Posts Tagged ‘iphone’

iProfit

I find the pricing of the new iPod Touch interesting in light of the current iPhone pricing models.

A new 8GB iPod Touch, with all the functions of an iPhone except the phone, costs $229. A new 8GB iPhone, meanwhile, costs $199 before the data plan is factored in.

AT&T subsidizes iPhone prices to Apple in exchange for driving sales, at rates commonly assumed to be $325 per phone sold. This means Apple sees revenue of $524 per iPhone sold but only $229 for an iPod Touch.

Does this mean the phone and 3G capabilities of the iPhone cost Apple several hundred dollars per unit in production and R&D? Are the core components inexpensive enough that the iPod Touch provides the same profit margin? Or is the iPhone simply an outrageous cash cow?

Business

UX Critic: the iPhone 3G Purchase Experience and Firstness

My wife bought an iPhone 3G on Friday morning. To do so, she had to have a friend sweet-talk her way into cutting a long line at our local AT&T store. My wife then took home a partially activated phone and, like everyone else, waited hours to get it to work.

Much has been written about the botched iPhone activation process surrounding the 3G/2.0 launch this weekend. But the entire experience of buying an iPhone is bordering on broken.

Apple generates extreme amounts of hype for its products, and the gotta-have-it nature of its launches creates untenable demand curves. This leads to a scarcity effect that, for Apple, has been hugely beneficial in its promotional efforts, and in its bottom line.

How should the user experience of first-day demand be viewed?

To hard-core fans, buying an iPhone is a singular thrill, complete with risk/reward and time/money trade-offs. Scoring an iPhone on Day One gives a person bragging rights, an invaluable perk atop the value of the phone itself.

The millions of iPhone buyers that don’t want this experience are stuck waiting until the hype dies down. But despite their disinterest in the crowds and lines, they probably don’t want to wait.

The iPhone appeals to Americans’ overwhelming desire to be first to experience something. Movies generate nearly half their box-office sales the first weekend; albums’ biggest sales come the week of their debuts. (Internet geeks know this feeling all too well.) This now applies to, of all things, a cellular phone, as I myself experienced last summer. (Full disclosure: despite my continued criticism of iPhone trends, I remain a satisfied iPhone owner who bought his phone on Day Two last summer.)

But scarcity and “firstness” can combine in ugly ways. To wit, my wife’s friend cutting a long line to get a coveted phone within hours of its release, a scenario which no doubt occurred elsewhere. This leads to even greater frustration for those waiting on line, and whose firstness is being usurped.

Layer onto this the technical problems Apple experienced. How does it feel to purchase a brand new, unusable phone? To be forced to open a sleek device and remove its SIM card just to make phone calls on an old phone? For some the first-day difficulty dissolves into the background as the satisfation of the iPhone UX takes hold, but for others the memory, and dissatisfaction, remains.

And don’t forget the basics. AT&T has not worked out a system for transferring SIM card data into an iPhone, so lengthy address books are obliterated, requiring immediate data entry. And the iTunes paradigm creates multiple payment paths: to AT&T for phone services and to Apple for everything else. Perhaps it has to be this way, but it’s an ungainly system for users who want to analyze their usage patterns and costs.

This is not to say that the iPhone isn’t a masterful device (it is) or that Apple could have done much differently (besides staggering the 2.0 software rollout, not really). It’s simply an observation of the sociological effects of consumer demand, and the potential drawbacks of immersing oneself in said demand.

Remember, when all is said and done, it’s just a phone.

Business

Update: new iPhone pricing plans

AT&T has officially detailed its 3G iPhone pricing, and it’s actually a bit worse than I noted last month.

The cost of data has gone up $10/month, as previously discussed. What I forgot to include was the loss of free text messaging–current owners get 200 SMS messages included in their $20 data plan. Now those 200 texts cost an extra five bucks.

Redoing the comparison, what I had outlined as

Old: 399 + (24 x 20) = $879
versus
New: 199 + (24 x 30) = $919

is, for users interested in the same level of access, actually

New: 199 + (24 x (30 + 5)) = $1039

Sure, the price increase includes the upgrade to 3G service, which can rightly be considered a premium. But the pricing strategy feels almost bait-and-switch-esque in its execution. They’re trumpeting a $200 savings in the price of the phone, yet users are paying $160 more for usage.

Ironically, what is classified as a win for the mobile phone industry–Apple’s moving to a subsidy model to make its prices more attractive–ultimately leaves AT&T with a horrible jack-up-the-prices publicity nightmare on its hands.

See you when the third-gen comes out in ’09.

Update: AT&T is not raising data rates on original iPhones with new activations, suggesting that the 3G network is the justification of the price bump. Well, that and the fact that they already made their money on the profit split of the initial iPhone sale.

Branding

The consumer cost of the iPhone

Everyone is all abuzz, as they always are, about Apple’s latest product news, in this case the $199 3G iPhone. As expected, the focus is on the price: $199 for an iPhone! What a deal!

Yet it’s not that great a deal. The entry price has been lowered but not the true cost. Of course, Apple and AT&T know this; it’s the foundation of the cellular industry, and AT&T Wireless is happy to exploit it here.

Full disclosure: I am a wildly satisfied iPhone owner. I’m not buying the new one, though, in part due to the economics. Here’s why.

The current (now previous) iPhone cost $399 for the device and $20 per month for a required AT&T Wireless data plan. Over the life of a two-year (24-month) contract, the total cost of ownership amounts to

399 + (24 x 20) = $879

This number excludes taxes, regulatory fees and marginal inflationary adjustments, but it’s an accurate gauge of what Apple and AT&T get from the consumer across two years.

For the new phone, the price drops to $199, but the monthly data fee has risen to $30. Sounds small, but over the course of two years, guess what?

199 + (24 x 30) = $919

By the end of two years, total cost of ownership for the new phone is actually higher for the half-price iPhone. Apple managed to get monstrous press coverage of its $199 price point with little mention of the data charge, which substantially affects the equation.

Now, I’m obviously simplifying a conversation with many other variables. (For example, over two years, “real cost” including inflation and float may benefit the monthly plan; people who renew contracts in less than two years have altered ownership costs; etc.) But my point is simply put: list price and true cost are not the same, and the 3G iPhone is no cheaper than its predecessor.

Branding

Ripple effects

Last Friday my iPhone’s vibrate feature failed. I had a day or two of odd brrrraap buzzes, wheezy ailing things, and on Saturday, pfft! no more vibrate.

I went to Apple’s Genius Bar on Sunday, fighting masses of bored tourists on Easter to get my phone inspected. The technician (genius?) took a quick look at my phone and decided that I had broken the external silence switch when I dropped it at some point. “There’s your problem, right there,” he said cheerily.

Before I had the chance to get defensive, he had opened a drawer and taken out a small white box. Out came a new iPhone–refurbished, I’m sure, but visually perfect–and within five minutes the genius (technician) had swapped SIM cards and activated the new phone. He took my phone–nine months old, dropped several times, with the scuff marks to prove it–and put it in the box with an explanatory label.

And that was it. “Here you go,” he said, “you’re all set.” And I went home with a new phone in my pocket.

I tell this story not simply to add to the “cult of Mac” but to examine just why Apple has been so successful.

  • Trust. The tech who met me listened to my request, quickly verified it, and moved onto solving the problem. No challenges, no curiosities, no wondering whether I had violated an arcane clause of my limited warranty. Heck, the tech even pointed out that I had dropped the phone–surely grounds for voiding my claim, and for which I had prepared an extensive explanation about timing, cause and effect, and so on. But it made no material difference to him.
  • Ease. All I did to get my phone replaced was make an appointment, hand over the phone, and sign a form acknowledging my receipt of a new one. No other paperwork or, as noted above, difficult questions.
  • Flow. The Genius Bar is, of course, free. I booked online, arrived late on Easter Sunday, and still got taken within minutes.
  • Goodwill. The net effect of the above: I am a newly satisfied Apple customer, not only proud of my iPhone (proud! of a phone!) but delighted with my recent experience. I’ve spent the week telling people my story, which routinely elicits amazement and wonder: what other company is this easy to work with? This in turn continues Apple’s amazing halo effect, which translates into ever stronger sales.

The message, to any company selling products: treat customers with respect and make life easy for them. Individual transactions may have a higher cost than a cost accountant may prefer. But the long-term impact is undeniable.

Business

Mobile phones and the Internet

Earlier this week Google announced it was seeing 50 times as much activity from iPhone users as any other mobile handset.

Yes, 50X. “We thought it was a mistake and made our engineers check the logs again,” Google’s head of mobile is quoted as saying.

The article goes on to discuss Google’s plan for expanding mobile services, but that’s not the real news here. It’s more about how iPhone users view and use the device, which is unlike any other cell phone.

  1. The iPhone renders full web pages. No other phone does this or even comes close. It’s so easy to use, and so attractive, that iPhone users (like me) don’t seek alternatives, like using SMS to contact Google or buying standalone GPS devices.
  2. The iPhone has wifi. A few other smart phones are getting into this, but they’re still restricted to mobile-web renderings and all the scroll-wheel-and-chiclet-clicking activity that they imply.
  3. The combination of the above two features turns the iPhone into a pocket-size computer. Which means that someone with an iPhone finds it easy to jump online on a whim, and use it in ways other phone (and laptop) owners do not.

This is where the iPhone is shifting paradigms. It’s not just about the touch-screen UI; it’s about the immediacy it provides.

I can be sitting on my couch, watching TV, become curious about something a broadcaster says, and in seconds google the information with the gadget in my pocket and my wireless network. No reaching for the laptop, waking it up, sitting properly; no fiddling with a typical smart phone’s menus and cell towers.

After a while this becomes second nature, which increases the frequency of use and creates the snowball effect Google is seeing from iPhone searches. More and more consumers will move in this direction as the rest of the mobile device industry catches on.

Business

The Absolute Last Thing I’m Going To Say About the iPhone

…this week.

No. I’m not buying one on Friday.

I’m not buying one because there are only 20 phones per Apple or AT&T store. There will most likely be far more than 20 people to buy it here in New York.

I’m not buying one until I have some quality time with one in an Apple store with one. I want to see if, you know, I like it.

I’m not buying one until a few weeks have passed for any manufacturing glitches to work themselves out.

Right now, there are no iPhones. There is only hype versus FUD. Its not a great criteria to base a $500 to $600 purchase on. I have a feeling I’ll really like it (or I’ll like it better than my current phone, which sucks) but I just don’t know yet.

So there.

Gadgets

iWebMusicPhoneThang


I can’t resist. My take on Steve Jobs’ keynote at WWDC yesterday.

iPhone Development is Web Development

So Steve says: “Want to write apps for the iPhone? Make them AJAX-enabled web apps. They’ll execute in the safari runtime, and we’ll give you some extra APIs so you can do stuff like make the phone call someone.” This is a pretty bold move, and to me it illustrates the following points:

  • AJAX is ready for prime time for many apps. Well, when Google released Google Docs and Spreadsheets we knew the gig was up. You can just approach a web app like a desktop GUI app if you want, and there are more and more toolkits to allow you to do it if you wish. Additionally, with Flash you can pretty much take care of whatever you can’t do with AJAX and DHTML.
  • Safari is the sandbox. Way back in the Web 1.0 days, we had Java applets, and we liked them. Actually we hated them. But they did have a good security model baked in: they could only operate in side a secure “sandbox” where they had limited access to the resources of the system, preventing the viral spread of malware that was propagated by certain Redmond-based software companies. Sandboxing the apps into Safari is actually a pretty good security decision for an environment of transmitted apps on mobile networks.
  • You already know how to program for this. Making iPhone development JavaScript, HTML and otherwise web-based means tapping into a huge existing pool of talent, with little learning curve.

Safari is iTunes

Safari is to the iPhone as iTunes is to the iPod. That’s why its now available to Windows. All Apple software is marketed with the intention of adding value to their hardware platforms (where they make their real money). iTunes is available on both Mac and Windows not to add value to Windows, but because its real platform is the iPod. In this case – the platform for Safari isn’t so much Mac or Windows, its the iPhone. Let me say that again: Safari is the iPhone runtime.

Dashboard Widgets are Also Web Development. On Safari.

But wait, the real platform isn’t exactly Safari, its WebKit, the engine underneath. When someone makes an OS X Dashboard widget – its using JavaScript, CSS and running on the same WebKit runtime that powers Safari. Why, its web development! But here they’ve added a few extra APIs for you to access.

I think this is a good indication of where Apple is headed for network-device development. They are basically saying that Safari/WebKit is the network runtime, and that they will extend that to expose the capabilities of the individual devices. They will have “gateway” software like iTunes and Safari which will run on whatever personal computer OS is handy, and that will provide added value to the real hardware platforms: the iPhone and the iPod.

Gadgets