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Europe's iPhone perspective

From Europe, it’s fascinating to see the media hype around the iPhone introduction and the associated blogs mentioning the technological features.

The response here is basically “not impressed” from a feature perspective: Several carriers (even wireline) offer voice e-mails. A 2 Mpix camera is meager in a market where 3 Mpix camera’s have been out for over a year, and you won’t even be able to buy a phone without audio/mp3 player. Most existing smartphones (starting at less than half of the iPhone price) have a dedicated OS/MS Windows version that offers the user multiple browser and office-type applications as well as the capability to run navigation software such as Tom Tom.
In fact, integration of navigation software into the mobile is one the hottest items in EU phone sales, now that everyone’s familiar with phone camera’s, audio, and video. Touch screens are not unique either in this area, but even the smartphones maintain their keypads in support of the 850 million phone users (i.e. everyone except the US) that use it for creating SMS messages (on both wireless and wireline phones). Hopefully, the iPhone also has a solution for visually impaired people?

The European press is impressed, however, by Apple’s iPhone marketing campaign. The market penetration of the iPod in the US will greatly boost sales potential for the iPhone. The press sketches a bleak future for other US centric products such as Blackberry and Palm. Equipment providers, such as Nokia, were quick to state that Apple is now following the path they’ve already been taking for years while pointing at some basic flaws of the iPhone for the EU market, such as lack of a 3G capability.

To me, the key strategy behind Apple’s iPhone introduction is mainly based on a defensive replacement scenario. Just think about it: When all mobile phones play mp3 audio and have no built-in connectivity to iTunes, what will this do to the market for the iPod and associated music downloads?

With kids getting their mobile phone at the age of ten or less, the interest in iPod’s and other mp3 and/or video players will disappear over time, so Apple needed something quickly to defend their iPod franchise. Most kids do not have the budget to buy the iPhone, however, so Apple should better get an inexpensive version of the iPhone released soon. I’m sure that AT&T/Cingular will see the huge market potential and be eager to sponsor the price (as far as allowed in the US).

Apple’s initiative to enter the mobile phone market is following Sony’ decision, several years ago, to enter this market (cleverly done with partner Ericsson). Sony added its audio/video know-how to Ericsson’s phone, which are now outrank most other phones such as Nokia’s. The latter phones offer better computer capabilities, however, and as long-term mobile phone manufacturer, Nokia’s market penetration is still significantly higher. Now that the audio/video industry and the computer/software/gaming industry are all moving into the mobile phone arena (Microsoft also announced they will release a Zune mobile phone), I’m sure we’ll see some great new introductions in the coming years.

With the differences in features becoming smaller, sales of mobile phones will be entirely determined by marketing budget and strategy. In that respect, the Apple iPhones will be a fierce competitor. Marketing power and creating a hype is key, and that's exacly what happened at Macworld 2007. Technology is not involved. As Om Malik writes in his blog: “... hopefully we will all be rational soon”.

Gert Nieveld 2007/01/11


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