The Original iPhone Was A Flop
My vanity alert buzzed this week with a link to this forum thread (you may have to manually scroll to the top) quoting a bunch of people who said the iPhone would be a flop. Fanboys love nothing better than pointing out every time someone made a prediction about Apple failing, where it clearly succeeded.
The problem is that a large portion of the quotes were correct in context, including mine and Steve Ballmer’s. Mine, which came from this blog post, was:
“It’ll sell a couple million units to the many people who have wet dreams about Steve Jobs, and that will be about it.”
Matt Maroon, MattMaroon.com , 7 May 2007
and Ballmer’s was:
“Five hundred dollars? Fully subsidized, with a plan? It is the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard which makes it not a very good email machine…”
Steve Ballmer, Microsoft CEO, January 2007
Both quotes, as evidenced by the dates, were about the first iPhone, and both turned out to be correct.
When Apple first announced the iPhone they set a goal of selling 10 million units by the end of 2008, a goal they would never have made with the iPhone we were talking about. Both of our arguments centered on the pricing. If you read my blog post I specifically mention the pricing as the major issue in almost every paragraph.
Originally the unit wasn’t selling well at all. So Apple dropped the price a few weeks after it launched, pissing off the early adopters of course. Why? Because me and Steve Ballmer were correct.
Even after that price cut, it continued to underperform. Ballmer and I were more correct than even we knew. According to Apple’s own sales figures, the original iPhone sold only 6.1 million units in 5 quarters. When your sales target is 10 million units in 6 quarters, that’s about 27% below where you’re aiming, even with a price cut. I’m sorry, but that’s a flop.
Then, of course, things changed. Apple released the iPhone 3G, which was most definitely not a flop. The combination of a lower price, 3G speeds (which had become standard for smart phones nearly a year before the first iPhone launched) and, perhaps most importantly, the App Store did for the iPhone what the Nano did for the iPod. It’s now undeniably a success, in some ways even a game changer.
And that’s not really surprising to me, or probably to Ballmer (though he’s contractually obligated to never admit it) or most of the others quoted back then. It’s what they did with the iPod. The first of those were expensive and of extremely limited appeal too. Apple does product development just like everyone else, often better than everyone else (though they too have their Apple TVs) and they refined the iPod greatly over successive generations until they had a winner. They got there a bit faster with the iPhone, but they also had a lot more experience and a much larger ad budget to work with too.
But I think we’ve found a great test for fanboyism. If you relish in applying predictions about a $500-$600 device with no 3G and no app store to a device that costs $100-$300 and does have both 3G and an app store, you’re a fanboy. Or just someone with little capacity for logic. Either way, enjoy those dreams about Steve.
December 14, 2009 at 6:22 pm
You’re so wrong it hurts.
The one of the biggest reasons of iPhone’s success was the unsubsidized selling of original iPhone. That and easy process of unlocking meant that absolutely EVERYBODY around the world who wanted that phone, was also able to buy it and to use it. That’s how the hype got everywhere – everyone around the globe who was somebody also bought one. Except you
. This also meant that when AppStore was up, EVERYBODY around the globe was able to buy a development phone – 3G was sold only by AT&T, but there where LOT of 2G phones available on the market. Those things mostly cemented iPhone popularity.
Now let’s go to your beloved Palm Pre and let’s analyze this massive failure. A phone, sold only by one carrier with obsolete US-only standard (6 months later GSM in Germany and UK) – a phone that NOBODY around the globe can buy and can use while the hype is at the highest. Nobody still cannot buy Pre for development – yes I checked, couldn’t fin’d any unlocked GSM Pre…
Not different with Android. Tell me which model I should buy – I need unlocked GSM phone, using 2.0 today and guaranteed upgradeability for at least 2 years. The G1 was epic fail as I know.
December 14, 2009 at 6:31 pm
I think you’re a bit confused here. Either that or a fanboy rationalizing. Anyone doing serious app development can buy a phone on any carrier. The price of the an iPhone (or an Android unit, or a Pre, or whatever else) with contract for 2 years is less than you pay one good developer for 2 weeks. It’s insignificant.
And the vast majority of the app store comes from English language developers right here in the US or other locations that got the iPhone early. There’s no evidence whatsoever that the ability to hack the iPhone (which was not easy back then, given the number of programmers I know who had an unmodded one) had any effect on the 3G’s success, which itself was not overnight.
Both Android and Palm will be on every carrier and standard with multiple handsets shortly, though that has nothing at all to do with my post. Neither does the fact that Palm is beating its own sales forecasts rather than underperforming them by 30%.
December 14, 2009 at 7:30 pm
The original iPhone sold over a quarter million units in its first week (about the same as the Droid, which no one is calling a “flop”) and over a million in its first quarter. It was frequently sold out for all of summer 2007, so it’s not like they needed to lower prices to move inventory. They were selling them as fast as they could ramp up manufacturing at the time. Lowering prices would have done nothing except reduce Apple’s profit. This post is a good reminder of what demand for the iPhone was like at the time of the price cut in September 2007: http://www.blackfriarsinc.com/blog/2007/09/one-million-iphones-sold
Sure, it reached even larger markets as the price fell. But you really didn’t predict that the cost of a computer product would drop (and capabilities increase) following its launch? Given the history of iPod pricing after each new model launch, it was predictable that Apple would target price-insensitive luxury consumers first and then move steadily downmarket. I see this as a well-executed profit-maximizing plan, not a flop by any stretch.
December 14, 2009 at 7:34 pm
You’re right, that link does illustrate my point clearly, with its opening quote of “Both commentators and bloggers continuing to claim that the iPhone million unit mark represents weak demand.” Even after the price cut it was, as I pointed out, nowhere near on track to meet Apple’s expectations.
I don’t disagree that price dropping was predictable and solid strategy. But that alone would not have made the unit what it is today. Not even close. It was the trifecta of price drops again, 3G, and app store, none of which invalidate predictions that the original unit would flop.