Why iPhone will succeed - as a niche player

Stan Beer
Thursday, 28 June 2007 07:50

Business IT - Technology

Unlike a few privileged reviewers, I haven't had a chance to thoroughly test Apple's new wonder gadget but I have held one in my hands and played with it for a few minutes. It's a beautiful piece of engineering and it will sell well, but only in a limited market space.

There has been so much buzz and hype about the iPhone (Microsoft must be wondering how Apple does it) that an early sellout of every phone that Apple produces for the next few months is just about guaranteed. After that, even if the iPhone is found to be wanting in some areas, the hard core Apple faithful will guarantee continued sales while Apple introduces improvements and new features.

Apple has sold more than 100 million iPods over the past five years. I suspect the company, its shareholders and Steve Jobs will be ecstatic if Apple can post similar figures for iPhone over the next five years, without cutting into standalone iPod sales too much. But it's a hard ask.

Jobs has already stated his goal of 1% marketshare - about 10 million iPhones sold - in 2008. Based on surveys, that's likely to be achieved. However, 2% marketshare in 2009 will be an order of magnitude tougher and, beyond that, 3%, which is about how many smartphones are sold in total globally, almost impossible.

All of the above assumes of course that the iPhone doesn't succeed in creating a totally new market dynamic which pits it against ordinary mobile phones rather than just the higher priced smartphones. Some analysts believe that will be the case but, if it's Apple's intention to be more than a niche player, it will be a tough sell.

In the much more price conscious mobile phone space, the iPhone will be judged first and foremost as a phone and secondly for its additional functionality. It will come up against the likes of the Nokia N95, the Motorola MotoRAZR V3xx, the Samsung A801 and a host of other high end mobiles that boast strong phone functionality and can be purchased on nothing up front plans.

If you accept that most consumers buy mobile phones not to play music or surf the web but primarily for voice and messaging communications, then the iPhone may well come up short against the likes of the N95. I didn't get a chance to test the iPhone's hands free speakerphone, which for me is a must have. However, well known reviewer David Pogue says both the speakerphone and vibrate mode on iPhone are weak. On the N95, as with many other phones in varying price brackets, both the hands free and vibrate functions are excellent, which these days should be a given with any mobile phone.

Likewise, the N95, being a Symbian phone like the rest of Nokia's range, freely allows downloadable third party applications, one of the most important of which is instant messaging. Being a Skype user, it is a very handy feature to be able to chat with IM from my mobile phone to both Skype phones and computers running Skype. It's also handy to be able to make and receive Skype voice calls. The iPhone currently has no IM chat capability.

One voice feature that I really do like on the iPhone, however, is the ease with which a user can set up a multi-party conference call. It really is revolutionary stuff. How often will cellphone users set up conference calls? Perhaps more than they used to if they own an iPhone.

I can live without downloading my own ringtone but others apparently can't judging by the array of sounds you hear from mobile phones these days. It seems strange that Apple has restricted iPhone users to its limited range of native ringtones, when given that it's also an iPod, most users will probably have a library of hundreds of iTunes songs to choose from.

As far as web browsing is concerned, the iPhone from what I saw in my brief five minutes is probably better than the N95 or any other mobile phone on the market. However, even the multi-touch screen iPhone lacks the basic functionality of a computer-based browser, with no RSS, Flash or Java capability. From my point of view that's OK because I don't believe most cellphone users buy their phone for web browsing.

Native browser aside, the thing that will disappoint many when considering the iPhone is that you can't use it as a wireless modem for your laptop. The possible reason for this is that Apple may be waiting until it releases a 3G version, which makes sense given the slow data transfer rates of Edge.

From limited hands on experience, the screen-based keyboard on even the early model iPhone I played with was excellent, as was the flick-screen navigation feature. The multi-touch screen will be a plus for the iPhone and it's a fair bet that other phone makers will try to emulate it in their future models.

Another plus for the iPhone that other cellphone makers will take note of is that the Apple phone really does have the most simple and elegant user interface ever constructed for a mobile phone device. Like most of what Apple does, everything has been designed with the user in mind.

As far as price is concerned, the question for most phone users outside the "I'll buy anything with an Apple logo camp" is whether they want to pay US$499 or US$599 on top of a two year standard rates plan with no choice of carrier. Apple is betting its design and coolness factors will sway them to open their wallets. However, after the hype has worn off what we are left with is a phone and consumers who will be asking themselves "is this phone worth the extra money I'm being asked to pay?" Apple is betting they'll say yes. It's a big bet.