iPhone cannot win the smartphone wars

I'm going to make a bold prediction: Apple's iPhone will lose the mobile device wars. Such statement will send some iPhone fans howling -- perhaps appropriately so with the full moon days passed and Halloween days away. :)

Put another way: iPhone is to Android -- and somewhat Symbian OS -- handsets as Macintosh was to the DOS/Windows PC in the 1980s and 1990s. The Mac's rocky start in 1984-85 gave way to great success because of several killer applications, with desktop publishing being among the most important. But by the mid 1990s, Windows PCs pushed down Mac market share. The iPhone is poised to track similarly. Gartner predicts that Android OS shipments will exceed iPhone OS by 2012 (see chart). I'm a believer.

The question of how far iPhone can go is important, because a new computing platform is rapidly emerging. Mobile devices like cell phones are sure to replace PCs. PEW Internet claims by 2020. I'm on record as predicting much sooner.

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Today, Gartner predicted that this year, worldwide smartphone shipments would grow by 29 percent year over year to 180 million units, exceeding laptop unit shipments. From this year, Gartner predicts that end users will spend more on smartphones than they will on notebooks. The analyst firm expects that most PC manufacturers will move into the smartphone market (where Apple already is with iPhone).

Chicken-and-Egg Thinking

The iPhone's staunchest defenders insist that applications will rule the market. Over the weekend, tech blogger Robert Scoble followed a Twitter debate with blog post: "85,000 reasons why iPhone isn't going to be disrupted." Like many other iPhone enthusiast bloggers or journalists, Scoble believes that iPhone must succeed because of the vast number of applications. In a somewhat terse Twitter exchange, I called him and other die-hard iPhone fans unreasonable. He blogged in response:

If you get me all those, and all the other 85,000 apps, but on a device that is sexier and more fun to use (and more productive) then I'll definitely be reasonable and switch...Until then I have 85,000 reasons to be unreasonable...Yes, I'm unreasonable. Let me know when I can stop being unreasonable! :)

The large number of applications does at first glance seem like a pretty good reason to claim iPhone's eventual domination of what arguably is the next, major computing platform. However, the number of applications is no surefire measure of iPhone's or any other platform's success. Applications are but one -- and not the most important -- platform characteristic. Successful platforms share five common traits:

  • There are good development tools and APIs for easily making good applications
  • There is at least one killer application people really want
  • There is breadth of useful applications
  • Third parties make lots of money
  • There is a robust ecosystem

I usually only put the first four items on the list, but here extend the fifth from the fourth, which is the most important of all. To single out applications as the measure of success is to put the chicken before the egg. Related: The platform chicken-or-egg scenario, where there is question: Which comes first, the platform or the applications? The chicken-or-egg question presumes that many PC operating systems fail because there aren't enough applications; that many developers wait to develop applications because they want to see if the platform will gain momentum among consumer or business customers; that platforms cannot gain momentum if there are not applications.

Gartner Smartphones 2012

But this reasoning is flawed. It ignores fundamental rules of economics. The chicken-or-egg theorists should ask why do developers wait at all -- or not? My answer: Because they want to make money. The fourth point in my list -- "third parties make lots of money" -- is more important than number of applications. It's the most fundamental reason why platforms succeed or fail. The fifth point --"there is a robust ecosystem" -- is intrinsically connected to the fourth and over the long term is as important, if not more.

The Ecosystem is Everything

Among technology platforms, the Windows PC is classic example of a robust and vital ecosystem. The Google informational/search platform is another. Around either platform, there is a discernible ecosystem of third parties -- not just software developers -- making lots of money. The two ecosystems are broad and deep. By comparison, Apple's App Store/iPhone/iPod touch platform is narrower and shallower, despite the depth of applications, because the ecosystem depends on a closed, end-to-end technology platform. Apple controls everything.

By comparison, in the 1980s and 1990s, DOS/Windows was more open than Mac OS, because Microsoft only controlled the software and Chairman Bill Gates took the brilliant approach of licensing to third parties. (Commenters, please don't huff. I didn't write that DOS/Windows was open, but more open than Mac OS, because of licensing.) Through the licensing scheme, good luck (because of competitors' mistakes) and Microsoft efforts to establish standards around DOS/Windows and DOS/Windows PCs, a robust ecosystem of third-party profiteers emerged.

The ecosystem is everything. Windows Vista's market failure is good explanation why. Vista suffered from perception problems that were much larger than its performance problems; Vista isn't a bad operating system, it just wasn't good enough to displace Windows XP. Vista wasn't just competing against XP but a huge, supporting ecosystem of third parties making money from it -- PC, peripheral and component manufacturers; distributors, resellers and retailers; software and Web services developers; and consumer, enterprise and small business services providers, among many others. XP had five years in the market before Vista's release to build up this broad and deep ecosystem, which also included customers -- many of them large businesses -- dependent on the software to make (or save) money.

What's really interesting about the Gartner numbers (see chart): Windows Mobile declines, but not that dramatically, through 2012. Why? The ecosystem. Microsoft has established a viable Windows Mobile ecosystem that somewhat compensates for the weak mobile strategy. Ecosystem also is one major reason why Symbian OS will remain so dominant, despite steep market share declines. Another: Nokia plans to open source Symbian OS (process is underway). By comparison, Gartner predicts that BlackBerry and iPhone OSes will reach near identical market shares, and, not coincidentally, both are part of closed, end-to-end systems.

A History Lesson

Parallels between the past and present foreshadow iPhone's future. The IBM PC launched in mid-1981. About 18 months later, Compaq announced its 12.5 kg clone, nicknamed the "luggable." A year after Compaq started selling its IBM PC clone, Apple announced the Macintosh, in January 1984.

Desktop publishing was the Mac's first killer application, contributing to sales growth over the next five years. But Apple couldn't win the "Clone Wars" against DOS -- and later Windows -- PCs. The resulting clone attack, essentially every other PC manufacturer against Apple, was too much for Macintosh. The PC ecosystem overwhelmed Apple.

To reiterate: In the 2000s, like the 1980s, Apple successfully launched industry-changing platforms -- iPhone and Macintosh, respectively. Like Macintosh, iPhone's end-to-end licensing model is poised to limit the supporting ecosystem's growth. Meanwhile, Google, Microsoft and Nokia license their mobile operating systems to third parties.

Among the three, Google's Android is the one to most closely watch, followed by Symbian OS, assuming publication of source code under open source license is completed next year as planned. While DOS/Windows was more open than Mac OS during the 1990s, Windows Mobile is more closed because Microsoft has failed to establish standards around the software. By comparison, Android, which Google open-sourced, is to mobile devices more like DOS/Windows was to PCs in the 1980s and 1990s: A more open operating system around which third parties make money and an ecosystem thrives.

iPhone Against the World

In March 2009 Microsoft Watch blog post, "The iPhone Platform Comes of Age," I glowingly praised App Store/iPhone/iPod touch. But I tempered my enthusiasm:

Whether or not that platform succeeds depends on many factors. Among them:

  • How Google, Microsoft and Nokia shape up their mobile platforms in 2009-10.
  • How many market share-leading handset manufacturers adopt Android (HTC just announced three more Android handsets).
  • How quickly Apple can expand its iPhone OS install base -- and that includes iPod touch.

Since I raised these reservations about Apple's platform, Microsoft and Nokia fumbled their mobile strategies. Meanwhile, Android is rapidly gaining momentum among handset manufacturers and developers. In a presentation given last week, Gartner analyst Ken Dulaney predicted that Android smartphone OS share would grow from 1.6 percent in first quarter 2009 to 18 percent in fourth quarter 2012 (see chart). By comparison, iPhone OS: 13.6 percent, up from 10.8 percent. Symbian OS will remain dominant, Gartner predicts.

That said, the mobile device market will be bigger than just handsets, which is where Android already is gaining adoption for use on other connected devices. Barnes & Noble's Nook ebook reader and Verizon's Droid phone are but recent examples of where Android is going, and where iPhone is not. Meanwhile, new information published this week shows how Android 2.0 emphasizes information interoperability -- openness that should grow the ecosystem, like DOS/Windows did for PCs decades ago.

Another "everyone else against Apple battle" is coming, with Android looking to be the better OS around which an ecosystem grows and thrives. There's a Star Wars metaphor here somewhere. Apple lost out to DOS/Windows because of the attack of the PC clones. Now the droids are coming for iPhone. Apple's power is the Force -- blogger and journalist enthusiasts like Robert Scoble. Can the Force win? I say no, but you tell me. That's what comments are for.

68 Responses to iPhone cannot win the smartphone wars

  1. HereAndNow says:

    The game changer, this time, could be HTML5, WebGL, etc. If web apps become the norm for app development & all smartphone platforms support them, then people will be able to buy whatever device they like (iPhones, Androids, Blackberries, etc.) & all the same apps should be available for them. Purely hypothetical, but possible.

    • gawd21 says:

      It would be possible, if not for Apple, as they would never allow that.

      • HereAndNow says:

        Actually, Apple had originally intended apps for the iPhone to be web apps. Apple is one of, if not THE major driving force behind WebKit & WebKit's HTML5, WebGL, etc. support. So Apple really deserves credit for openness, in this case.

      • mattjumbo says:

        Let me boil it down: more apps is not the same as more open. "More open" is meaningless. Look at all those Ubuntu desktops out there. Right?

        WIndows "won" because of, like the big monkey said, "Developers, developers, developers, developers!"

        Apple can't win the smartphone wars because they already "won" them on July 10, 2008 when they opened the App Store.

        99 percent of all humans don't even know what a "smartphone" is. Just like "MP3 Players" as opposed to "iPods." They know "iPhones" and "Things That Look Like iPhones."

        And, last but not least, there is the whole issue of "winning." Did Apple lose the PC wars? Really? They made more profit than Dell or HP last quarter on far smaller volume. You go on and tell Compaq, Packard Bell, and IBM's PC division that Apple lost the PC wars.

        I bet you get some funny looks.

      • davesmall says:

        A little reality therapy is in order. Windows won because they offered a migration path to MS/DOS users. Apple could have done that but didn't. The rest of your argument is pure malarkey.

        Smartphones are not going to ever replace computers. They're complementary devices. The small screen is too big a limitation for them to ever replace computers.

        Android's big problem is fragmentation. It's the same problem that made Unix workstations so problematical. Each phone manufacturer can customize each phone model seeking a competitive edge in features. After all, Android is free and it's open source.

        Developers will suffer with fragmentation. You don't want to develop multiple versions of your apps, especially if each individual version has few users.

        Apple has the winning formula here. Microsoft is over and done. Stick a fork in them (unless they come to their senses and drop Steve Ballmer who has been running the company into the ground since 2000). Companies like Nokia and RIM are three years behind Apple and trying to play catch-up but they're suffering from severe delusions of adequacy on the engineering front.

        There will be more than one winner and there will be several losers. Android is going to be one of the winners but fragmentation limits their potential to much less than the iPhone. Symbian, Microsoft, and RIM are on a downhill slope and the angle of descent is increasing rapidly.

      • JoshF says:

        Fragmentation?

        Seriously?

        It's the same Base OS on all Android phones, and the same SDK for developers to develop apps.

        This is not the same as linux or unix, those were core differences in the OS.

        Even phones that have been skinned like the HTC Hero just have a different look behind the scenes all the apps that work on Android work on them.

        I think the consumer will enjoy variety and the ability to customize their phone rather than being stuck with one unit which is pretty much uncustomizable besides downloading apps.

      • I wouldn't talk of a war. There is a market and there's competition. Apple successfully brought the smartphone to consumers (and also proved that convergence of devices is the future). They created a new market for smartphones and it's getting crowded very fast. I think Apple will remain a player in this market for as long as they can make a healhty profit from it.
        Smartphones will soon overtake featurephones and access to the internet should be a universal feature. Most consumers will probably not look beyond apps for social platforms on their smartphones and those apps will be a standard feature on all smartphones. Games might make a difference for part of the market though.

  2. gglockner says:

    The smartphone "winner" will be determined on who has the best enterprise strategy. For a while, Windows Mobile had a strong position among corporate users, but that's fading. Seems like Blackberry has the corporate market to itself - at least in the USA. So far, the iPhone has made very little inroads into the corporate market. And this is despite some good efforts by Apple - unlike their complete indifference in terms of selling Macs to corporate buyers.

    In terms of the consumer market, so long as Apple keeps a low purchase price, they should continue to thrive. Android may make some inroads; I'm reserving judgment until the Android is fully mature.

  3. NicholasOrr says:

    I'm on WinMo still and I'll be going to Android.
    iPhone is nice if you're prepaid to fit the mold - I'm not...

    I use GAFYD so naturally Android is the best fit.

    Plus a 5 inch screen is appealing - I'd need to use a bluetooth headset though.

  4. dkratter says:

    The whole 85,000 apps on iPhone argument is disingenuous. Yes, the App Store has that many applications. But how many of those overlap with the applications on Android Market? For instance, what is probably the most popular mobile application ever, Pandora, exists in both stores (and many others), so that one doesn't really count in anyone's favor. The same could apply to probably hundreds of other applications (Google Maps, Shazam, etc.).

    Also, how many of those 85,000 applications are actually used, or are any good? While scrolling through the Android Market, I can see how many applications get low user ratings, or have very few download numbers. How many of those apps are just repeating the functionality of dozens of other apps, just in a slightly different way? It is a certainty that Apple's App Store is the same way.

    So what we're really talking about is not 85,000 applications. What we're really talking about is the question of how many quality, unique applications exist. Obviously at the moment, Apple is far ahead, with their long lead time. But now that there's an ongoing explosion of Android handsets coming out this quarter and next quarter, I think it'll be only a matter of months before the App Store and the Android Market have very similar numbers of quality applications.

  5. beluga-love says:

    I am not sure I understand what the fuss is about... Apple haven't lost any wars. Apple is a thriving, profit making company that is doing well enough out of the Mac alone. And they are gaining market share even in a market place that was 'wrapped up' by Microsoft.

    And they are well ready for the mobile platform... with less fragmentation then the competition, with more apps, with incredible high user satisfaction ratings, and with a perfectly reasonable open app market with a low threshold for developers, with a fast growing gaming community, with a stealth device, the iPod Touch, selling 2 for every 3 iPhones, with great developer tools, with a working app store, with in-application micro-sales... and we can reasonably expect Apple to come up with more and improved devices just like the competition. They are in control of their own hardware and software and the market.

    And even better for Apple, they will actually make money each bit of hardware they sell, with lots of financial reserves to tide them over during hard times and provide decent margins, as they have proven in the current recession.

    Now, Google has deep pockets too, but as far as open-ness is concerned, how open will Google be in the long run? How open will the OS's be that the manufacturers provide at the grace of the carriers? Google is not enforcing standards unless they tie the user to Google services and that is exactly what you describe as hindering WinMo.

    So all we get from your column is a 'prediction' based on a hunch, a made up graph that has been created by 'analysts' without any particular evidence to back it up.

    Do you know how many Android devices have been sold so far, or have you got any figures that would be mildly interesting and useful to back up your prediction?

    I just couldn't find any...

    Very disappointing.

    • Balderstrom says:

      Yes. Winning or Losing is not really the point at all. No matter my personal feelings in regards to Apple and its secretive/closed nature, it cannot be denied that Apple excels at what matters, Profit Margin. Whether or not they attain majority share of some specific subset of electronic devices is irrelevant as they make more money on less sales.

      Another way to look at Gartner's (*)ficticious numbers is that that both Apple and Android's Q12 share is higher than it is now, and the Symbian and Blackberry Q12 share's are less.

      (*) Ficticious: Gartner best guess. I suppose the money-market's et al revolve around some companies' "best guess".

      Yet one might want to keep in mind just how much "news" you read that isn't actually news... it's just a prediction and quite possibly a large waste of time.

    • psycros says:

      Couldn't agree more. This is a writer determined to appear smarter and better-informed than he really is. Betting on Android is a total no-brainer, because its: (a) the new hotness, while the iPhone isn't, (b) more open and (c) not tied to a single manufacturer. This piece is the analytical equivalent of taking a helicopter to reach the other side of a parking lot.

    • JoshF says:

      Few key points to note.

      -Android 2.0 is just now coming out, and will offer more features built into the OS than the Iphone.

      -Android is available, or will be, on every carrier and is world wide.

      -Android is available on different peices of hardware. Those of us that want a bigger screen, or a physical keyboard have that option now

      -Android devices usually cost less than the Iphone

      Because of those factors and Apples ego I think it's a safe assumption that proliferation of the android platform will grow and grow.

      Naturally that will cut into the profit margins of the other PDA platforms our there, including apples.

      I agree the article is a best guess, and shouldn't be taken as facts but it is definitely plausible and Joe disclosed this in his article.

      I also agree that the Android platform doesn't have as many apps, but what do you expect from a platform that only had one crappy phone available for the last year. In time the apps will come, and the big apps that are important to most iphone users are already on the Android platform.

      A year from now the market will look substantially different than it does now, that much I can assure you.

      As for Windows Mobile and WebOS I don't see those two platforms having a successful future.

  6. lvthunder says:

    Who wants a winner? It's called competition. I want Apple, Google, Microsoft, Palm, and RIM to continue to one up each other. I don't want a so called winner. They should fight to the end of time. That's the only way we get the best phones.

    • dracodos says:

      Although i have my reservations about Palm and Microsoft lasting in this market I'd rather have these companies continue to fight tooth and nail: develop, improve, and continue to work on ground-breaking products. Thats what really needs happen. There will always be one that may hold the seat above the rest but the fun part in competition is seeing who can dethrone the leader again and again and again.

      That's really what needs to keep happening even in the OS realm.

      • gawd21 says:

        I think that Palm sill shoot itself with the WebOS. I think that it is a very poor idea for all phones.

    • thomat65 says:

      Kudos. That seems to be the only way to get innovation from capitalism. Can't wait to see what comes next!

  7. bigsexy022870 says:

    There are factors at work that are missing from this article. Like That logic doesnt matter for one. Windows mobile should be the winner since it's such a large player and has been arround forever. Oh yeah I forget that it's a failure cause it really sucks. Even the all mighty Microsoft could make it happen. Apple will rule the phone market much like they did with the mp3 player market. Most likely with the mp3ish aspect of the iphone. The iPhone does music and media in general better then anything out there. Capable of thousands of streaming radio channels and able to stream home media to the device. It makes for a perfect combo device.

    • siryak says:

      "The iPhone does music and media in general better then anything out there."

      How so? By requiring you to use a bloated media software to put anything on it? Or maybe it is the proprietary formats that it requires?

      • beluga-love says:

        @siryak

        Requires proprietary formats?

        iTunes is based mp3 and the open standard mpeg-4, so maybe you'd like to elaborate?

        As far as 'bloated' is concerned that is a matter of personal opinion... iTunes is so heavy, because it has so many features. If you want a bare bones client then by all means go for the alternatives that are available. But if you want the convenience of a one-in-all solution iTunes is the way to go.

        The iTunes file structure is as simple as it could be and makes finding your tunes easy, the playlists are accessible via standard xml files.

        In fact iTunes is so successful and effective that even Palm would rather their Pre pretend to be an iPod then develop their own media player.

      • DotNet_Coder says:

        "Requires proprietary formats?"
        I believe that siryak is referring to the iPhone's inability to allow media files to be transferred over standard USB and requiring that iTunes be used for even simple media management on the iPhone.

        "In fact iTunes is so successful and effective that even Palm would rather their Pre pretend to be an iPod then develop their own media player."

        Actually, the reason Palm wants to piggy back upon iTunes is because of market penetration. Why build your own when you can use what's already out there? Also, Palm thought of this as something of an iPhone killer; "Look, the Pre syncs with iTunes too! You can now switch from your iPhone to the Pre!"

        It's lame in all aspects, but not out of the ordinary by any means...

      • siryak says:

        Exactly ^^^

        It may be able to accept an mp3, but not without iTunes. Unlike what I would consider a good media device I can't simply drag and drop my files onto the iPhone.

        "As far as 'bloated' is concerned that is a matter of personal opinion... iTunes is so heavy, because it has so many features. If you want a bare bones client then by all means go for the alternatives that are available. But if you want the convenience of a one-in-all solution iTunes is the way to go."

        I don't want anything. I don't need a bloated client to do something that I could do with copy and paste. Most media devices don't need a client at all. I don't see how you can get much easier than drag and drop.

        With the iPhone I haft to add the file to iTunes and then sync it with the phone. It is just an extra step that is completely unnecessary.

      • DotNet_Coder says:

        One of the many things I love about my MyTouch3G is that all I have to do is connect it via USB, mount it, and then drag and drop media files. If we are to take Apple's example of "it just works", then this blows iTunes/iPhones out of the water in terms of ease of use. I do not need to download anything to access my phone's file system. If I so choose to access it using a media player, both MediaMonkey and Windows Media Player recognizes it and syncs flawlessly.

        Just one example of where Android is closing the gap between itself and the iPhone...

    • psycros says:

      Heh heh, too true. I love how he talks about the Windows Mobile ecosystem - you know, the one that requires developers to pay big bucks to have their apps actually install on locked phones (which is 99.9% of them).

    • thomat65 says:

      I do agree that sometimes logic doesn't seem to win out. However, some would argue that the ZuneHD does music and media better. I don't own any of the things mentioned in this article or the comments but you've made a very subjective claim that would be better served with some objective facts.

      Please nobody start the ZuneHD vs. iPod war. Both have their positives and negatives and we should pick one that suits ourselves not everyone else. There I just said everything that needs to be said. Please no one start another rant.

  8. Dannyboynyc says:

    Scoble makes a good argument for how the App Store’s sheer size is a big competitive advantage for Apple. But I think what’s being missed is how this is a competitive advantage. It’s a sign that the iPhone and the App Store are popular, and it’s a self-perpetuating form of popularity, in that developers go where the action is, and users go where the software is.

    The danger I see is in conflating cause and effect. Is the App Store popular because the iPhone is great? Or is the iPhone great because the App Store is popular? There’s a big difference between those two arguments. The latter is the argument Microsoft has long made regarding the advantage of Windows: Windows is great because Windows has the most software and most developers.

    The iPhone has turned that around, and it’s driving Microsoft executives batty. The situation is so at odds with Microsoft’s view of the computing universe that Steve Ballmer came up with this cockamamie explanation: “The Internet was designed for the PC. The Internet is not designed for the iPhone. That’s why they’ve got 75,000 applications — they’re all trying to make the Internet look decent on the iPhone.” Pound the table, indeed.

    The simplest reduction of the age-old Mac-vs.-Windows debate is quality-vs.-quantity. But I don’t blame Apple for bragging about the sheer number of iPhone apps available, because it’s something that can be measured. It’s a powerful marketing point because it is an undeniable fact: there are nearly 100,000 apps, and more every week. You can’t quantify the advantage Mac software has over Windows.

    But my interest remains, as ever, in the quality of the apps, not the quantity. Let’s say that when the dust starts to settle in this market, Android winds up with far fewer total apps than iPhone OS, but they’re of generally higher quality. That would make Android the Mac to the iPhone’s Windows. I would switch to that platform. (Feel free to substitute WebOS for Android in the above hypothetical.)

    The number of apps already in the store — and, even more so, the momentum with which new ones are being added — almost certainly guarantees the continuing popularity of the iPhone and iPod Touch for the next few years. But Windows is proof that popularity doesn’t guarantee market-leading quality.

    • rebradley says:

      There may too many apps. Who can go through 100,000 apps in search of what they want? Most people would quit the search after 10 minutes. What counts is how many platforms you can get Android on. That's why PC wins over Mac. You need good apps but not overkill. If you can get Android from every carrier on the latest hardware at less cost and less restrictions than the iPhone most will go with lower price and availability. iPhone loses in a competitive world.

      • psycros says:

        You make a good point here. Nearly all of my friends have iPhones now, and I have to tell them about decent apps because they can't wade through all the junk to find the treasure. And I don't own an iPhone.

      • genovelle says:

        That funny, because even though my friend tell each other about great apps and there are many. Its about what you are trying to do. A need will come up and I say I wonder if there is an app for that. I search on the iphone of even in google and guess what there usually is.

  9. CademiaX says:

    "Nokia invokes a 'NATO defense' strategy against Apple's iPhone"

    Love this article being posted right before this one. Says a lot about this prediction.

    I haven't found a phone yet that matches the 3GS for speed, usability, and just straight up sexy looks-hardware and software. The app store is by far a major selling point, jailbreaking is pretty popular-especially if you are a drug dealer ;)

    Sure, there are the corporate guys who swear by their blackberry, but then again if my company gave me an iphone I would rave it about it non-stop as the greatest ever.

    Lets not forget about next year, when the 4th gen iPhone will be coming out. AT&T had more NEW activations with the iphone this year then in previous. I am pretty sure it was this site that took pictures of store fronts being empty for the 3GS launch, yet it out sold the previous models.

    Plus all this talk about the exclusive with AT&T ending. If Verizon, Tmobile and ATT all sold the iPhone.... Damn, that is all I can say.

    The day I see an android phone, or nokia phone create a line around the block and then some, I will agree with you on this.

    OH, did you see the numbers Apple posted in the middle of a recession? RECORD BREAKING!

    You're looking over lots of details Mr Wilcox.

    My iPhone is the only apple products I own, I am far from a fan boy.

  10. quigonn32 says:

    Hmm it just amazes me how much everyone hates(perhaps out of envy) apple's success with the iPhone. They just can't stand the fact that it apple pretty much now dictates in what direction CONSUMER smart phone should be going. Well get with it!!! It is NOT the 1980's and apple is a lot smarter with the way it launches it's products, and yes Android may gain some market share but saying that by 2012 apple will lose the smart phone "war" is far fetched. If anything, there will be no clear winner due to increased competition.

  11. Viking369 says:

    Last I checked capitalism is reigning supreme, so would it be fair to state that the "winner" of the "smartphone wars" will be the one making the most money from smartphones?

    Simplistic numbers game as per Gartner figures - ASP per iPhone of $600 * 2012 predicted sales of 71,500,000 = 42.9 Billion dollars.

    42.9 Billion dollars!
    That's 1.3 times the ENTIRE revenue for Apple in 2008!
    That's raised-pinky-to-corner-of-mouth-amount-of-money!

    Joe, if I'm wrong with that definition of winning, please elaborate - I'd love to be enlightened.

    • joewilcox says:

      @Viking369 There's something not quite right about the math. Nokia ships about 100 million or more phones a quarter today. Being super conservative and putting Nokia's ASP at $100 you get a figure ridiculously larger than the company'a revenue. Also, competition will bring down ASPs, even for Apple.

      Selling prices are another factor, which I purposely left out of the post. Apple is hugely profitable selling Macs for $999 or more. But competition elsewhere means lower PC pricing and less market share for Macs. I presume Apple will continue to price high for smartphones, while competition will drive down pricing for other devices. Pricing will work as a check against iPhone growth, too.

      If your measure of success is profitability, then Apple will likely do well still with iPhone. But if the measure of success is next-generation computing platform that everyone uses, iPhone is likely to be No. 3 at best.

      • Viking369 says:

        Thank you Joe for the reply, I do really appreciate it - but have to disagree with you on some things: "the next generation computing *platform* that everyone uses" is this little thing called the web - not a phone or phone OS from any company.
        In my opinion the apps and games on mobile handsets are just the icing on the cake - iPhone OS 1.0 had an internet browser experience that to date no other phone has matched - way before an SDK - that is no accident.

        My questions for you are:
        .) What is your measure of success in this "war"?
        .) If you disagree with my above web-is-platform assertion, then might I ask what single device or OS will be the next gen computing platform everybody uses?
        .) Did you or Gartner have smartphone market predictions in 2006 for 2009, and how accurate did they turn out to be? ;-) (And how does that bode for 2012 predictions...?)

  12. jemo07 says:

    I think that there are several missed angles missed on what the iPhone is. There are several devices consumers carry around... things like PDAs (they are almost dead), mp3 players, phones, compact cameras (video & photo), game console, and a mobile phone... (we can add radio on there and even live tv in the near future).
    Well, if we can blend all these products out there, what do you get is something that the iPhone is not.. but it sure is getting there.

    Well, I see that the Apple distracters have take the approach of the chicken/egg to basically explain why iPhone/App Store are doomed.

    If you look at it, there are several reasons for the success of the iPhone. One could argue that devices like PDA’s, mp3 player, compact camera (soon video), gaming platform, and phone where blended together and thus the iPhone was born. I like to take a pragmatic look at what it is and call it pocket real-state. This is a very expensive (measure in sq/cm) piece ot the market where Apple has put focus on the digital era. Modern day technowariors (or what ever you’d like to call them) ten to own these mp3, phones, compact camera, gps, portable gamin, and netbooks. Now add to this a ebook and the list goes on and own….

    You could try to build all of this into a single platform… or you could do a brilliant thing like Apple did and built a platform (the platform is the iOSX) that you can build solutions for customer’s needs in the pocket real-state market. Furthermore, Apple has figured out that there is not a single “Best of” anything (see Moskowitz) and they have decided to build several platforms to meet many customer’s needs. Hence Apple moves several platforms, iPhone, iPodTouch, and soon to come iSlate.

    Now, how do you get the attention of developers to extend to every niche out there? Well you do another brilliant thing, create an infrastructure where you could have instant global distribution of your software. One could argue about the at time inflexible rules and limitation on what an app can be on this platform, but this again becomes the prime formula to success and these limitation promote the creativity as to what the iOSX should host. I know many a programmer that have spent years writing open source and shareware app that never made any money. And if you thought the Apple was in business to please your customers, the answer is yes, their business is too about money, how they can please their customer taking as much money from them while keeping them happily smiling. (it’s like that joke that Tarentino tells about pissing on the bartender) Well, may figured out that they had a great idea that they could develop and try to make some money, thus the AppStrore flourishes beyond any annalists prediction. Heck, I took my life savings and bought Apple at 6-20-38-76 and let me tell you, their business model has been rock solid.
    Alternatively, How many Apps are out there for the Android? How is making money from these apps? If I am a developer, where do I go and put my app on, the Andriod site? Remember competition is a good thing, look at all those malls. Now if these are global malls with millions of visitors per day… they I’d like my storefront on that street.
    I challenge most here to think about what they are into…. For me is photography and flying… if I look at the AppStore, there are bout 30 apps that I can choose from for each of my hobbies… and that choice is what makes the difference. The fact that Apple put some serious restrictions on the API and App acceptance is what allows me to have 30 plus paid apps with out any issue on the iPhone… What are you into to? Have a look at the AppStore and see if there is anything on there that tickles your pink.

    One more thing… (jejejeje) if you consider that this was all said before and there have been many predictions of the fall of the iPod… look at where we are today. Remember, there are far more consumers out there than the business employee.

    What do you get? An appealing product that could hit several markets:
    The young must have the greats product out there
    Busy people with limited real-state to carry all these gadgets (Unless you are a female with a large purse/bag or a male that is into the back/side/bag/purse thing "be your self".)

  13. mjm01010101 says:

    Gartner are the same analysts that predicted Windows Vista would be the last operating system Microsoft would make "of its kind." http://news.techworld.com/operating-systems/6718/windows-vista-the-last-of-its-kind/

    • thomat65 says:

      And I agree with some of the reasoning that was used in that article. But you're right, here's Windows 7!

    • Morsel says:

      Yeah but I don't think Gartner expected that Vista was going to be a failure back then. Their predictions can now be applied to Windows 7 ;)

  14. Neoprimal says:

    Apple has never tried to win any wars. All they do, or need to have, or have been doing...is appeal to a certain crowd, and they're doing that perfectly. I've said it before and I'll say it again, Apple successfully markets their products for more than their competitors AND sells them. That's all they need.
    Let's recap. How long did Apple sell the Iphone, subsidized for $400-$600 when every smartphone out there on a subsidy was being sold for $200-$300? How long has Apple marketed and sold underpowered PPC computers with standard (by that I mean, the same as), yet proprietary hardware for way more than their PC counterparts. Noone remembers when Apple parts HAD to come from Apple? And they were expensive, way more expensive than the same part for the PC? Video card for Apple computer, 300...video card for PC (any PC) 100. They started with this thinking, and they continue with the ideal. Even now with absolutely standard, generic parts the likes of which are the exact same innards as their PC counterparts, they market and sell them for a hefty premium. Only now have Ipod and Iphone prices come down to match the market.

    So yeah, they don't need to win any wars. They have a plan and strategy that has been working for YEARS. As long as they can keep their 'fans' fans...they'll be fine and market analyst defying time and time again.

  15. tmiller_hockey says:

    Why are we talking about a smartphone war?
    Apple already won it when everyone else was sitting around with their thumbs in their butts.
    Google and Palm were just out of touch then. The other thing this so called study isn't taking in factors of what Apple might do between now and then with the iPhone.

    It's all speculation.

  16. BionicAntboy says:

    If I had to project 3 years out, I'd say...

    iPhone they got about right
    Android will probably do better
    Palm and Microsoft may do better (depending).
    Symbian is going to go the way of the old Palm OS.
    Maemo is going to be the new Symbian, but with not nearly the numbers.
    RIM will probably not do so well.

    In detail...

    RIM's unique features just won't BE in 3 years time. Everybody else will have Exchange support, as well as the easy implementation of web based mail such as GMail etc, so unless Blackberry makes up for it in other more consumer friendly features, it's in trouble. Their recent purchase of Torch Mobile suggests this is what they're shooting for, but I don't think they've got the 'all round device' attitude to make up for the increasing number of people realizing that they can get a robust email experience out of just about any smart phone OS these days.

    The iPhone will probably stay where it's at. Android is going to steal a lot of its thunder in the consumer market, but Android is really going to make its gains off of Symbian/Maemo.

    I suspect that with a slew of new devices from a variety of developers with more advanced features, Android has the upper hand (though Google has to be worried about bifurcated development for phones with different features a la Windows Mobile).

    The two biggest unknowns are going to be Palm and Windows Mobile.

    Palm because 500K + in one quarter, on Sprint, is a pretty impressive number. They need to get beyond the shackles of exclusive deals to get the device into enough hands. This might get Palm out of the doldrums.

    They also have to open of the device further for developers, as in full access to the device to develop the most compelling apps.

    IF Microsoft can rebrand it (a la Windows 7) as a consumer friendly device on the release of WM7 next year, and unify the architecture from a developers perspective, like the leaked specs suggest...

    http://www.rgbfilter.com/?p=815

    If (and it's a LOT of 'ifs') they can bring the same kind of 'all in one' value add that Apple does, with integration with their desktop OS, the Xbox and Zune Marketplace they have a chance to do better than the analyst predictions. When it comes to developers, Windows Mobile is actually VERY easy to develop for, it's the wide range of phone specs that makes it difficult. A gaming app made for the HTC HD2 (a hint at the future of WM7?) won't exactly do well on a non-touchscreen phone.

    Symbian is going to suffer the most losses, both in volume and percentage, because they really have to unify under Maemo. Now, this is more of a North America angle, but I don't think Maemo will make up for the losses of Symbian.

  17. Iliedtoregister says:

    My God - all I ever read is the PC is superior to mac because of ALL the applications available. Not that the shoe is on the other foot? How do you tech "experts' manage each day?

    Worthless article.

  18. rauckr says:

    I suspect Apple's ultimate market position will depend on the definition of "smartphone". Sorta like what the definition of "is" is. Apple will likely remain at the high end of the market. If you measure market success by the number of units sold, low end vendors will be on top. If you look at who is making money selling smartphones, Apple will do very well indeed.

    • Aires says:

      Yeah I would question whether the iPhone is smartphone as well. It's basically a phone built on the back of an iPod that can access the internet.

  19. Enlightenment says:

    Death To Apple! Long Live Android!

    Android will win the cell phone war because it can be installed on numerous vendors hardware, which is the same things that happened with DOS and Windows. iPhone is closed proprietary hardware: no 1/8" (3.5mm) headphone jack, no micro SD flash, no micro USB, no swappable battery.

    Death To Apple! Long Live Android!

  20. Viking369 says:

    Here are an additional 2 cents on this matter - the 80s/90s PC scenario is nothing like today's world. In the 80s/mid-90s Windows was the center of the ecosystem, of which individual applications and hardware were a part of.
    Now the Internet is the nucleus of the ecosystem and OSes like Windows, iPhoneOS and hardware devices like the iPhone and Droid are simply part of that ecosystem, but not the core of it.
    At least that's what I personally think is the case, and why I personally don't see the validity of directly correlating the past progression of events and way things went down with what's happening now. The internet has reached critical mass and there's no way any single vendor is going to pull away and build an ecosystem in it's own image that can rival internet scale.

    (Thank God for that, I might add... :) )

  21. Aires says:

    I've gradually come to the conclusion that Apple really need to step up a gear with the iPhone next year. The iPhone itself was revolutionary in 2007, but so many phones are catching up to the iPhone now. It'll be really interesting to see what Apple come up with next.

    • siryak says:

      They can start with the camera. 3mp is not exactly revolutionary nowadays. Also if they can get that new dual-core chip in there so that it can handle more than 1 program at once that would help quite a bit as well. Also it would be nice to see maybe some haptic feedback.

      • Aires says:

        I'd like to see them implement Folders into the os so you can put icons away in folders like on jailbroken phones. I'd also like the icons to move into landscape mode when you move the phone and tilt it into landscape. The os is great but it needs a few tweaks as well as a better camera. It should be possible in the next iPhone to include a 5mp camera and multi-tasking is a necessity.

      • genovelle says:

        The funny part is the 3mp camera quickly became the most used on the web on flicker and for video on youtube. It must be good enough for those that own it. Keep in mind apple only has a small percentage of phones on the market and did even offer shooting video when free phones did. They made it easy to use so people use it. The phones that offer multiple programs at once have the same processing power as the Iphone, it the poor battery life that comes with doing it. My band member has a pre all the other players have Iphones. No matter where we are he has to find an out let to charge his phone. We don't. But we can do multiple things at once that he can't, like talk on the phone while searching the internet or playing music while doing anything. I can even play music while on the phone by opening Itunes and hit play. For me the timely clicks and typewriter key with the letter typed and the ability to just slide over if I miss. More important is that the predictive correction works very well if you trust it, and it learns.

      • Aires says:

        I did read somewhere (where I forget) who explained why and how it is practically possible to include a 5mp camera so I do expect to see that. The only thing with the new multi-task processors that bothers me is the heat it'll generate. But the os needs to be slicker, there's too many good jailbroken apps out there - Apple should learn from them.

    • TheBoots says:

      Patience, my friend. Patience.

  22. mrrt says:

    Joe, by your own arguments the iPhone has the strongest hand in this battle:

    Robust Hardware Ecosystem:
    - 70% of cars have iPod dock integration available as standard or an option
    - thousands of iPod dock compatible audio systems, clock radios and all sorts of peripherals
    - the iPhone OS 3.0 hardware API meaning everything from glucose meters to breathalysers plug into the iPhone and iPod Touch

    Robust Software ecosystem:
    - In-app purchasing
    - 100,000 iPhone devs
    - 100 million active credit cards on account with iTunes
    - Digital Albums (nascent)
    - all major games developers on iPhone/iPod Touch platform

    - Good Dev Tools and APIs: the Cocoa iPhone dev environment is industry leading in ease of use and power.

    - One killer Application: iPod/iTunes/App Store

    - 3rd parties make lots of money: Plenty of iPhone millionaires and heaps more making decent cash – far more than Android developers per capita

    The iPod has demonstrated that Apple’s model can obliterate the massed competition of Microsoft with Plays for Sure and then Zune, Sony, Dell, Toshiba, Creative, SanDisk etc in media players and Wallmart, Tower, Pressplay, Real/Rhapsody, Ovi, Kmart etc etc in Music stores.

    Also, I wouldn’t trust Gartner’s predictions for 2012 – they are the same company that predicted Windows Mobile 2003SE would cause major grief to Symbian back in 2005. That prediction sure came true – Not!

    2012 is not 1992 and Apple is not the same company.

    -Mart

  23. DonGato says:

    Nobody will win the competition and that's fine. There is a phone for every one. You want an iPhone, you have it... you want an Android based phone, you can have it... you want a BlackBerry, you can have it... and so on. Some will disappear or shrink their market share but there is people for every one of them. And I think that nothing made by Apple will be used by a majority, and might be a decision by them as they want to be exclusive.

  24. RationalCop says:

    Somebody else in the Tech field makes another no-risk prediction. SSDD.

  25. Sarah_1 says:

    Never say 'can't' to Apple. Never count them out and never, absolutely never, say they can't win.

    You just end up eating your words. Again.

  26. TheBoots says:

    If you measure "win" as largest market share by unit sales, then I would probably agree with you. But if you flip that around and measure success instead of the iPhone for Apple and its shareholders, then I would disagree with you. Apple has less than 10% market share in computers in unit sales, has a smallish share also, behind RIM and Nokia in cell phone sales (even smartphones), yet look at its market cap and valuation, and cash generating capacity. If Apple wants to dominate unit market share, I think it can quite easily do it at the expense of value to shareholders. Apple's business model and its focus on shareholder value should be the target and it has a consistent overall business model that is working.

    • dhjdhj says:

      You need to look at the rate of change of marketshare --- Apple continues to gain market share, which is why the stock price continues to rise....

      Every year, somebody writes "Apple has 'only' x% marketshare" --- and nobody (on this forum at least) seems to notice that 'x' is steadily increasing.

  27. whatcolorisanorange says:

    Well, yeah. Apple never, ever, EVER had a chance to dominate the smartphone market. But they're making a bit of money, and I think they're happy with that.

    I mean, look at the Nintendo GameCube. Simplistic view: ROFL NINTENDO 5HUD QU1T THE V1DEO GAME 1NDU5TRY. But I believe they turned a profit. Wasn't that the point?

    So Apple's turning a profit, and as long as they do that, they're going to keep making iPhones. It's going to piss a whole lot of people off here, but I think I'll live a bit longer if I ignore the iPhone rather than think about it more than that.

  28. mackswift says:

    When the iPhone first came out 3.5 years ago, I was befuddled as to why people were falling all over themselves for an new type of iPod with a few anemic cell phone functions tacked on. A friend of mine HAD to have and she ran out to get it. I tried warning her away from the Sect of Apple and the Cult of Jobs, but she claimed I didn't get it. It was just sooooooo cool looking and simple and you can touch it!
    Imagine her surprise and frustration when she could send or receive any kind of MMS message and she couldn't forward texts. She threw a fit when she found out that my Sony Ericcson w300i could do quite a bit that her fancy sleek sexy and cool iPhone couldn't.
    "Why can't I do picture messaging?? Why can't you send me that funny ringtone from your phone with bluetooth??"
    Simple. Because of the simple fact that people have transferred ringtones to each other to save and use on their phones and because people have transferred full songs or video clips and trailers via bluetooth, memory card, and side loading; and they've done so for years. Apple and Jobs force you to use the iTunes ecosystem with devices like the iPhone in order to force you to pay for a ringtone/song/clip/etc and also play approval police, "Sorry, we don't approve of that kind of file on our iPhone file system."

    Its taken Apple 3.5 years to get MMS messaging, which most cell phones have had since about 2000, onto the iPhone. Sure there's a 90,000 app App Store, but who wants to wade through 90,000 fart sounds, burp apps, and mediocre games for their phone? But other then that, there really hasn't been much change to the iPhone in the 3.5 years its been around. A closed up and completely controlled and policed ecosystem does not evolve, does not improve. It eventually withers, dies, and fails.

    • mrrt says:

      What - just like the iPod has withered up and died in the face of the the massed opposition of Napster, eDonkey, torrents, Microsoft, the Plays for Sure platform, Zune, Sony, Dell, Toshiba, Creative, WallMart etc etc.

      Oh wait... cue chart of the overwhelming 70-80% worldwide marketshare of the iPod and the world's biggest music store - the iTunes Store...

      ;-)

      -Mart

      ps. You can easily, without hacking, load ringtones, music, videos etc onto the iPhone without purchasing them from Apple.

      pps. SimCity, Need For Speed, Real Racing, Sims, Oracle Enterprise apps, QuickOffice etc etc show anyone who is honest that there are plenty of quality apps in the App Store.

  29. robdurst says:

    It's all about margin. Margin*share - cost = profit. Profitability wins.

    Rob Durst
    http://www.durstgroup.com

  30. Adrian79 says:

    blah blah, i will still prefer the iphone for its UI and ease of use anyday!

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