iPhone: Beginning of a Mobile Age, and Apple’s Future

By Kyle Baxter

I am not sure even Apple knew what they had when they announced iPhone in 2007, but consumers and developers certainly did. Many people’s first responses were, Wow, this is great — it runs OS X, so we can run the excellent applications Apple built and develop our own.

My first reaction was similar. I marveled at Safari, Photos, and the iPod interface, but I was most excited about what other developers could do with iPhone’s multi-touch interface, screen and networking. Whether Apple knew it or not, what they announced was not just a phone, internet communications device and iPod, but an entirely new mobile platform — the future of computer devices.

Although initially skeptical of opening the iPhone to third-party developers, Apple has opened to a surprising degree. The iPhone SDK, released in March 2008, gives developers the same tools used to develop applications for Mac OS X, and great framework support within the iPhone. The SDK’s release made it clear that Apple intends to not only create a platform out of the iPhone, but create the best mobile developing environment available, and dominate this new market.

In late May 2007, at D5, Jobs briefly discussed what he called the “post-PC” — a device that is more specialized in functionality. When asked what device people will be carrying with them in the next five years, Gates said he believes in the tablet-type of device.

Tablet PCs have been available for a few years now, and by no means have they taken off. They have not been widely adopted because currently, Tablet PCs are little more than notebook PCs with touch-sensitive screens. The operating system is just Windows, which was designed for a much different user interface — the mouse and keyboard. Their user experience is abysmal, and the real power behind a mobile, touch UI-based computer was never tapped.

Microsoft tried another class of mobile device, called the Ultra Mobile PC, which suffered the same problem. These devices are small, handheld units, but run Windows with minimal alteration.

Both types of devices failed because they did not have a specially-designed UI for their function.

Microsoft’s Windows Mobile has seen much more success, because it was designed, if poorly, for its purpose: to run on mobile devices. RIM’s Blackberry has seen success for the same reason. The Blackberry is designed to provide mobile access to corporate email, and it has therefore done quite well.

Regardless, however, these two platforms will not be the dominant mobile device platform in the future. Both Windows Mobile and the Blackberry, while arguably the first to bring ubiquitous web access and communication to market and a system to develop on, were targeted primarily at the enterprise. They focused on email access and corporate applications, and have been very successful in doing so — but the consumer market will define what the future mobile platform is.

Center Leg

RIM blocked their potential growth by defining themselves as an enterprise provider, and Microsoft’s refusal to define Windows Mobile’s core focus has done the same. No one really knows whether Windows Mobile is a mobile computer platform, or a convergence device that complements, rather than replaces, the PC. The effect is that neither RIM or Microsoft have captured the public’s attention in defining what a post-PC device is. For the average consumer, a Blackberry or a Windows Mobile-powered phone are just that — phones. Many consumers buy them and merely use them as a phone with a QWERTY keyboard.

Apple, however, has clearly defined what they believe the post-PC will be. It combines your media and communications into one device, to complement your PC. It will never replace the PC’s ability to write long documents, edit video, or the host of other things that require a large screen and processor.

Some argue that the iPhone is unimportant because it has no new real functionality — other phones have been playing music, sending email, and browsing the web for years, they say. This is all true, but this argument misses the fundamental point of the iPhone: because its intention is so clearly defined, and it is so easy to use, the iPhone is the first device that makes people want to use email, the Internet and their media all on one device.

Jobs made this clear in his WWDC Keynote on Monday, when he showed numbers for how people use the phone. 98% of iPhone users browse the web, 94% use email, and 80% use ten or more features. That is what is different about the iPhone — it makes people want to use this functionality on their phone.

And that is why the iPhone will be the dominant mobile platform. There are, of course, other reasons; the developing environment is great, so developers actually like building apps for the iPhone, for example. But the iPhone’s ability to push people to use it as a true mobile device rather than just a phone is the central reason: people want to use it, so developers will develop for it. It is that simple.

Jobs’s WWDC Keynote, more than anything else, makes it clear that the iPhone is not Apple’s side business, but will soon become its central one. Jobs began his speech with a picture of a three-legged stool, each leg representing a piece of Apple’s business. Music, both iTunes and the iPod, were the right-most leg, and the Mac was its left-most. The center leg was reserved for the iPhone.

While explaining how MobileMe works, Phil Schiller off-handedly said something interesting. He said that MobileMe pushed email, calendar and contacts to all of your devices — your Mac, your PC, and most importantly, your iPhone.

Jobs’s stool, and Schiller’s comment, all indicate just how important the iPhone is to Apple. Indeed, the WWDC Keynote had nothing to do with the Mac at all — it was dedicated to the iPhone.

Price

On Monday, for my personal blog TightWind, I wrote:

the aggressive pricing and dropping of the revenue-sharing agreement signals that Apple is moving full-out to gain cell phone market share.

Which is an abrupt change in Apple’s business model. With Macs, Apple’s goal is not to take a significant chunk of market share from their competitors, but rather to sell high-end Macs with a strong profit margin.

Up until today, the iPhone followed a similar strategy. Apple would sell iPhone at a high-end price, and only wanted to take 1% market share by the end of 2008.

A $199 iPhone, while still too expensive for most phone users, puts it within reach of much more consumers. Perhaps most interestingly, though, and most tellingly, the iPhone now sells for $100 less than the iPod Touch, which reverses their order. Apple is aiming for dominance.

According to traditional logic, the iPod Touch was the iPhone’s smaller brother — a stepping-stone to the full mobile experience, much like the iPod was a stepping-stone to the full Mac experience. At WWDC, though, Apple made the iPhone’s initial price cheaper than the iPod Touch. If Apple only intended to build a nice, niche mobile environment out of the iPhone like the Mac is, they would never have cut prices so strongly. You reduce prices when you want to sell a shit load of product, and you only do that when you want to dominate the market.

And that is Apple’s goal: make iPhone the mobile platform to develop on.

Encompassing

To do that, Apple needs to dominate the consumer market and be successful in the enterprise market. For the latter, Apple is doing something they have never really done before. With their 2.0 iPhone update, Apple took a list of everything enterprises want — and built it all in to the iPhone. Full Exchange support, VPN, remote wipe — no compromises, they just flat-out built it in.

If Apple controlled the consumer market but ceded the enterprise to RIM and Windows Mobile, they would eventually lose the consumer market, because the two are linked. While developing only for enterprise is not a strategy for building a complete platform, as RIM and Microsoft found out, enterprise users are also consumers, and would like to use their mobile devices both as work and personal phones. Giving the enterprise market to RIM and Microsoft would allow them to hang on, some safe ground to launch attacks into Apple’s homeland, so to speak — the consumer market.

That is why Apple has embraced the enterprise so strongly with the iPhone.

But Apple is also trying to do something no one else has really done before. They are bringing Exchange — enterprise — features to the consumer, and are connecting the PC and post-PC device. MobileMe, or Exchange for the rest of us, synchs email, calendar, and contacts between your iPhone and PC, whether it is a Mac or PC. Undoubtedly it will do more in the future, but its overarching intention is to keep your iPhone and your PC connected at all times.

Future

At Macworld in 2007, Apple changed their name from Apple Computer Inc., to simply Apple Inc. The reason is now clear — Apple is no longer singularly about the Mac, but also the mobile device which complements the Mac. Currently we call it the iPhone, but it is rather clear that Apple is working on new devices based on a similar OS.

This is the future of Apple. They failed to dominate the PC market with the Macintosh, despite its revolutionary design. Apple has no intentions of making that same error with the iPhone.