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Will the iPhone be Bigger than the PC?

Posted by: Peter Burrows on March 06

At the end of Apple’s event to unveil its iPhone software roadmap this morning, Steve Jobs served up another “one more thing” surprise. Venture capitalist kingpin John Doerr came on stage to announce a $100 million fund, aimed at start-ups developing software for the iPhone. After a heartfelt tribute to Jobs—he invited the 200 or so attendees to join him in “saluting the world’s greatest entrepreneur.”—he made an audacious forecast. Noting the iPhone’s size, flexibility and ability to deliver personalized, location-based services, he said that the device would one day be “bigger than the personal computer.”

Steve Jobs didn’t express that sentiment; as father of the modern PC business, he’s probably pretty partial to that device, as well. But details of the software plan—and the big smiles on Apple executives’ faces as they presented them—suggest that Apple is indeed aiming high with the iPhone.

Much of the event was taken up with details of how Apple would fix the issues that have prevented CIOs from adopting the device since it was introduced last June—such as adding compatibility with Exchange and Cisco’s VPN technology.

But what can really set the iPhone apart is Apple's effort to build a vibrant new software ecosystem around the device. I'm no developer, but iPhone software chief Scott Forstall--with an assist from four developers who were able to create neat new apps in two weeks or less--made a strong case that it will be a snap to develop compelling applications that take advantage of the iPhone's unique features. For example, Sega's Ethan Einhorn showed how by exploiting the accelerometer in the iPhone, the game-maker could make games such as Super Monkey Ball that are controlled in part by tilting and moving the iPhone around in space, like a portable Wii. (Einhorn won the award for most unlikely quote of the day: "It just feels like the way Super Monkey Ball was always meant to be played.” Truly, a great moment in tech history.)

Maybe Jobs had just turned up his reality distortion field during this part of the talk, but the most compelling part of the talk was about Apple’s distribution strategy. Sure, Apple is maintaining control of this ecosystem by insisting that all iPhone software be sold only through the company's new App Store. And yes, Apple gets a 30% cut on sales. But if you're a start-up, you suddenly don't have to worry about creating an e-commerce site, funding a marketing campaign, ensuring security, paying for bandwidth or cutting distribution deals, notes Creative Strategies analyst Tim Bajarin. If your app passes muster with Apple and makes it onto the App Store, it's immediately available to each and every one of the four-million-plus iPhone users in the world. As Jobs put it, "this is the best deal going."

No doubt, not everyone will agree with that. Here’s what my colleague Steve Wildstrom thinks:

Apple made history with the iTunes Music Store. With the iTunes Applications Store it is fighting history and, I think, making a big mistake. Apple is trying to establish a walled garden for applications at a time when the whole push of the industry is toward open platforms; in effect, they are just trying to displace the carriers as the keeper of the garden.

Other than the iPhone, all of the smartphone platforms—Symbian (a small player in the U.S. but the world market leader), Windows Mobile, Palm, and BlackBerry—have open application development. Android is going to push that openness down into the “feature phone” market. Verizon has promised sort of open application development, though we won’t find out exactly what that means until March 19.

I’m not sure how Apple can march against this tide. Jobs is right; the iPhone is a little computer. But he won’t let owners treat it like a little computer and he won’t accept a computer development model. Wrong, wrong, wrong.


Personally, I think both of these Steve's are right, depending on the developer. If you’re a software start-up seeking instant fame and fortune, the App Store is a great way to go (or if you want to distribute your code for free—in which case Apple won’t charge you anything). Here's Mac developer Dan Messing's take, here.
But what about established software companies, that have already invested in their own distribution networks, their own brands, and their own economic model? I'm sure many big software companies will create iPhone apps, but with some trepidation: Surely, they've read all the articles about the music labels--who were thrilled at first with the deals they struck to sell music over iTunes back in 2003, but who have spent recent years grousing about how Apple is racking up iPod profits by selling their content for just $.99.

There are many other factors standing between Apple and mobile computing domination, seems to me. Not mentioned in the presentation was how Apple will reach the many thousands of companies around the world. From what I gather, it plans to use its education salesforce, which knows how to sell in bulk to school systems and universities, in this effort. Still, barring some partnership to let partners such as AT&T or Microsoft sell the iPhone on its behalf, will that be enough?

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Reader Comments

Davewrite

March 6, 2008 10:33 PM

Steve Wildstrom praises Symbian, Windows Mobile, Palm, and BlackBerry's but the iPhone is already overtaking them in market share except Blackberry. Apple's reasoning for their application distribution system seems to be controlling malicious software, according to them the ipod just works because it is a closed system and they are worried about the iPhone now that third party native apps can run on it. Steve nixed the Mac Clone models (remember before Steve's return there were Mac Clones) because Apple was spending so much time fixing compatibility issues with the cloners and today the 'open' method has crippled windows: slower new OS updates (MacOsX had several updates for one lackluster Vista), instability and horrendous virus/malware problems. The other thing is that "new platform" is not just the iPhone, it is the new iPods (the 'touches') and I am sure a whole slew of mobile devices (iTablets?), by itself the iPhone might not be bigger than PC but if other things come out of the iPhones potential who knows?

Dave

March 7, 2008 02:24 AM

the difference is Apple is letting the software developers set their own price be it 99 cents or 9.99 or whatever.

And as for walled gardens, all this much implied "openness" means nothing if people can't find your app. Apple has solved that problem beautifully and I fail to see how their tools (most of which are based on opens source foundations anyways) or the app store will impede "openness" . i find this critique absurd, unless of course you wish to distribute porn. Then, you might not find it as open as you might like.


Phil Evans

March 7, 2008 02:32 AM

4 million+ iPhones but how many iPod Touches? You seem to be forgetting the market will be much bigger than 10 million+ devices by the end of 2008 - particularly for games.

The argument for open-ness doesn't necessarily apply either - just look at what Apple has achieved with a closed hardware platform on the Mac. The 'sandboxed' nature of the applications will create some restrictions (e.g. files don't look like they can be shared between two applications). However, in key areas, data can be shared -e.g. the photo library, email, address book etc. And Apple is being open in supporting IMAP, POP, Exchange ActiveSync, h.264 and other standards. Why not shop for your iPhone/iPod apps in one place? It's not like hardware, books or music where I might get a cheaper deal from one store than another. And its not like I'm going to be spending $100's on iPhone apps as a consumer anyway - the 'serious' software like Photoshop and Office will always stay on the desktop. I think they will encourage huge innovation and attract many new developers to the Mac and Touch platforms.


Danthemason

March 7, 2008 06:15 AM

Apple owns the future. Even the most hard headed Apple bashers will come around when the rest of the civilized world is being more productive with Apple products clipped to their belts.

Sherlock Asimov

March 7, 2008 08:45 AM

@ Steve Wildstrom

Although I might be nobody to you for now, here is my thought :

while your statement about all the other mobile platform is true to some level, but I think I'm speaking for Apple fans or Mac users here when I say "we don't want crappy and ill-designed applications polluting our beloved platform". Symbian (a small player in the U.S. but the world market leader), Windows Mobile, Palm, and BlackBerry, oh, good lord, Windows Mobile is just the perfect example of the fact that when it comes to design, Microsoft doesn't even have a clue or they just don't care, they took customers for granted, thinking they are the big guys here who don't have to hear the feedbacks.

Lewd Obbs

March 7, 2008 09:04 AM

Stop being illiterate and understand what you transcribe from a speech. John Doerr is talking about the mobile phone. Not the iPhone and to him, Apple's approach is setting off a wave bigger than what PCs brought 25 years ago. Here's why; mobile phones reach one in every 2 humans today and will reach 3 in every four soon enough (certainly within the life of a 10 year venture fund). PCs have had huge impact, but their penetration will never get to that level. iPhone represents the best of the thinking that will accelerate the usefulness of mobile phones in ways no one could imagine 5 years ago. Enough said. I'm going to stop reading Businessweek pieces on the iPhone or complain to your editor. You are sullying the brand. Yesterday's article was also extremely feeble so I'm sensing a trend here.

Dave

March 7, 2008 12:50 PM

Another thing i see which is apparent, Wildstrom whining on the " computer development model. Wrong, wrong, wrong." Misses the point entirely. Apple is gearing this towards the ease of use and connivence of CONSUMERS, who dont give a flying you know what about Steve Wildstrom thinks, computer development models. Blah. They, we , want software that works and can download at their finger tips.

Apple soon will have this in place, and Wildstrom's tantrums are meaningless to the people who matter to Steve Jobs, consumers. But then again, he only has built Apple, NeXt, Pixar, rebuilt Apple, revolutionized the music industry and retail as well. Maybe I shouldnt listen to Jobs, but rather Steve "Whats his Face" after all.


Oh Blah Dee Blah Dah

March 7, 2008 01:58 PM

RE: "Surely, they've read all the articles about the music labels--who were thrilled at first with the deals they struck to sell music over iTunes back in 2003, but who have spent recent years grousing about how Apple is racking up iPod profits by selling their content for just $.99."

If developers feel that they deserve more money, they should just RAISE the price of their product. Surely, it's the unique CONTENT (i.e. game, application, etc.) that the developers are selling.

Apple will have to have an iPhone rating system on its web site, just like Amazon: The most recently purchased, The most sold today, last week, last month, most ever sold etc., and ALL on one web site, that BILLIONS of worldwide cell phone users will be able to view.

Davis

March 7, 2008 04:39 PM

Critics of the App Store should apply the same argument to every other platform, and actually think about how humans want to use a personal device. Which company does not want to be the one stop shop for everything? Don't Amazon, eBay, Yahoo, etc. already try to sell everything from one portal? Maybe Paypal should be shutdown so developers have the 'freedom' to host their own online payment systems. Why do people bother to download everything from SourceForge or C|NET? It's human nature and user friendliness. I personally don't care to remember every single commercial website necessary to get the stuff I want. Just give me an online catalog, and that is what the App Store does, and more - no one but Apple is daring enough to try to guarantee the quality and security of what goes into a very beloved, personal device for you ane me. I'm sure App Store-breaks are bound to come, but that's OK. That only goes to show how Apple stimulates creativity like no other consumer company. Apple should be admired, and soon imitated, by every other mobile business.

creole

March 8, 2008 02:42 AM

Nuff of this stupidity, guys. Apple manufactured 4 million iPhones over a period of 8 months, sold 3.2 million of them. Symbian operating system smart phones sell at a rate of approx. 5 million every week (makers are Nokia, Sony Ericcson Motorola, LG and Samsung). The number don't even compare.

iPhone is not capable of high speed download over 3G networks. Did you realize that Symbian phones have a download speed of 7,2 Mbps over HSDPA, while Iphone is rate at 256K over EDGE ? Iphone is pitiful and if there wasn't the undereducated US customer, wouldn't even make the news...

Old Guy

March 8, 2008 09:12 AM

Well let's see, I am a software developer and I can reach 100% of my target market by selling through one source and set my own price? Give up 30% for selling expense is cheap, and I get a check every month. But hey, I want my own distribution chain so lets build one and keep 40% of the sale price after spending a lot of time, sweat, and tears managing that wonderful independent channel. Hmm, which is the no brainer? Keep the money, or I did it my way.

Caleb

March 8, 2008 02:40 PM

Oh please, the iPhone can't even handle Adobe Flash support. Don't be so naive.

Steven

March 11, 2008 12:47 AM

It's amazing to me how the pundits (e.g. Steve Wildstrom) continue to hold up platforms such as Windows Mobile and Palm as examples of success in this industry. If all of these platforms are so great, why has the iPhone become so successful in such a short period of time? It has nothing to do with open application development or Flash support or 3G vs. EDGE - all great geek arguments but irrelevant in the world of consumers. It's the UI, stupid.

And who are any of us to decide that the U.S. consumer is undereducated? The consumer knows what they want and they buy it. They are not going to waste money on the little piss-ant applications which are a result of this great "open application development," or waste time reading a thick manual just so they can find out which ten keystrokes and five menus they have navigate in order to accomplish the most simple of tasks. At least not if they have an alternative. Apple has presented an alternative.

So don’t be a hater. If you would rather purchase your Windows Mobile phone with 100 features (80 of which you will never use because you cannot find them) and spend all of your time tinkering with it, or searching for 3G coverage, or charging your battery because the 3G chips are power hogs, or playing with all your great overpriced open apps on your tiny little screens, go right ahead. But don’t begrudge the rest of us an alternative.

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A blog on the daily doings of Apple and the many companies in its orbit, with insight and analysis by two longtime Apple-watchers BusinessWeek Senior Writer Peter Burrows and BusinessWeek.com Senior Technology Writer Arik Hesseldahl.

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