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« Nokia quarterly results Q3 of 2010, is a mixed bag | Main | Bloodbath update, whats up with Samsung, Android, SonyEricsson and the others »

November 02, 2010



The iPhone is still crappy, overpriced and overhyped. The smartphone market is very much like the computer market, and the iPhone is well on its way as a niche fashion trinket for the affluent, much like the rest of the Apple products.


RIM might find itself in some trouble as well if this thorough analysis at is to be believed.


It is overhyped & overpriced but get yourself a life, its not crappy at all.

@Tomi : Just like you, ive never imagined iPhone to become such a major market player with just one model. I used iPhone in early 2008 for a while but only as a secondry phone as I found it hard to replace my N-series Nokia's.

Than, in early 2010, I got myself iPod Touch 3rd Gen. I was so amazed by the considerably huge app store, unparallel'd swiftness & speed that I switched back to iPhone 3GS in Summer this year. Apparently, UI & Style were always iPhone's forte so adding much desired smartphone features here & there did a world of good to #Apple.

Two things which worked strongly in favor of iPhone & continue to be in its cordon are :

- Loyalty of #iPhone users

- Strong desire/fantasy of masses for iPhone


Tomi, Apple will never produce a QWERTY phone as long as Steve Jobs is the CEO. He hates buttons.


Hi Tomi,

Add the "economic crisis" variable to the equation. I´m not expert in economics but i read by several analysts, that the premium products sells better than the affordable ones, in economic crisis.

Maybe the pyramid distortion comes from there and be slicing the mid/low handset market. These crisis causes also a devastation in the business market (and RIM a victim).

I´m not saying that Apple is doing bad, but it´s overrated. I´m a supporter of your theory for diversification for market share in the long run. Or else it will be vanished by Android / Symbian / Bada elephants.


Spot on article - I agree with all of that.

I want to comment on this: " If Apple feel their market share growth has stalled, they can instantly boost it by releasing a couple of new product models in the next year."

I think Apple knows this but can't do it right now. For one thing, people are buying as many iPhones as Apple can make. Do you need to fuel demand (QUERTY version) when you already have trouble filling orders? No. They will tackle these things one step at a time, and Verizon / CDMA is the first of the bunch, good as confirmed already. Verizon is a necessity both for VZN which is bleeding subscribers to AT&T, and for Apple as AT&Ts network is breaking down under the onslaught.

The other reason Apple can't do all of this is the intense focus of the company. There is no more focused person on the planet than Steve Jobs, and his entire company is shaped this way. There are very small teams working on revolutionary technologies, and in order to pull off incredible engineering feats on a regular basis, everyone's vision must be sharp. No is the most important word, and concept at Apple. No distractions, no unneeded features, nothing more than what's needed.

Why do they need to keep inventing things? Because that's Apple's strategy - they know others will copy what they do, so they keep running. They produce a pace of innovation that's impossible to keep up with.

Witness how Microsoft threw everything out the Window to finally create Windows Phone 7 - only to be caught out in the cold when iOS was suddenly running on a tablet, and tablets were suddenly hot. WP7 is a good iPhone clone - but the whole concept from top to bottom is impossible to port to a tablet. Android was never meant to go on a tablet and so is in a similar situation. I doubt Google will be able to put out a tablet version that can keep up with the iPhone from 2010 in 2011. Once again, competitors are 2 or more years behind.

It's a unique strategy and I think you'll need to go far back in history to find equivalents... maybe Edison's General Electric.

Yap Choon Hong

Hi Tomi,

I am very impressed with your courage to admit you are wrong. I was also hoping you'd have some insight as to how Apple can manage to do all these...

If it means anything, I was using the iPhone 3GS for a year, then switch back to a Nokia E72. The 2 main reasons were poor battery life and no QWERTY. Like you I am a sworn QWERTY user, and going for iPhone was a very difficult decision to make at first. Strangely, after a while I find myself missing the iPhone so much that I bought an iPod as a part replacement, and find myself constantly thinking of going back to iPhone as iPhone 4 at least is supposed to have improved battery life, though still no QWERTY. But without a doubt, a QWERTY iPhone is my biggest dream...


In my family, we've had several messaging and typing contests among those who use Blackberries and those who have iPhones. The iPhone users always win. I can type Lincoln's Gettysburg Address at almost 50 WPM with no errors. My brother, a BAC banking VP who runs a far-flug division from Hong Kong to London using his Blackberry, can go about 18 words per minute. My nephew, a college student, can do 28 wpm using his iPhone and 14 wpm when he used his old Blackberry. I've found that when you get used to typing on an iPhone, it is the fastest and most accurate way to type on a small device.

I often six or seven text messages in less than a minute, or even less than 30 seconds if the messages are very short. I am an old newspaper reporter and type very fast and very accurately to start with. So I naturally beat most people.


Props for admitting you were wrong!

There's been a massive shift in behaviour and perception, caused by a phone with 'tiny' marketshare.

I listen to people talk about the iPhone, random people, plumbers, doctors, teens, friends, family - they gush about it or say things like 'i've seen this game on the iPhone, i might get one' or 'xxxx says their iPhone is really good I might get one'

Often I hear things like 'the sales rep said it was just like the iPhone, but its crap'

Do you know why clients are coming to my company for m-commerce/mobile version of their sites? Because mobile traffic from iOS devices is now becoming significant enough to produce budget for mobile work. Apple has created a knock on effect with the success of the iPhone.

Couple of things:

1) Yes people love QWERTY but they love using a great phone more. The tides are changing, whilst teens love QWERTY and BBM, I'm also starting to see how much they hate the rest of the phone, the crappy OS, the camera etc. People won't hang around forever before switching - See Nokia.

Just because Motorola say that 30% choose because of QWERTY does not mean they are willing to put up with a poor experience just to have it and won't buy touch on their next phone.

Is texting with one hand important for teens? Yes. Is it critical? No. Will they switch for a better experience without a QWERTY? Yes.

" It would immediately be the ultimate must-have phone for all the youth"

It already is, they just can't afford it.

"The cool kids would get them"

They already do. Oh and you know what the cool kids show the other kids? Not the QWERTY-les iPhone - It's the APPS

They may or may not do a QWERTY/Nano (it seems like Apple believes in the future to be touch). By the way if they do bring out a QWERTY you can't claim it was your idea!

2) " You can be sure, there would be lines of fanatical Apple loyalists standing in line for days"

You need to get this fanatical Apple loyalist out of your system! - Apple is mainstream, mothers, fathers, aunties, grandparents and teens own iPhones - I have friends who have never owned any Apple products other than a iPod before the iPhone. Will they buy the next iPhone? Probably yes, simply because they are so happy with their existing phone and will be willing to pay for another one.

They are not fanatical, they are not in tech, they are not in marketing, they aren't gadget freaks, they are normal people.

3) Is the N8 camera better than the iPhone 4?

Tomi Ahonen

Hi everybody

Thank you for the comments, please keep them coming. I will respond to everybody but it will take a bit of time, as I am also behind on responding to the comments from last week's blogs. I will return to talk with everyone of you.

Tomi Ahonen :-)



I commend your willingness to be self-critical. I wish more analysts would be as conscientious..

Apple is a remarkable company- I was a long time keyboard addict, but am not willing to part with my iphone 4 for anything. Does the fact that a company from the outside, with absolutely zero relevant experience, was able to so effectively disrupt the market say anything about how poorly the market was being served? Or do you believe that Apple is just an outlier? In a world without the iphone, would one of the Androids have filled a similar role?

The model of cozy relationships between carriers and handset makers designed to lock users in overpriced, long term network contracts just seems like something ripe for disruption.

Google's long term strategy is so commoditize the smartphone, dropping prices to the point that carrier subsidies are unnecessary in any market, preparing to commoditize the carriers themselves. That is, turn them into the dumb pipes to the Internet they so fear, but that we users-not to mention Google- would probably much prefer...


One lesson I think phone manufacturers would do well to re-learn from Apple was highlighted by their release of the new Macbook Air laptops a couple of weeks ago.

Particularly in tech, there's a tendency to focus on feature lists and making sure that new products are leapfrogging a particular individual feature (speed or size, typically some numerical value) offered by a competitor's product. E.g. - offering a 1Ghz processor to beat out my competitor's 850Mhz, or 12MP camera vs. their 10MP, etc.

Apple has been very good at focusing on the desired overall end experience, at the expense of a feature checklist. Something they did on the iphone as well. As you pointed out, many seemingly core features were missing, but the overall screen quality, responsiveness and UI metaphor were spot on.

The new macbook air laptops feature relatively old, slow CPUs- Intel's low voltage Core 2 Duo around2.0Ghz, where most makers have integrated latest generation Core i5 or i7 and much higher clock speeds... But, Apple's use of flash memory drives and dedicated graphics chip more than makes up for the much slower CPU, so that that to the user, the Airs seem faster than laptops with the much faster chip.

None of this was truly innovative, SSDs (flash drives) are quite common, and many maker use them. However, Apple's business discipline and focus on end experience enabled them to decide to use the slower and much cheaper processors, but were able to splurge on flash drives and a dedicated graphics processors, while maintaing their margins, delivering an attractive market price and a laptop that generally performs wonderfully.

I suppose it's easier to focus on things like this when enjoying absurd margins and brand loyalty.


I commend you on a courageous post. I see you struggling to understand what is happening with the iPhone and the mobile market, and it is gutsy to display that struggle in a public forum.

At the same time I see failure in your ultimate conclusions. You are trying, but not seeing it.

It isn't that there was a larger market for smartphones than was previously realized, it is that a breakout product has expanded the market. People who a few years ago could never have imagined needing a smartphone, much less paying so much for one, are now satisfied iPhone owners. This is what Apple did with the iPod as well. There were plenty of MP3 players out there before the iPod came along, but the friendliness of the device, the marketing, and the one-two punch of iPod/iTunes created a market that just wasn't there before.

And all of the suggestions for expanding the iPhone line are nothing more or less than compromises -- a physical keyboard (after all, the touchscreen keyboard on the iPhone is QWERTY) means a compromise in weight, or size, or screen size. An iPhone Nano would mean compromises in functionality and ease of use. SJ and Apple are out to make the best product they can -- not the product that best matches a market. If the product is great enough, it will create a market around itself (see above). Products that are created to meet a market, end up as "checklist" products -- they've got to include a certain checklist of features their market research tells them the need, regardless of how well those are implemented, and whether or not people actually need what the research suggests they need.


Two main points - today they released a PROFIT market share - Apple holds a 50% market share by profits of smartphones, next closest is at 16%. And here's the bottom line - Apple made $8B last Q selling 14 million phones, Nokia made $9B selling 110 million phones. Instead of splintering its market, Apple offers you ONE PHONE which says this is the best we have to offer you. If you want it, buy it - if not, whatever.

Apple can do this for one reason only - Steve Jobs. Look at Nokia or as the VP of MS readily admits. Bureaucracy kills. When you have 200 product managers, they spnd 25% of their time making products and 75% of their time sabotaging their rivals. So, what do you end up with - compromises. I understand Nokia wanting to sell a lot of cheaper phones, that is a perfectly fine strategy but do you really need 2,000 phones? Just look at the mac lineup. You have an entry mac where you ring the monitor and keyboard (the mini), you have a desktop all in one for nearly everyone else and you have a pro line who have a corporate budget and are willing to pay for speed ... or closer in, look at BMW - you have variants with each series but 6-7 main product lines are all you need. That was the trouble with mobile makers, their 500 product managers were so intent on cranking out new - it ended up making their products DISPOSABLE because users expect that whatever they buy to be obsolete and replaced within weeks ... unlike the iphone where you pretty much know that not only wont the price change, there is no new phone for maybe up to a year and other than storage, you ALL get an iphone. There is NO better one if you buy the newest ... and also because of Steve Jobs, it's not cluttered with pointless features. Again, because of disposability, mobile makers were forced to just add checklist features but they never sat down and said, does this make sense or it is easy to use? Look at the 12 MP camera - yes, Mp is nice but without a real glass lens and optical focus, it's like putting a 800 horsepower engine in a Tata. So, it's a selling point but to what point? that's Apple - the camera is good enough (even before the flash), it was the nicest 3 MP phone camera and now the nicest 5 MP camera because of the SOFTWARE. the MP is pointless because that's just a chip.

That's what Apple has that no one can replicate. The ability (with SJ) to recognize what will work for most consumers (not everyone but enough people) ... and NOT to release products or features if they do not work ... like the touchscreen. It's BETTER than a keyboard because the keys resize visually as you tap on it - holding down a key brings up 5-10 accent marks and you can switch languages with a tap ... and unlike othes who just released it to say it was a touchscreen, Apple waited until it was working. that is the difference. Other mobile makers release products to fill a schedule - Apple makes sure it just works. just look at their ads, people accuse apple of hype but what do their ads show in mostly real time - here's how it works - one tap here and this launches, no voodoo, no overpromises ... while Android has that robotic hand promising you'll surf faster than a wave (how fast is that real?) or palm's first campaign (traffic lights will turn green!) or MS' Win7 phone ads which seems to say you'll find our phones so unworthy of your time, you'll spend much less time using it.

Yes, not everyone on planet earth will want or afford one but apple is not selling to 6 billion people but 500-600 million is good enough.


One brief comment regarding Apple's lack of options for users. I took a quick look at Motorola's Android phones - the ones they currently sell and the ones that will release by the end of the year. Here is what I see

Processor Speed: 528 MHz, 600 MHz, 720 MHz, 800 MHz, 1 GHz
Screen Size; 2.8, 3.0. 3.1, 3.7, 4.3 inches
Camera: 2, 3, 5, 8 Megapixels
OS Version: 1.5, 1.6. 2.1, 2.2 and 2.3 is coming by the end of the year.
Form Factor: Touch Only plus 4 different physical keyboard configurations.

In the next few months, Motorola is releasing phones running Android 2.1, 2.2 and 2.3. Imagine how crazy it is going to be to upgrade the OS on each phone and maintain a consistent user experience. And Motorola is hardly the only manufacturer in such a situation - Samsung and HTC's lineup looks very similar.

Why does anyone think that this would be a good thing for Apple? A consistent user experience is vital to maintaining Apple's reputation. You throw in too much variety and this is what you are going to get. Yes, Apple might go from today's 2 models to 3 or 4 but that's as far as they will ever go.




In the 18 years I've been on the Internet, I have never been as impressed as I am with this post. You have my deepest respect.

But I still think you were wrong for lumping MP3 players with cell phones 4 years ago ;)


Hi Tomi, Glad you posted this, I think you've begun to get it more fully. I've always thought you grasped some pieces but not others about Apple. Now that you've explained your model, I can see how you came to such a poor prediction.

Apple, as I've explained before, is not in a rush; as seen over and over, expanding too quickly is a recipe for bankruptcy. Apple is willing to forgo additional revenue and profits in the short-term so long as they are on track with their strategy. (Look at the patience in developing iPad and new MacBook Air to address the netbook phenomenon.) And you can be sure they have a strategy going out five years that will reach much more of the cell market. That strategy has lots of alternatives based on expected technology maturity and varying market/business/cultural conditions, out of which Jobs will make his choices.

As for QWERTY, I'm certain Apple is investigating how to make a phone for the people who want to do blind text entry, but it won't be a physical keyboard with buttons, and it won't arrive until they've figured out how to do it. That's their M.O. So they will "underperform" until they get it right.

I don't see a nano - 3.5" screen is the minimum; Apple won't fragment around that. iPhone could get smaller around the edges, and definitely thinner.

I think enterprise (large business) adoption of iPhone (using the same consumer model) will reach a tipping point in the next year. It will be helped mightily by iPad adoption.

Now that AT&T is saturated, the CDMA version is coming for Verizon and China Telecom and others in early 2011 in time for Chinese New Year. TD-SCDMA version may come in 2012 or 2013. Apple is going after China's upper and middle class big-time.

Until the market is much more saturated (adjusting for the replacement factor), I'm not convinced we'll see more than one new iPhone model a year because of the time it takes for Apple to ramp up production and get distribution all over the world. Due to this distribution delay, I expect the use of the old model as the second model will also continue.

Tomi Ahonen

Ok, lets start with the first replies

Hi Tim, gous, Manu and Simpleblob

Tim - I agree with parts of what you say, and definitely Apple in tech, and the iPhone specifically in mobile, gain a lot from extra hype they do not necessarily 'deserve'. And I also do see lots of similarities with the PC industry. But I don't agree with your conclusion that the iPhone is headed to be a fashion trinket for the rich. Yes, its an expensive phone and has a lot of fashion allure, but look at how a 5 year old can watch a parent use the iPhone and instinctively learn to use it. Or how it can be given to a grandparent, who can immediately use its features. The iPhone is bringing mobile internet and mobile data (and apps) uses to the masses, even as its not a true mass-market phone by price (at least, not yet).

gous - thanks. Yes, RIM is having its share of problems but is also spectacularly insulated from most of the competitive pressures due to its Blackberry instant messenger solution with its consumer products, and its corporate data solutions including email with business customers. So while all in the smartphone bloodbath will feel the pain, Blackberry will feel less of the total competitive pressures than most rival brands.

Manu - very good points and we agree obviously. I totally agree that the big keys are loyalty with existing users, and the exceptional desirability, still now, 3 years after the original was released, where an uninformed 'normal' person consumer might look at today's iPhone 4 and think its essentially the same device as the original iPhone 2G from 2007. Its not even that Apple would have given us four generations of always spectacularly radical outwardly appearance, on the contrary, there is almost a counter-intuitive lack of design innovation, a bit like with the Porsche 911 model, that is more-or-less identical today to Porsche 911 cars from over 40 years ago..

With both the loyalty, and the strong desire, Apple has obviously been able to ensure exceptionally high levels of repeat brand purchases, and also to keep high prices for new customers, even as they've expanded their reach dramatically in all markets.

simpleblob - that may be true (never a QWERTY model) but I argue it nonetheless. I think you would probably agree, that at least today, when the iPhone 4 sells 14 million units per year at a price of 600 dollars, there is ample 'room' for a premium super-iPhone in the 800 to 1,000 dollar price range, that could offer some luxury features like a bigger screen 4 inches or maybe even 4.5 inches, and a better camera etc - while keeping the look-and-feel similar to the current line of iPhones and iPod Touch'es? And this strategic option would be a good way to both give new premium Apple products to loyal iPhone users, and to raise the profits of Apple? And where perhaps in 2007 the US market might not have quite accepted a 1,000 dollar 'super iPhone' - today that would not be seen as outrageous. And obviously in Europe we've seen 1,000 dollar superphones in the past from Nokia, SonyEricsson etc, so the price would not be such a shock.

Thank you all for writing. I will return with more comments soon.

Tomi Ahonen :-)


Tomi, your earlier predictions regarding the iPhone were quite sensible. You were entirely correct in pointing out that there are only a limited number of people who will buy a $600 phone.

What threw you off is this: There are a LOT of people who will buy a $600 state of the art, easy to use and utterly beautiful personal computer that they can stick in their pocket. That it could make telephone calls was a bonus.

The iPhone was a groundbreaking computer disguised as a cellphone. Consumers knew it even if the phone industry was blinded to it through a forest/trees process.

How Apple was clever enough to see this opening into the market is beyond me.

Jake Agnew

"Recognizing How Significant is Apple's Achievement with iPhone making it a Top 5 handset maker"

Hmm. You might want to check the grammar on that one.

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