Hello, can you hear me now?

The only other PR event that even compares to the iPhone circus was Harry Potter. But unlike iPhone, Potter delivered on its hype, selling 8.3 million books on the first day.

In terms of Apple's numbers which were released yesterday afternoon. Apple said that it had "shipped" 270,000 iPhones by the end of the quarter.

Yet only 146,000 were activated by AT&T. Assuming that some 10 or 15 percent of the iPhones sold weren’t activated (for some reason or another), that would make actual sales under 175,000 for the two day period.

Look at the situation from Apple’s point of view. After six months of incredible publicity (more than for any other product in history), what would Apple like to see happen when the product finally went on sale?

I think they would like to have seen 90 percent or more of the Apple and AT&T stores sold out of iPhones. To make that happen, they would have had to ship fewer iPhones than they expected to sell.

Since Apple shipped 270,000 iPhones, they obviously expected to sell well over 300,000 units. (Pundits predicted 400,000, 500,000, even 800,000 units in the two-day period.)

Why restrict deliveries in the first place? Apple wouldn’t have wanted to offend its loyal fans. After all, if a store doesn’t sell out on the first day, all those people who waited in line for hours are going to feel cheated.

In fact, anyone that waited in line for days must feel a little silly today. There was obviously no rush and no shortage of the devices.

Is the iPhone off to a great start? I don’t think so. Furthermore, I expect to see a gradual weakening of iPhone sales in the months ahead. The bad PR surrounding these early sales figures is obviously damaging.

Convergence captures the imagination and generates hype, there is no doubt about that. But divergence brings home the bacon. That is the message I hope to get out loud and clear.

Comments

[Chris Pich]

You are absolutely right, one has to capture the consumers imagination. A brand has to build a persona and form a relationship with potential consumer. People buy brands to join a group, society or club and feel connected with other consumers. A successful brand will reach deep into the mind of the consumer and connect with their sub-conscious desires. That is why the Harry Potter has been a huge success. Readers of all ages and walks of life are drwn into the Potter world!Therefore purchasing anything that is connected with the brand.

That is the power of brands!

[Scott Miller]

>>> BlackBerry

Isn't the BlackBerry also a "convergence" device? It's fundamentally a phone, with email and web access. And they all have cameras. Convergence, right?

BTW, I haven't seen recent iPhone sales, but everyone I know is getting one, or plans to get one as soon as the price comes down a little. This really has the feel of a slow-n-steady take-off, rather than a rocket blast fad.

What makes the iPhone work is that nearly every function is made stronger by the phone's other functions. This only becomes clearly apparent once you've used it. It's the synergy (a word a normally hate) of all the features that make it a much stronger whole. The next model of the iPhone will have GPS, and that too will make the phone that much better, thanks to synergy.

Again, it's not convergence, it's integration. In 2 years when the iPhone continues to thrive, I'm curious if you'll see that your theory needs slight tweaking. ;-)

[Laura Ries]

The real question is how to build a brand. A brand is how you build a successful, profitable company. Our theory is that you build a brand by pulling things apart not putting them together. A look at branding history proves this. In every category new brands are created by narrowing the focus. Computer brands are in trouble today because they are trying to be too many things. The brands that are succeeding are the ones that focused (at least initially) on one idea. Google, Skype, iPod, BlackBerry, You Tube, Facebook, Adobe, Intuit, Linksys, Hewlett-Packard.

[Scott Miller]

>>> her convergence/divergence theory is crap.

Actually, no it's not. It's absolutely correct. Instead, the mistake the Ries' have made is that the iPhone is not a convergence device, just as a computer is not a convergence device. It took me a while too, to understand the difference: The iPhone and the computer are both integration devices, integrating software, hardware and communication into a far more powerful, more useful whole.

I'm still not sure the Ries' have grasped this yet, as I've not seen them comment on it. I think I've found a small hole in their marketing theory that they've never properly considered, and may take them some time to warm to. After all, we're all creatures resistant to new ideas and change.

[Michael Buffer]

Laura promised to keep all these postings
on the website till next year. That's very good so everybody will see that her convergence/divergence theory is crap. She doesn't even know how to apply her own theory. What a joke. She doesn't have a clue what kind of device a PC or an iPhone is. She has no idea at all. I mean saying that 270.000 iPhones sold in the first 30 hours of sales is a disappointment in comparison to the number of items of the new Harry Potter book is ridiculous. How about comparing the revenue??? Seems a good idea to me. Every College boy would do that. Laura is just a silly xxx!!!LOL

[Clay]

I'm wondering if you have anything to say about Dell's recent decision to sell its computers at Walmart. I personally think it's a bad move. Maybe I'm just anti Walmart.

It makes sense that Dell is known for low prices and so is Walmart, but Dell is also known for bang for the buck deals and customization. I think Walmart's low price reputation also translates into a low quality label that might be placed on Dell in the long run. What's your stance?

[Scott Miller]

Just a little more, since I feel like for myself, at least, I've finally cracked the code on convergence versus integration devices: Is a computer a convergence device? After all, I use it for making phone calls (Skype), I use it to play games, for reading (the web), for research, for writing, finances, and even watching videos. Yet the PC isn't a convergence device, it's a device that integrates several functions and utilities, often in synergistic ways that benefit each other.

The iPhone is no different at all. It's an integration device, NOT a convergence device that slaps together functions that would be better off in specialized devices. (Well, the iTunes feature of the iPhone might have been better left out--that's the one convergence type feature in this device, but this alone will not sink the iPhone. Many people, like me, will mostly just ignore that feature, just as we ignore many features of computers that are available, but hardly used.)

[Scott Miller]

I believe that convergence is a path to failure, too, but the iPhone is not being bought as a convergence device. It is being bought as an *integration* device. It integrates several functions that require wireless connections, and makes this integration seamless, and supremely convenient. Being able to look at my contacts list, for example, tap on the address, and have it appear on Google maps, has been miraculously helpful already. I can go on and on, but the iPhone is a revolutionary leap in terms of integration of functions and ease-of-use. The touch screen interface is a revelation to everyone who tries it. I will never use the iTunes feature of the phone (though, I did upload an audio book, just in case I'm on a flight and want to lean back and relax), but iTunes is not why people are buying this phone. This is the best phone in the world for keeping people in touch with the world.

It's price is currently sky high, and I think that's slowing down sales. But as the price comes down, I think the iPhone will explode in popularity. It's not having a rocket ship launch, it's taking off like a 747, slow and steady, with a lot of room to climb still.

[Jarrett Green]

Who knows about this iPhone thing. It's unpredictable because there's been nothing like it. I did however watch the Ries report by your dad. The whole idea that the computer was a divergence device is incredibly, almost PROFOUNDLY off-base! "The Computer" at first was a calculator - a way to do math quickly. Since the begininng it has converged with: Typewriters, phones (modem), printing presses, the photographic darkroom, arcades, canvas... God some many things. As a graphic artist, I can on my $1200 laptop do the job that 10 years ago took a team of artists, typesetters, printing film houses, photographers, probably 100s of people working on hundreds of thousands of dollars worth of equipment. And that's just the Computer converging with DESIGN! What about all my $1200 laptop could do for scientists, business folks, accountants (talk about convergence).

Regardless of the iPhone, I don't think you're convergence/divergence spiel will hold water in a. a world of shrinking technology, and b. the 21st Century.

[G-Money]

The iPhone is not just a convergence product, but a category and paradigm-shifting product. It is not a phone with wi-fi internet and music. It is a portable computing device that just happens to have a phone.

Whether Apple sells a bazillion units or not, it really doesn't matter. Steve Jobs has effectively created enough buzz around the Mac OS and Apple innovation to create renewed interest in all things branded Apple.

Bottom line: This device is just cool. And everyone wants it. I would say that Apple played it's cards right this time.

[Stacy]

Laura,

You are "applying" your theory of convergence incorrectly. Why? Your inputs are wrong. You think the iPhone is a phone and that's what's leading you down this path. By taking a broader view, I think your conclusions would be different.

I made the same mistake. I headed over to Sprint to buy another BlackBerry. After about 10 minutes playing with the top of the line models, I realized I could not compare it to my friend's iPhone I played with the day before. The two "experiences" where not even on the same planet!

Based on my needs, I had convinced myself that email was most important and that means BlackBerry. Period. But the broader reality includes my personal experience "using" a device too. Factoring that in, I'm getting an iPhone when my contract expires 34 days from now.

Your convergence theory is right on, but your "inputs" are wrong.

[Guruprasad V]

I think that guys like you’re putting too much pressure by predicting numbers which are ridiculous, awkward, meaningless and ofcourse idiotic. Please don’t look anything and everything in a week, month or a quarter. These are all long term bets. I think APPLE is also succumbing to numbers game. Wait for sometime and then come to conclusion. I think that intelligent analysts, tech writers and marketing guys like you are putting too much pressure to Apple. I think folks like you are coming up with numbers on their own terms and they’re coming into conclusion about success or defeat about a product. Give APPLE a break.

[Andrew]

Harry Potter, I take this as a worldwide figure..
$19.95*8300000
=$165,585,000

iPhone in just the US:
Lets say average price is $549 for the hell of it, even though the 8GB version outsold it's 4GB brother.
$549*175,000
=$96,075,000

Wow I wish my marketing failed that bad. Lets wait and see how it does worldwide.

[Cam Beck]

"Look at the situation from Apple’s point of view. After six months of incredible publicity (more than for any other product in history), what would Apple like to see happen when the product finally went on sale?"

What's interesting about the incredible publicity is how much of it came from Apple's brand evangelists. Joseph Jaffe, for instance, recently auctioned off a sponsorship for his podcast, "Across the Sound," for an iPhone. The unspoken sponsor was the iPhone itself, but Apple didn't have to pay a dime for any of it.

That event consequently led to others talking about the maneuver. Whether they approved or not, Apple's brand wasn't damaged in the least. Joe (and others) crave (covet?) the iPhone, and from Apple's point of view, that's a good thing.

If anything is holding back sales, it's the price and the total cost of ownership (including the opportunity cost of missing out on Gen2 devices) -- not the fact that it's a "convergence" device. If they dropped the price by, say, $200 and AT&T waived the data cost, everyone and their mothers would have one, including yours truly.

When the real price comes down (and it will come down), you'll see more people buying one.

With a few exceptions, the iPhone is getting rave reviews. Everyone I know who has one is head-over-heels in love with it. What this means to Apple remains to be seen, but their profits were recently reported to be very strong compared to last year (which were strong enough as it was).

[rick gregory]

Laura,

All you've written about lately has been the iPhone and it's all got the same negative cant. Why? You haven't been providing original analysis, you've been harping on common objections that everyone has - convergence devices will never work, no one wants them, etc, etc. Hell, weeks before you could even get one, you decried the iPhone as a crappy device. Not because you had one in your hands, but because... well... how? I mean how in the hell does someone say a device is crappy when they haven't even tried it? These posts haven't been critical analysis, but merely hit pieces.

Apple sold 270,000 iPhones in 30 hours. 146,000 activated. in 30 HOURS. How many did they sell on Sunday? How many were activated on Monday? How many have been sold to date? And why should we care what pundits predicted?

Apple might well fail - the iPhone is a different device from the Blackberry and other phones and it may well not get the broad acceptance that Apple so clearly wants. But instead noting that current cell phones are so abysmal that people were actually willing to stand in line for a new, radically different one, you've been, well, whining and putting out highly negative FUD with a minimum of actual analysis. Will you be equally vocal if there are millions of iPhones in people's hands by this time next year and sales are strong?

[Morgan Cloward]

Laura:

Looks like you and Al were right on this one! Just over a month ago you said with "all convergence products, when you combine functions you don’t get the best of breeds, you just end up with a fruitless mutant."

[ed lee]

from my personal experience and people i've talked to, the iPhone is going to be a huge hit. people who have one, love it and can't stop showing it off/talking about it/fondling it. people who see one, want one/talk about wanting one and try to fondle everyone they see.

even in canada, where it isn't available, people can't wait to get their hands on it. people i know have even bought unactivated iphones just to use it as a very expensive wifi enabled ipod...

this positive word of mouth is, in my personal and professional opinion, far more valuable than the negative publicity around the missed numbers is harmful.

Ed

[Dan]

Not surprising. Nice product, interesting marketing story, but I just don’t think iPhone has captured the public’s imagination – especially for the price. Can’t wait to see the touch screen feature spread to more devices.

[Matthew Lockwood]

I love the fact you hate the iPhone (and convergence) devices so much. I'm inclined to agree with your standpoint on it, and it will never do as well as the Crackberry has so far. Having said that, as soon as I can get my hands on one in the UK, I will just for the cool factor. I won't be playing music on it, or doing much with it other than showing it off as an expensive toy.