Why Apple won't sell 10 million iPhones in 2008

One per cent is aiming too high


Comment Steve Jobs sounds modest with his 2008 sales prediction: "10 million iPhones is one per cent of the mobile phone market". This is indeed true, but it's not a useful benchmark.

The vast majority of those phones are super cheap. The smartphone category, which is closest to iPhone territory, is very different. Symbian has sold 100 million smartphones in the last 10 years. BlackBerry hasn't reached the 10 million figure yet. It's a bit like saying the world car market is 18 million cars so McLaren can sell 180,000 because that's only one per cent. In practice, it sold 28 cars last year.

It would be surprising if iPhone accounted for one per cent of sales just within the one network which has been announced – AT&T. The network has 56.3 million subscribers but not all of them will get a new phone each year. Even so, half a million smartphones is a huge success.

Where Apple has gone wrong is in setting expectations. The phone will be late. All first smartphones are. The Nokia 7650 was late, the Ericsson P800 was nearly a year late. The amount of testing necessary for a new phone is incredible. And a new entrant has a worse time of it. The established players know the unwritten rules for getting phones accepted by each of the networks. They know which criteria are absolute and which can drift a little. It's a bit like getting your odd-ball car MOT'd by the garage which does all the work on it. They'll let some things through on the nod that a garage which had never seen a Marcos or Ultima before would fail the car on.

Apple has had the iPhone accepted by AT&T, which may waive the rules for its new best friend, and reportedly Rogers in Canada, but there are over 200 significant networks in the world and the networks buy 80 per cent of the world's handsets. They will want everything squeaky clean and tested. Apple must get into the networks. And that means a long testing courtship. Implementing the special features, such as visual mail, is going to be uphill.

Motorola announced a very similar system with the P1088, codenamed MAP, nearly a decade ago and failed to get the networks to support it. Apple has even less chance, or at least less chance of doing it in any sensible timescale. The networks don't like fiddling with their services. Just an hour of outage, even if it was just an hour of the SMS service dying with the messages stored and forwarded, would cost so much in lost customers it's not worth the risk. Each customer costs about $200 to acquire and a drop in service is the best way to lose them. Getting iPhone into a significant number of networks is going to be a problem. Even if there is central purchasing - as there is for Telefonica or Vodafone - the iPhone will still have to be sold by Apple to each of the individual countries within the empire and have to undergo local testing.

Remember, the mobile industry is one where some of the biggest companies in the world have tried and failed: Siemens, Philips, Fujitsu. None of them have creditable market shares. Even IBM put a toe in the water in the late nineties and then stayed away.

While iPhone sales volumes disappoint everyone, the device will not. It's the future direction of mobile gizmos. Most BlackBerry owners have a separate voice phone. The iPhone is a video iPod with a better screen that just happens to make phone calls. Over the next few years we'll see more mobile music devices, mobile organisers, mobile web browsers, and maybe mobile navigation devices, all of which happen to have a SIM card, and which can make calls - but making calls is a secondary use. Devices like this have been tried, but they've all been ahead of their time – not in technology terms, but in man-in-the-street acceptance.

The trick Apple has missed is downloadable music. This is usually seen by the geek community as being driven by the omission of 3G, but downloadable music could be done a different way: if you had a custom format, smaller sizes, with better compression. You'd need some other things, like a fast processor in the music player, but Apple has that. And you'd need to hold the custom format in an online database. For pretty much every other company in the world this would be a show-stopping problem. Only Apple can do this.

The iPhone, however, is good for the mobile phone world. It gives all the incumbents a shock in the user interface. Of course, we've yet to see quite how good it will be, but this is Apple and it's unlikely to be anything other than wonderful. It will also drive that man-in-the-street effect. People will start to want a connected music player. By the time the sat-nav in your car has a SIM, you have a mail device, music device, maybe even a digital camera, and of course a phone with a SIM, a mere billion phones a year starts to look small. This won't be 2008, maybe 2014, but even then one per cent looks to be aiming too high. ®

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