All That I Know (About Technology)

Apple has done it yet again. According to the Q1 2010 results (source), consumers snapped up 8.7 Million iPhone devices this past quarter. While a few mobile market analysts feel that Apple missed their sales target (BTW, some expected sales to reach the 9 Million to 11 Million units mark), the growth of the iPhone still represents a healthy 100% increase in sales in comparison to the same quarter last year.

In my discussions with Marketers, I’m regularly asked whether iPhone app development or iPhone mobile campaigns make sense considering the dominance of rival smartphone devices such as RIM’s BlackBerry. There’s valid concern if you consider only the number of mobile devices but that number isn’t as important when you consider usage. While RIM currently outsells Apple in smartphone devices (RIM sold 10.1 million devices in the quarter ending November 28, 2009 whereas Apple sold 7.4 million iPhones in about the same period), the iPhone accounted for 60% of page views AND 75% of mobile revenue at the top online retailers this past holiday season according to Omniture (source). So while BlackBerry devices are more prevalent, users avoid using this device to browse the web. This decision is likely based on the poor web browsing experience. And Marketers that are considering the accessibility of their website should optimize it for the iPhone.

So Marketers that want to interact with the largest group of mobile users should first focus on the iPhone platform — nothing else compares. But besides usage, Apple provides plenty of additional reasons for why the iPhone platform will also win in the long run:

• The current quarter’s iPhone unit sales numbers exclude the 55% year-over-year growth in sales of the iPod Touch. The iPod Touch is a Wifi-enabled mobile device that supports many of the iPhone applications. The iPod Touch user segment represent a group that is not bound by telephony service but are still connected (likely to be a younger demographic).
• Sales growth was driven by strong global demand. This implies that marketers can now expose their application/campaign or brand to an international audience (while facing the challenges that come with such a relationship).
• With the introduction of the iPhone 3GS, demand for the iPhone has spilled from the consumer market over to the enterprise market. Apple reported that 70% of the Fortune 200 are either deploying or piloting the iPhone. While marketers may have previously focused on the business to consumer or B-to-C market segment, they now have an opportunity to create applications that address the needs of the business to business or B-to-B market.
• Apple continues to invest heavily in customer service, whether it is through training of mobile carriers on device or one-on-one coaching of new customers at their 283 stores (currently present in 10 countries). This is a critical tactic for Apple to attract and service an older demographic of users that may not be as comfortable with touch-based technologies.
• The numbers did not account for the  upcoming product introduction of a tablet-like device. This highly anticipated announcement is expected tomorrow but the value of this news is that Apple will give marketers yet another device that will support mobile applications. The segment of the users that select and use this device is still unknown but it is potentially a new group of untapped users.
• Lastly, Apple has completed two recent acquisitions: music streaming service Lala and mobile advertising platform Quattro. Both represent the company’s continued future-looking view on revenue generation and demands.

Apple seems to be benefiting from a positive feedback loop. While the iPhone does have its flaws (it is not a perfect mobile device!), Apple has built an elegant smartphone unit that is extremely user-friendly. Additionally, iPhone users regularly promote their smartphone to other non-users in their social circles so the masses are choosing iPhone when deciding to go mobile (source). For brands that are still on the sidelines or ones that are only focused on the alternatives (which is a mistake; source), there’s no better time than now to jump on the iPhone platform bandwagon.

Financial information for publicly traded companies always provides a wealth of information, especially if you’re searching for clues as to where the technology is going. That’s why I love looking at quarterly earnings announcements from big technology companies, like Apple, IBM, Google and Microsoft.

Last night, Apple announced their 4th Quarter 2009 earnings and reported that their quarterly revenue hit almost $10 Billion dollars. [If you're trying to gain some perspective on these numbers, you should consider that Microsoft recently posted revenue of $13.1 Billion for the same quarter (which ended June 30th, 2009).]

I ran across a few interesting stats in the earnings report and the analyst call transcript:

• 7.4 million iPhone handsets were sold in the past quarter, a rise from 5.2 million iPhones sales in the prior quarter.
• Nearly 21 million iPhones were sold in the fiscal year, which ended in September 2009.
• There are more than 85,000 applications for the iPhone in the iTunes store.
• iPod sales were down nearly 8% for the quarter to 10.2 million units.
• iPod Touch sales also grew strongly during the quarter, up 100% year over year.

What does this mean to Technologists?

POINT #1: Apple is in a dominant market position.

They’ve reached this position via the introduction of the iPod and the iTunes Store. Over the years, everyone and I mean everyone (eg: Amazon) has tried to develop an interface with music library/music store capabilities but none have been able compete with iTunes.

POINT #2: Demand for apps in a packed iTunes apps store remains strong.

Soon after the introduction of the iPhone, Apple established a Developer Program that allowed technologist to create custom applications for the iPhone platform. The program required developers to pay a fee to distribute their application in the apps section of the iTunes store. The apps were valuable to iPhone users because they could personalize their device and be more productive (eg: I can check my Starbucks card balance and the weather while listening to my favorite song). But Apple also limited the number of apps by instituting an application approval process that required new apps to be vetted before they were made available to the public. By restricting the iPhone platform (that is in wide demand), they further fueled the fire of marketers who wanted to interact with these iPhone device users.

POINT #3: Exclusivity agreement with AT&T has driven iPhone innovation.

Apple launched the iPhone in the US by establishing an exclusive relationship with AT&T. While the relationship has received plenty of criticism (source), the exclusivity agreement has benefited Apple in that they were able to focus on a single platform and deliver innovative features for that platform. They avoided marginalizing the features of the iPhone by not having to deal with integration issues that come with having to support a device on the networks of multiple carriers. Additionally, the infrastructure investment has driven AT&T to improve their customer support by providing a more robust network for a smart phone devices.

BOTTOM LINE:

Apple provides a growing platform with a broad user base. Developers that are considering mobile applications will first need to build for the iPhone if they want to have the broadest reach. But because of the fierce competition, developers have to recognize that their app has to stand out in an already crowded market place. The good news is that Google and other competitors (aka, Microsoft) are courting developers to their mobile platform because they recognize the importance of mobile. One effective strategy that developers can employ is to look for alternate mobile platforms as a means of getting some initial buzz. By establishing a foothold in these platforms, Developers can build further recognition for their application on the iPhone platform. As part of this strategy, developers will have to utilize a platform that allows them to code their application in one language that can be compiled into a language that’s compatible with each platform. [NOTE: each mobile platform requires different programming languages/programming skills]. Otherwise, they will not be able to create and distribute their application in a timely manner.

I am quickly learning that I can’t live without my Apple.

I recently broke down and purchased an iPhone 3GS . I resisted to become enslaved to another electronic leash. For those that don’t know what I mean, it is the nickname for the BlackBerry that I carried for almost two years in my prior job. I saw it as a leash because of the blinking red light. For the uninitiated, it is the indicator light on a BlackBerry for new email messages. Like many others hip carrying users, I initially fell in love with my BlackBerry device because it allowed me to peak at my inbox. The pain of spending 5 minutes waiting on my laptop to reawaken from standby, log into the corporate network and fire up Outlook went away with a BlackBerry. But before I knew it, I was trained like Pavlov’s dog to look for the blinking red light. It was a vice that I was glad to be rid of for good, or so I thought.

As I debated the purchase, I wondered if my crackberry habit of checking my email would resurface. I knew that I was somewhat safe because Apple didn’t put an indicator at the top of their iPhone. Also, the iPhone has an option to turn off the sounds when a new message arrives in the inbox. It was amazing how I could be in control — I could set aside time to look at emails instead of stopping whatever it is that i was doing and rushing to my device to look who wrote me or what blew up (if there’s an emergency, they can always call!).

So at this point, I’m only a few days into this “experiment” but I’m already realizing why so many people are fans of the Apple brand. It managed to be totally focused on serving consumers like me.