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Why the iPhone matters: 8 questions for Horace Dediu

John Cox | July 9, 2012
Horace Dediu writes data-driven analyses on a wide range of mobile industry topics.

Horace Dediu writes data-driven analyses on a wide range of mobile industry topics. He is the founder and author of Asymco, a blog for "curated market intelligence," and previously worked for eight years at Nokia, as an industry analyst and business development manager.

His background also includes software development, IT management, and computer science research. He has an MBA from Harvard Business School and an M.S. in engineering from Tufts University. He lives in Helsinki, Finland, with his family and a view of the Baltic Sea.

We asked him eight questions about the five-year impact of Apple's iPhone, and he replied from his iPad.

Five years ago, people actually began to get their hands on the Apple iPhone. There were other smartphones; no prior phone products from Apple; there was no App Store, no apps "ecosystem." So what accounted for its initial success with consumers?

The iPhone was launched with Internet communications and media consumption as the primary key selling points (also as a phone). At the time there were no phones which had browsing and media consumption that average consumers could actually use. The iPhone was competing with non-consumption in its key selling points. Apps came a year later.

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The fifth version, iPhone 4S, was introduced in October 2011, and widely criticized by the tech press for a variety of failings. Yet it became by far the best-selling iPhone to date. Why?

The iPhone 4S was successful because it was a very much improved product over the iPhone 3GS, which was what most users who upgraded their iPhones were using. The average time in use of a smartphone is about 24 months.

Also, for consumers who did not have an iPhone it offered a very good set of unique features like Siri and Retina Display and high-resolution camera. There were many consumers who could buy it because the phone was more widely available than ever before. This formula will be applied again for the next iPhone and it will be equally successful.

The tech press has been a good counter-indicator for market success.

Despite the iPhone's success, you said in a recent interview with MacUser that "Apple will need to sell at least 1 billion iPhones in the next few years. Seen another way, Apple has a market share of about 9% on a quarterly basis. This needs a lot of improvement." How can, or should, Apple improve that share?

Apple will reach 1 billion users by increasing distribution and improving the product in meaningful ways. It will also maintain older products in production and thus offer lower price points. What I don't know is how soon they will reach all the available markets. The product does depend on high-quality 3G network availability and agreements from operators to be used on their networks. Also their media consumption model depends on the availability of media downloads -- something which is very slow to grow internationally.


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