Black and White Program

The iPhone and the Killer App

July 18th, 2008 by John Eastman

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In three days, one million units have been sold, and 10 million downloads of the software have been performed from a host of 500 applications. All of this activity occurred for a product that did not even exist 14 months ago. What will this lead to?

Apple announced that in the first three days of the sales of its new 3G iPhone, they have sold 1 million units. The original iPhone took 74 days to hit the 1 million sale mark in the U.S. in September of 2007, and the iPod took nearly two years to hit that mark. Apple also announced that 10 million downloads have been made from its iPhone Application Store, from which the company has available over 500 applications. Approximately 40% of the applications are free, and 90% of the remaining products are priced under $10.00. Essentially, the App Store is an effective delivery method of applications for the iPhone. It is simple to navigate and utilize, and each publisher provides an overview of application function.

Yes, there has been a bit of confusion over the AT&T calling and upgrade plans, glitches have occurred in phone activation, and certain features are notably missing– multimedia messaging, the ability to attach an image to a message, being one of them. Browser cut and paste, and voice dialing (something available on much older devices) are absent. Being locked into a few select 3G network suppliers (such as AT&T in the U.S.) is not everyone’s favorite idea and does limit choice. It is not clear why Apple has chosen to leave certain features out, but with its other capabilities, enticing design, and the recent inclusion of the App Store, Apple is well on their way towards achieving their goal of making the iPhone indispensable to its customers.

Stepping back from the impressive opening numbers, one may wonder the following: Who is buying the new 3G iPhone? What type of applications make up the majority of downloads? Are users sub-planting other phone and device manufacturers (i.e. Blackberry, Treo, and Motorola) with their purchase? How is the actual success of the iPhone measured— is it by Apple’s profitability with its nearly 50% gross margin; or by its market share of phones worldwide– Apple’s objective is a 1% market share of a 1 billion unit market by 2010; or by the number of purchased units and customers who rave about their cool new device?

A recent survey by Piper Jaffray in New York City and Minneapolis indicates that iPhone buyers are predominately Mac users (61%) and users opting out of Motorola and Samsung phones. A higher percentage of buyers for the new iPhone are Windows users (39%) when compared to the original launch (25%). Also of notable mention, is that 85% of buyers said that the new features were the compelling reason for their purchase, while only 9% rated the reduced price as the reason.

Apple opened the door to software developers for the iPhone this time around, something quite new for Apple. This has initially provided a landscape of ideas, in the form of over 500 software applications. This landscape will enlarge in time to provide more and more applications that make use of the iPhone’s features and capabilities. A look back into history will tell us that Apple has a steady record of a closed architecture. Apple’s “build and control everything within” methods stem back to the days of Xerox’s PARC (Palo Alto Research Center) mentality. They design and build everything in-house so that they can better control it, equaling higher quality control. When Steven Jobs visited PARC on a mission to view their Graphical User Interface (GUI), he drew from their design, build, and quality control methods to create Apple’s philosophy—which has been met with much industry criticism.

In the personal computer wars of the 80’s, Apple lost significant market share to Microsoft and PC clone makers, not due to technology or design reasons, but for its closed box ideology. Apple did not open its systems to software developers enough to be effective, and it locked down its operating system, while thousands of developers flocked to the IBM and PC clone manufacturers, developing applications based on Microsoft’s DOS operating system. The practice continued in the 90’s with Windows development. Apple’s opening of the iPhone architecture is indeed a new direction that may yield long-standing benefits and growth.

Taking a closer look at the approximate 500 applications offered at present in their respective categories, what is offered is much about play. Included are 64 entertainment applications, 30 gaming, 83 general utilities, 70 sports, and 50 productivity. Business and news are the most under-represented categories with only 14 and 12, respectively. Music boasts 25 titles, and finance, 31. Notable among these applications are portals with:, Sales Force Mobile, the New York Times, AP Mobile News Network, Facebook, Myspace, AOL Radio, Virgin Music, Weather Bug, and the GPS tools.

So how does Apple sustain the growth of iPhone sales and use, climb its way to a larger market share, and continue its growth pattern? Looking back into personal computer history, we may see the answer.

The Killer App
All software developers want to develop the killer app. A killer app is defined as an application so useful and meaningful that it becomes the reason for the purchase of the hardware platform it resides on. The first killer application may well have been Lotus 1-2-3, the prominent financial spreadsheet application. It made the PC useful, powerful, and became the compelling reason for the corporate world and small business to invest in PC systems, networks, and the like. At the time, it fueled the industry unlike any other product of its kind.

While Apple’s iPhone design and functionality certainly provides its own great platform, and enough compelling reasons to purchase it now, there is no killer app at the moment in the inventory of applications, or one in the current phone itself. Granted, it is a phone, not a conventional computer– if there is still a conventionality in today’s design and products, and the device provides great multi-functional tasks as mentioned beforehand, but in order to sub-plant rivals like Blackberry, Treo, Nokia, and Motorola, Apple may need a killer app for its multi-functional device.

I wonder what Google is working on?

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