say they`ll consider buying iPhone as their choice of smartphone.

[Alexei Poliakov aka @yaromir]

Sorry, I meant Tomi not Tony in my previous comment...

[RajP]

It still amazes me how many people simply don't get Apple, and assume that its success is due to delusional customers, or pretty candy-coloured buttons, or marketing. To these people, the success of Apple products simply does not compute. They wave huge checklists of features that other phones have had for years, no, decades. They talk up superior competitor tech specs. They puzzle over how this could be mathematically possible.

To these people I say: it's not the What. It's the How.

Apple's mantra has always been to take a basic set of features that can be done in a reasonable time, and implement it better than anyone else. I don't need a larger set of clunky features. I need an essential set of features done frustration-free. Take a look at Apple's ads. They show the product working. Go to Apple's stores. They have fully working products on display showing what the product can do, not dummy shells with screenshot stickers.

Comapring megapixels on a camera is one classic example. Jobs clearly explained that they decided to stick to 5 megapixels because it lets them build a backside illuminated sensor that makes for better pictures. It's not about 5 vs 13. It's about "which pictures look better overall?" Also, I am pretty sure Apple could have put in a more powerful flash if it wanted to. But it decided to pick the optimal solution in terms of picture quality and battery life.

Raj

[HCE]

Not much to add to what Lee, Brad, Kevin, Raj and others have said - it is quite clear that Tomi does not get the appeal of the iPhone.

I'd just like to point out a couple of news items that have some relevance to this issue.

First there is Nokia warning on profits and also its mobile device value share and they cite several factors including competition at the high end of the market - which essentially means Apple, Android and RIM.

It is clear that they are maintaining market share by slashing profit margins and there seems to be no end in sight. They cannot continue this forever. Android phones are being discounted but not to nearly that extent and Apple has not even *started* discounting yet. If they do, Nokia will be further squeezed.

Then there is what we are seeing in iPhone 4 pre-orders. Way above even Apple's expectations - so much so that their servers could not take the load. Indications are that this isn't just people who are upgrading - there are a ton of new users getting on to the platform for the first time.

Of course these are just two data points but they are strongly indicative of where the momentum is.

- HCE

[Mark]

Some interesting points from the Apple guys, however...

1) 600K pre-orders is good but Apple have a history of good first day/pre-order sales. The truth of the tape will be in the next couple of quarters' earnings. Tomi has already mentioned he thinks it's a 30-40 million selling product, the question is if it can grow share.

2) Nokia's downgrade has been mentioned. I would point out that since they haven't released an N Series phone for well over six months this isn't surprising - aside from a few E Series phones there's no high end presence to compete. Furthermore, according to Nokia the competition comes from Android, not the iPhone whose numbers were already included in their outlook.

To suggest that either is indicative of the way the wind is blowing is a bit premature. Not saying Nokia will make a huge comeback with the N8, C7 and others but if they stop the rot - and put a dent in Apple's sales as a result - then that puts a different complexion on things.

Apple's selling points are ease of use and cool factor. They remain top of the pile in the former category, however that's being eroded - it's competitors don't have to be better, they just have to be acceptable. The latter is starting to fade, especially in Europe where there's a lot more choice now. Although merely anecdotal about a third of my iPhone owning friends are considering jumping ship purely because 'everyone's got one now'. Of course that means two thirds are still happy with them, but next year...?

Finally, Lee made the point about web traffic. Actually the iPhone doesn't drive web traffic. What it does do is get over represented in Hitlinks' stats. If you look at Smaato it's well off the pace.

Apple does have a large and very loyal fanbase. I can't help but think it's all getting a little bit boring though.

[HCE]

Talking of video calling. Here is an excerpt from David Pogue's review of the HTC Evo in the New York Times.

"After two days of fiddling, downloading and uninstalling apps, manually force-quitting programs and waiting for servers to be upgraded, I finally got video calling to work — sort of. Sometimes there was only audio and a black screen, sometimes only a freeze-frame; at best, the video was blocky and the audio delay absurd."

We can talk till we're blue in the face about how people had video calling ages before Apple and they have it over 3G networks while FaceTime is only Wifi. However, the above quote tells you that this feature seems to be next to useless in a lot of cases. Of course, we don't have a review yet but I'm fairly certain that FaceTime will work as advertised in most cases - which is why people will actually use it.

That's really the point here. It isn't about the number of bullet points on a feature list. It is about which features are implemented well and are usable.

As I've said before on this blog, I don't think Apple can continue their current path forever. Even if Tomi does not see it, pretty much all smartphone manufacturers recognize what Apple is doing and are trying to catch up. In 2-3 years they could have bridged the gap - at that point Apple will have to broaden its appeal by introducing more models, more form factors and discounting. But that day isn't here yet. There's still room for Apple to grow.

- HCE

[HCE]

@Mark

1. 600K pre-orders is exceptionally good - it is something like 10 times the number of pre-orders for the last iPhone.
2. Regarding the N8 - pretty much all the reviews I have read seem to say that the phone is underwhelming. Good hardware married to dodgy software.

As to the rest of your points, not much disagreement. The iPhone's advantages will fade in time but I think they have a significant advantage in some ways right now. In another couple of years that may not be the case.

- HCE

[Mark]

@HCE

1) You're right it is. I'm still more interested in the following quarter's numbers precisely because Apple has a huge number of early adopters. I agree with Tomi - this is a 30-40 million product (prob nearer the high end) and not small potatoes. Let's make no mistake about that.
2) That depends what you're looking for - as a media device the N8 is leagues ahead of the iPhone. As an app/browsing platfrom the iPhone is way better than the N8. I don't think the UI is as good as the iPhone's and I'm pretty sure the US based tech journals are going to have the usual moans about fonts and icons but I rather think it's a good idea to let the public have a few of pre-release models so Nokia can address the concerns. Bottom line is I don't think anyone who has used a Symbian device is going to be bothered by the UI at all because it's noticeably better than it was. iPhone and Android users aren't going to be convinced but this is more about stopping the rot than anything else. Like I said, all it has to be is good enough. Whether it is or not time alone will tell.

Your point about video calling is interesting. One thing Tomi's missing is that WiFi is a lot more ubiquitous these days so there's more reason for face Time to succeed. That said, it's a minor function at best for the moment.

[PatrickHC]

I would like to state that as much as RIM, HTC and Nokia may have more sales than the iPhone, what we have to consider here is that these manufacturers have more than one model compared to just the one iPhone model.That said, is it really fair to compare sales of say the Blackberry line-up of the Curve, Bold and the Storm, to just the one model of the iPhone? Seems like this is what is exactly happening and that proves that Apple and indeed the iPhone is a major force to reckon with. They are on top in that their one model is constantly being compared to and being paired up with multiple models of other manufactures. When you have just one model in the market and hold up such market share (less market share than others such as RIM, Nokia etc) then that should show that indeed Apple is on top of the pile. What would be interesting is for each of the other manufactures RIM, Nokia, HTC, Samsang to pair up their top phone models against the iPhone and compare the sales at that level. My feeling is that most of these other manufactures only beat the iPhone in sales because of the boost they get from other low-end smart phones in their line up.

[Romain Criton]

I'd like to add my voice to the several commenters (especially Yap and RajP) who have outlined that Apple always favors Quality vs. Quantity, and that's what makes Apple products so good and appealing.
They've done very well with this strategy so far and I'm sure it will last for some time.

[Tomi T Ahonen]

(sorry everybody, I had heavy travel past 2 weeks, am here to reply to next set of replies. i am at replies from June 12)

Hi mark, Jason, Fernando, weiphi & em. Replies to all individually

mark - actually no, I am not saying Apple market share will decline because it lags in hardware features. I have argued (elsewhere on this blog, many times, in very deep detail) that the reason Apple is losing market share is competition. The big rival is Android right now, will be Samsung towards the end of the year and next year, plus more competition from Nokia's first serious effort against iPhone (the N8) and a revitalized Palm ie HP, and Microsoft. What I had written in March, was that we had to wait to see the "June iPhone" waht turned out to be the iPhone 4. It was quite plausible that Apple would release a superphone now, that totally re-set the game (it did not, the iPhone 4 is evolution in the laggard US market, and very ho-hum in the European and advanced Asian markets where far more advanced smartphones are aleady sold, and of those 5 'improvements' in the iPhone 4, four of them were commonplace last year, and 3 of them were normal in top end phones - BEFORE the ORIGINAL iPhone 2G. Please understand mark, that I was referring to previous blogs, the arguments of why Apple is already now losing market share (its peak was Q3 of last year at 17%) have been argued elsewhere on this blog.

Jason - I agree, haven't seen any reports of NZ success in iPhone. Will be curious to see if any exist.

Fernando - thank you for many detailed and fact-filled and considered replies to others on this blog. You are doing my job for me, thank you so much.

A great point you make that had not hit me, is that yes, its very true, while Apple has a determined focus on making its iPhone particularly useful for one type of customer, so too is RIM - at least as much (arguably even more focused, as RIM has been far less willing to 'go mainstream' when compared to Apple and their new models in the past 3 years). I had never thought of that, yes RIM is keeping very serious focus on being the ultimate texting phone, whether wireless email, or SMS, or Blackberry Instant Messenger, or Twitter or Facebook or whatever social networking uses..

weiphi - very good points and I kind of agree with you. The strategy Apple has is brilliant. They have been a tiny PC maker for many decades now and by all reason (especially considering they were 'not conforming' to the industry standard Windows for most of that time) should have died and disappeared years ago. Same in PDAs (Newton) and iPhone and now iPad (tiny tiny tiny fraction of portable PC market - with totally unreasonable amount of hysteria about their tablet PC). The only product they've had since the Apple II, that has had anything near a mass market level of adoption was the iPod music player (not the Touch) and even with that today they have only about a quarter of the global stand-alone MP3 player market, and only about a tenth of the market if we add in the MP3 playing music-phones - which like Apple CFO Oppenheimer himself said, is part of the same market.

Apple should have disappeared, yet somehow they survive as the rebel, with totally radical business models, and creating what marketing experts call 'new market space' (as we wrote in our book Communities Dominate Brands with Alan Moore, when we made iTunes a case study of exactly that phenomenon, how Apple was able to re-invent the portable music market).

Ever since iTunes, the iPod has supported Mac sales and Mac sales supported iPod sales. The iPhone added to both and now the iPad does the same. A survey by Piper Jaffray of early iPad owners found that 92% owned an iPod, 74% owned a Mac, and 66% owned an iPhone - clearly its part of an Apple family of users.

With all that said, their total cumulative shipments of all iDevices will pass 100 million in June (said Jobs earlier this month). That is not installed base. If we're kind and say 80% of all shipped iDevice units are still in use, we're at 80 million devices total potentially reachable market (it is definitely less than this) - then the 'reality' kicks in.

Compared to the PlayStation Portable or Nintendo Gameboy DS or Kindle, thats a meaningful number. Compared to 'traditional' PC industry numbers - its a significant number. But compared to mobile, its meaningless. The installed base of mobile phone subscriptions worldwide is 4.8 Billion now in June. Out of that SMS text messaging is used by 4 billion people. SMS text messaging alone earns more than 100 Billion dollars. So take your 'iPhone compatible' platform, just on SMS we have... 50 times bigger reach. If we assumed there was no multiple ownership of Macs, iPods, iPhones and iPads (patently not true) the absolute maximum planetary penetration of iDevices would be 1.2% of the planet. SMS is used by 59% of the planet. And even this is not a 'fair' comparison, because we should compare the installed base to 'SMS capable' phones, not active users, the difference is even bigger.

Take last year's 715 million dollars of App Store revenues, on SMS alone, we have 140 times more revenues! I do see what you mean, it is smart by Apple, as a tiny player to focus on the rich end of the economy, the wealthiest nations, on a highly desirable, sexy, and super-user friendly device. A luxury product. But for our readers, it is a tiny tiny tiny fraction of the economic opportunity in mobile. Yes, the 'platform' is clever strategy by Apple, but that is mostly a bubble that will soon burst, when the economics of the facts come out and it becomes obvious that most iPhone App developers will never ever make money on their investment (in Apple iPhone Apps). Some will migrate to larger platform smartphone apps - RIM/Blackberry far bigger installed base in the USA, and rest of world, Symbian far far bigger than both RIM and Apple combined. But my advice on this blog and in my books has been for years, that the real big money is not in apps (there is some, mostly on business/enterprise side of apps) but in the services - ie SMS, MMS, WAP etc. That is where literally there is 250 BILLION dollars today. Not 715 million of which Apple takes 30% haha..

One last thing - currently to US based analysts, investors and tech bloggers it seems like Apple cannot do anything wrong - sold 2 M iPads in two months, sold 600,000 iPhone 4 units in the first day etc. What happens to Apple valuations and investor confidence when the App Store myth is exposed, when Apple iPhone market share is reported to have fallen, etc? They are setting investors up for massive disappointment right now, by not being totally honest about where they are. Dont' you think? A very perilous position, if I am proven right? And then please look at my track record on Apple, when I have been right, I have been usually the world's first to say so - the only times I've been wrong is where I went with the total industry consensus view like this year Q1 'China Surprise' sales numbers. If my numbers are right - there are going to be some severely disappointed Apple investors, don't you agree? (if I am wrong, I will be the first to write so in big headlines on this blog, as I have done in the past when I've been wrong haha)

em - thanks for the link to number 8. Yes, Asia is world's biggest phone market and will shortly become the world's biggest smartphone market (as China and India ramp up to 3G). Yes it can be quite important - remembering that in both China and India, Nokia is the best-selling phone and a highly valued phone brand.

Thank you all for writing. I will shortly return with more specific replies.

Tomi Ahonen :-)

[mark]

"I have argued (elsewhere on this blog, many times, in very deep detail) that the reason Apple is losing market share is competition."

There is always competition. There has been since iPhone Day 1 in Jan 2007. Why exactly will this competition cause Apple to lose market share?

You seem to say that it's because of Apple's lack of new hardware features in iPhone 4. My response is that you pointed out the iPhone's lack of new hardware features (or lag in including old hardware features) back in 2007 and 2008 and 2009 on this blog, and yet Apple has gained share year-over-year every year. So you're saying it again about iPhone 4. What has changed in the"competition" or your argument? Why should I believe you?

[em]

@Fernando Guillan

The link discussing Asian Lucky and Unlucky numbers is in the end, after the red text "Posted by". It refers to Wikipedia page "Chinese lucky numbers"

What Wikipedia says in short is that in some parts of Asia number 8 is pronounced like "prosperity" and number 4 is pronounced like "death".

Note Nokia (like other manufacturers) is skipping number 4 in its model names. You see C1, C2, C3, C5, etc. No number 4. I guess number 4 is missing from every manufacturer except Apple.

[Andrew S]

Hello Tomi, a VC pointed me to your post on Nokia a while back and I found your blog painting quite a nice narrative. Unfortunately I don't think it matches quite well with financial reality.

To a corporation, ultimately the goal is to grow and maximize profit. Apple has done this to the rate that it is valued at $240B, 8x that of Nokia. That is the ultimate expression of how your narrative of Nokia being some sort of market leader and Apple simply following in their footsteps is wholly misleading. I suggest looking at not market share, but the total share of profits that Apple has in the global smartphone and global portable music player market.

Apple wins by offering a product that normal people can use. They make a product that people enjoy, not a product that frustrates people as 90% of other smartphones do. Your narratives are about features and numbers, but Apple's are about humans, and the one number they have won in is profit. What was telling about your post in 2009 about Nokia was their focus on profits for carriers. SMS was the most profitable feature for carriers, so Nokia focused on SMS. Apple focuses on making awesome devices for humans, Nokia focuses on making awesome devices to get more money to carriers. Who won that battle?

Phones, like computers, cannot be compared by feature checklists. It's like comparing cameras by megapixels, or comparing computers by MHz.

Andrew (ex-Nokia user, now Blackberry user)

[Polly]

J'ai récemment commencé à utiliser le blogengine.net et je avoir des problèmes ici? sur votre blog vous dites que nous avons besoin pour permettre à des autorisations d'écriture sur le dossier App_Data ... malheureusement, je ne comprends pas comment l'activer.

[white iphone 4]

Hi, where did you get this information can you please support this with some proof or you may say some good reference as I and others will really appreciate. This information is really good and I will say will always be helpful if we try it risk free. So if you can back it up. That will really help us all. And this might bring some good repute to you.

[white iphone 4]

No wonder, with white iphone 4 in your hand will make you be the focus of the crowd! You won't miss it!

[Henry Peise]

As you already know the difference between the cameras in these phones is quite big but it was interesting to find out just how big using white iphone 4 and iphone 3. Check out the shootout gallery inside.