iPhone predictions

Seth Godin is putting out a challenge on what will happen with the iPhone. iPhone is the one product every marketing pundit seems to have an opinion on. And Seth and I are no exceptions.

Seth quotes Steve Ballmer and myself in believing iPhone will not be a winner. On the other side, Seth sides with iPhone and predicts 2 million units in 2007 and more in 2008.

It will be interesting to check back on this one next summer to see if iPhone can claim convergence success or it becomes the final convergence product to break the camel's back. Will the convergence bubble finally burst?

The best way to predict the future is by studying the past. But in doing so, you need to separate what you want to happen from what you predict will happen.

Right now most people carry multiple devices and most people dream about being able to only carry one.

But dreams are different from reality. In reality, one device cannot do it all, at least not very well. Being able to do everything, means you are usually not very good at any one thing. In general, convergence products are difficult to use, larger, more expensive and have poor battery life when compared to the original.

In the future, the phone, the wireless email device and the music player will each evolve in different directions.

Why? Study history. Look at the computer and the television. Many thought these would naturally converge so that every home would have one device. Not so. I still have a TV and a computer. In fact, I have multiple varieties of each. Don't you?

Instead of becoming more similar, televisions have become huge, giant sized devices with HD and other features. And computers have become smaller with the majority of units sold being laptops.

The same will happen with portable devices. The cellphone will become smaller. The BlackBerry might become bigger (It would be easier to type and read on.) And the music player will come in two varieties. The travel iPod and the home iPod. I have both a shuffle and a Nano myself. Running with my Nano now feels like I have a desktop computer strapped to my arm.

Early iPhone sales are likely to be brisk. Apple's amazing ability to generate PR will no doubt attract many Apple fans and early adopters to purchase an iPhone. Just like they bought a Newton back in the day.

But I stand by my prediction that the iPhone will not be a long-term success. What we will see instead is further divergence not convergence. Remember Apple's brilliant iPod is a divergence device.

That's my opinion. I am officially on the record. Check back after the iPhone has been on the market for a year. Was I right or was I wrong? Only time will tell. If I am wrong, I'll buy Seth an iPhone.

Comments

[Tom22]

i've learned so much from the ries duo and trout over the last year, but i think theyre kind of wrong about the iphone. the mp3 function probably CAN work. partly because portable music players have undergone many transitions and so people have more mental flexibility about their identity, and partly for their sheer convenience.

i'm not a believer in convergence products in general, but i think they are more successful in the tech field. look at computers. how many products have they replaced? the convenience factor is huge, and the mental block is smaller because of digitization. what i mean is that if you literally stapled a calculator, a word processor, a printer, a newspaper, a television and etc together it would look ridiculous. but when you combine functions in something that has a more focused physical identity, the mental block to convergence is less aggravated. the convergence product is still mentally more heavy and demanding than our categorical thinking would prefer, but with enough convenience it can succeed.

i think people block out the peripheral functions to simplify their image of the product. when i (very rarely) use a peripheral on something, i sometimes have to remember that it even exists. like the time i spent all night cursing because my brother borrowed my dvd player and i had just rented a movie. it never even occured to me that i could have played it in my PS2. have you ever had a need come up that you didnt even initially realize could be handled by a peripheral function on a computer or cell phone or something? this is what i mean by blocking things out to simplify your mental image of something. does it hurt the product's chances when you have to define its image yourself, rather than the company doing it for you by making simpler products? i think history has shown that it does, ESPECIALLY when it adds to the product's cost. like the blu ray player in the PS3. good for promoting sony's blu ray format, very bad for PS3 sales.

i just think apple should trim away the fat to make the product's image simpler, and possibly save some money to lower the price. it's a mistake to tie in 15 other functions, especially the tv. the "i" prefix on a handheld device, especially preceding a "p" in the same word, is strongly associated with the ipod. ipod, iphone. ok, its a phone + ipod. thats a big leap for anyone who believes in positioning, but i think the concepts might be able to fuse, though it would mean the end of ipods. but iphone meaning not just "phone + ipod," but instead "phone + ipod + tv + internet + organizer and etc" is crazy. i say trim the fat.
(great advice from a guy who can't post under 2000 words...)

[Eli Portnoy (The Brand Man Speaks!)]

Laura I too agree with your iPhone prognosis. I have made similar comments on my branding blog, The Brand Man Speaks.

I believe this will be a case of a successful product so overhyped..overpromising and underdelivering...that it will be considered an unsuccessful successful product.

I particularly thought it dumb for the new AT&T President to publicly state he expects a "shortage". That comment will likely be an Achilles heel or at least a dual edged sword.

The Brand Man Speaks

[Derek Martin]

Seth Godin's Wondering what the iPhone will be like. So is The Origin of Brands. Will it take off? If so, why?

In Steve Jobs & Bill Gates discussion at the "All Things Digital" conference last week, Jobs was chomping at the bit to tell us his little secrets, but he couldn't let his "ship leak from the top".
What's Steve got up his sleeve?
He's high on "post-pc" devices, so what makes this drug so sweet?

What We Know:
Steve believes the iPhone is the best iPod ever
The iPhone runs *full* OSX (not baby/fake/limited OSX)
The iPhone only comes in 4 & 8 gig capacities
4-8 gig isn't a lot of room when it has to hold OSX, applications, email, photos, videos, & music
Steve said that .Mac has been under-utilized up until now, and that will change in the near future
They are recommending that iPhone be used with "unlimited data plans" from AT&T
The iPhone supports EDGE (AT&T) and Wi-Fi (free/carrierless) for accessing data from the net
Many offices, homes, & public spaces have free Wi-Fi
What's all this pointing to?

Possibilities:
1) You'll store all your media on your home computer in iTunes, and your iPhone will be able to access it all via streaming. Favourites will be stored directly on the phone so they're available in the woods, driving, etc, but mostly you'll stream.
2) You'll sideload all your media to your .Mac account and both your iPhone and home iTunes will have the ability to access your online media. .Mac becomes your media server. Apple may copy Amazon's S3 idea and charge you per gigabyte to store your data online.
3) iTunes Media Store introduces the "all you can eat" model, where you pay Apple $30/month, and you can stream anythign to your iPhone/iTunes 24/7. All the music in the entire catalog is yours to listen to (but not download) any time. Remember a few years ago when I met with the heads of EMI Canada? I told them that to win the war aganist piracy they'd have to make paying easier than not paying, and that the way to do this was to a) never allow another download, and never sell another CD; AND b) to only allow streaming via high speed network to authenticated devices. I believe Apple's about to do that.

Any one of these options would pretty much kill 90% of the arguments against using iPhone as primary iPod due to capacity issues.

What else?
It'll have SSH/Terminal and RemoteDesktop built it, to make it the ultimate sysadmin tool.
It'll have a bluetooth keyboard (for those who want it to take notes etc) AND (more importantly) wireless bluetooth headphones/microphone. This will integrate your music headphones and phone mic into a single wireless unit. It may or may not use voice activation or a physical button to answer a call.

[Burak]

Completely agree with Laura that iPhone isnt gonna be a long term success for apple but it is definitely a revoultionary product in its market. However, as Apple shouted its iPhone release before 6 or 7 months to to the due date ... Rivals such as Nokia will definitely catch up with Apple, and will not allow them to run in the market alone. Will definitely hinder the sales of iPhone...

[Steve Wright]

I was in the Apple store in New York a week ago and the staff were spending most of their time answering inquiries about the iPhone (which wasn't yet available). There's no question the product will be hot out of the gate. How quickly will it cool off and how fast will imitators get to market? Hard to say, but Apple is a formidable marketing machine and make no mistake: these products are about image more than functionality. In terms of learning from past history, there are lots of examples of marketing winning out over tech (VHS v. Beta, etc). Apple gets the marketing piece and their tech is super user friendly. Feels like a winner in the near and longer term. The only stumbling block may be whether Apple repeats its past mistakes on licensing the new tech/brands to third parties.

[Mack Collier]

"I believe the iPhone will be very successful, but NOT because it's a "convergence device." It's going to be successful because it's a cool phone."

I think it will initially succeed because it is a cool $600 phone. It will be somewhat of a status symbol, but then when the price comes down, the status will go with it.

I agree with Laura, nice bump at the launch, but it won't sustain its momentum.

[Jeff Halmos]

Convergent products can never be so successful that they replace the devices they've converged (this is the crux of the Ries argument). So the question is, how successful does Apple expect the iPhone to be? Will it be niche, but profitable, like luxury SUVs, or will it fail altogether? If people are expecting/hoping it to sell as many units as iPod, which I don't think Apple is so foolish to believe, then they will be dissapointed. More than likely, it will be a success in profit and appeal, but sell modestly compared to iPod. It may spark more me-toos, but the newfound category will remain niche, like the Blackberry.

[Damir, Serbia]

How can anyone say iPhone is not a convergence device? Even they say it's a: widescreen iPod, revolutionary phone, breakthrough internet device.

RAZR was a success because it was visually DIFFERENT. And in spite it's Motorola name. They could have launched a new brand for chic designer phones. This way it was just a one-time hit.

[Carson Park Ranger]

I'm with the marketing mavin 100% on this one, but I'm invariably wrong about the potential of consumer products. I'm the guy who said, "who's going to buy a backyard barbeque that's so ridiculously huge," and "who would want a giant, gas-guzzling, luxury SUV?"

[Ethan]

Chalk up another vote for "hot out of the gate" (short to medium terms) and "cooling quickly" (long term).

The iClones will immediately flock to the iPhone (short). The iWannaBes will ditch current handsets for the iPhone when contract permits. Everyone else already has plenty of other options - including a small collection of high-performing divergence devices (including equally lovely, but much smaller phones!).

Even if history proves you wrong, I admire the strong and clear stance you've taken, Laura.

Note: excellent MadTV video clip about the "iRack" can easily be found online!

[Morgan Cloward]

I agree with Laura. The iPhone is a cool device, but its newness will soon wear off, publicity will wane and sales will drop. If convergence really is a good idea, then were the heck is my hover car?

[Scott Miller]

Here's the thing: People rarely buy a phone because of its convergence features (i.e. camera, email, etc.). They buy it because of size, phone related features, and overall cool factor. (The highest end phones are prestige items.)

The iPhone, despite it's horribly generic name, will succeed because it is a breakthrough, ultra-cool device. If it's a radically innovative phone (and it appears to be with it's tough screen), THAT'S all that will matter (not the fact that it's also an iPod and mini-computer -- that won't be much of a factor in its success).

I bet that within 18 months of the iPhone's release, Apple releases a cheaper, stripped version that is basically focused on just being a cool phone. That's the real appeal of this thing.

[Tom Frazier]

Add me to the 'basically disagree' camp. I agree that convergence only works with swiss army knives and clock radios... but I don't see the iPhone as a convergent device. The computing trend is that things get smaller and more portable. There is plenty of evidence for this divergence in the computer tree (iPod, Sony PSP, laptops, etc). The thing to note here is that almost all new computing devices get smaller and/or more portable. How many people choose to buy new desktop computers? Almost nobody I know.

Here is the reason for my disagreement. The iPhone to me doesn't represent a convergent phone, music, web, whatever device. It is the device that will truly occupy the mind as the next generation of computing.

I can easily see Internet kiosks soon only supplying screens and power cords that connect to your iPhone style device. Companies around the globe can issue you a mobile phone and expect it to be your primary computing device. Obviously those ideas are still a few years away but they are within reach. Even now I do as much or more work on my blackberry as I do my laptop and it doesn't come close to the same functionality as claimed by the iPhone. Software is again diverging (from server/terminal to client/server to software-as-a-service) and is becoming a rich data feed to a web browser.

Computing diverges somewhat evenly; meaning, software evolves at a rate equal +/- that of hardware. Nobody is going to develop really sophisticated software for hardware that doesn't exist and vice versa. The iPhone and devices to come will valide the SaaS model more than anything before it.

[David McElroy]

Hi, Jean. Maybe I wasn't clear enough. Your first paragraph essentially confirms the point I'm trying to make. The RAZR was successful because people loved it AS A PHONE. The other features weren't really relevant one way or the other. If someone wants to take the position that the addition of these other features means that the iPhone must fail, he must answer for why the RAZR didn't fail with those features added.

I'm saying the same thing will be true of the iPhone. It will succeed or fail as a phone, NOT as a "convergence device." I think it will be successful because people will find it to be an excellent phone that will be the cool and hip thing to have. The other things (music player, web access, etc.) will just come along for the ride. If it is successful, as I think it will be, many people will believe that its success is because it combines devices, but I think they'll be missing the real reason for its success: It's going to be a great and fashionable phone.

But we'll just have to look at the numbers in a year or two. There's no question that it COULD be a disaster for Apple. I don't see it that way, but the numbers will tell the truth one way or the other.

[Jean Biri]

David,

I think that the RAZR became a big hit not because of its features and specs but for its ultra slim design that impressed the trend setters and opinion leaders and eventually the millions who purchased it.

On another note, the iPhone should not be compared to the iPod, as the phone industry is a strange one. First, it's an exclusive product that will only be available on a given network in each country.

Secondly, most people purchase an iPod as their first digital music player whereas the iPhone will be a replacement of their current handset.

Third, when the iPod took over, the digital music player market was still in its infant years and to a certain extent still is whereas the cellular market is pretty much established and has its leaders and followers and is filled with so many players.

Fourth, like someone said, the iPhone's name brands it a mobile phone. Upon launch, the press and users might categorize it differently but with such a name, it will be hard for Apple to change their marketing message assuming that they will swallow their pride and choose the category that the general consensus gave it.

In conclusion, unlike the iPod, the iPhone faces more formidable hurdles that will make its launch rather challenging

[Joseph Steel]

I'm somewhat in agreement with you Laura, that Apple's iPhone will not have a long run in the greater consumer market. Where I differ is in the reason it won't; although I absolutely agree that in marketing terms it can create a problem, convergence of technology is not the problem here, as most product advances are made as a result of convergence. Computers, cars, and even clothes are cheaper, better, and more enjoyable because of the coming together of various development elements. Where I believe the real problem lies is in the marketing position Apple has taken with it's product name, as the word Phone is already defined in the minds of the consumer; on the other hand, nobody knew what an iPOD was. When a company establishes a new product the consumer is open to being sold on what it is, but as you well know, it's an uphill battle to change what already exists in their mind. Honestly, I've wondered if "Phone" wasn't chosen out of desperation rather than function, as it seems creatively un-Apple...esque.

cj

[Nicolette Tallmadge]

I don't think that Apple's launch of the iPhone is really about convergence at all...or at least not in the way that most people think. Look at the past products of Apple's...the iPod, the iLife suite, now recently the iTV, and soon the iPhone. All of these products have to do with media and how you manipulate it or when and where you consume it or share it. Apple's not positioning itself to sell "one" device where people can do everything they need to do. It seems to me that they are offering a suite of devices that can interact with each other with iTunes and iLife at the center of it all. Really, the iPhone is kind of like a trojan horse...slowly getting Apple and Apple products into your regular life. I can think of at least a half a dozen people right off the top of my head that bought iPods a couple years ago to use with the PC version of iTunes who are now buying new Apple computers.

I'm not tempted to completely agree with the 2 million units, but I think that it will be more popular than most pundits think. People said the exact same thing about the iPod and look where it is now. I agree with with David said previously, people will buy the iPhone because they think it's cool, not because it's a swiss army knife. And they'll still have their iPods, and might even continue to buy them alongside their iPhone....and that will suit Apple just fine, who wants to sell just one product anyway?

[Noah]

I agree with you 100% on this one Laura. The iPhone will have to excel at being a convergence device, or it just won't work. It's just too bulky to be just a phone.

My iPhone prediction is that they will sell out at first, and then drop out of existence.

[David McElroy]

I believe the iPhone will be very successful, but NOT because it's a "convergence device." It's going to be successful because it's a cool phone. If you consider the iPhone a convergence device, you must also consider the Motorola RAZR a convergence device. The RAZR accesses the Internet (badly), it has a (lousy) calculator, it does text messaging (badly), it acts as a (lousy) calendar, it acts as a (lousy) music player, alarm clock and a dozen other things. Is it a failure? No, not at all. It's a success because it was a cool phone that happened to have those other features along for the ride (which most people don't apparently use).

The iPhone will be a success because people will enjoy the elegance, ease of use and exclusivity of the device -- as a PHONE. The other functions of the iPhone are better than the nightmare of Motorola software, but they won't be the functions that sell the phone.

I'm generally a big believer in the ideas that Al and Laura have pushed for years, but I don't think customers perceive this as a "convergence device." They perceive it as the coolest of cool phones. I'm with Seth on this one, at least on the prediction, if not the overall logic.

[Subhash]

Hi Laura,
i'm a regular lurker though a first time commenter here.

On iPhone-challenge I would completely agree with you. In fact, I wouldn't have commented today if not for the strange coincidence that I had exactly the same argument with a colleague on iPhone sometime back.

What would be interesting is to see what all Jobs does in his attempt to make iPhone a "success". Good money after bad?

Very informative blog, Laura. Thanks.

-Subhash