The iPhone model: the new smart phone.

Image via CrunchBase

With the impending release of the iPhone OS 3.0, I found myself in a discussion with friends on the importance of Apple's presence in the mobile/smart phone space.  Whether or not you like the iPhone, or hate Apple with the passion reserved only for an opposing football team, you have to admit that their approach into this space is breaking the mould and building a brand new one for all other manufacturers and carriers to imitate.

Why?  The model for the mobile phone industry here in Australia is like that of most consumer electronics.  Bring out a closed platform/device, sell as many as you can, come out with a killer new feature and build a new phone around it, sell as many as you can, rinse and repeat.

This model has worked well for years and Nokia and the rest have made the odd dollar.  But there has been a fork in the road over the last few years with the emergence of the smartphone.  I put devices such as the Blackberry, Windows Mobile phones, and more recently, the iPhone, Android phones and the Palm Pre in this rapidly increasing column.

In this smartphone divergence, we are beginning to see a new fork in the road, that I believe is going to be the future of mobile phone technology and the future model for the industry.  Of course, Apple is blazing the trail.  Why am I not surprised? To put it clearly, instead of getting a new phone every year, you get the phone and get a new OS every year, making the sofltware the important thing, not the hardware.  The fact that there is now a revenue stream based on the life of the phones OS, rather than that of the hardware is going to be a game changer.

Figures, such as that there were 13.7 million iPhones sold in 2008, and around 800 million downloads from the App store shows that there is something to Apple's strategy.  And with Google launching their Android OS with an App store, and Palm doing the same with the Pre, we are starting to see a pattern.

The pattern is called Platform building.  It is not new, Palm did it well with their PDA devices for years, and Windows mobile could be called a platform as well, as long as you don't say it too loudly.  Blackberry in the US is also quite popular and is in the same market.  But Apple have done a few simple things, and with OS 3.0, are going to expand in a way that may break the existing mould.

As mentioned before, there has always been rules to the Phone market, and most of the smartphone developers have continued to work within them.  But let's look at a couple of ways Apple and the iPhone are bending them...

1. A controlled Eco system.

When the iPhone was released, part of the genius was to have you plug it straight into your iTunes.  Instantly you expanded the device and added content and attached yourself to the Eco system that was the beginning.  Back in the day. of course, it was just music, podcasts, TV and movies.  But when the App store was introduced, everyone was already there in the Eco system, and it was just a couple of clicks to access it.

A friend asked me recently if I thought that there were iPhone users who didn't use the App store, and I guess there may be one or two.  But because iPhone users have to plug their phones into the Eco system most nights, the chances are that nearly every iPhone user is going to have either the free Beer app, or the free Light-saber app.  And by being in the Eco system, they are more likely to pay for the other apps that fulfill a need as the time goes on.

And that is where Apple has created the new revenue model.  The app store is in some ways bigger than the hardware because they have made sure that all the hardware works with it, from the first iPhone to the iPods.  So just as the carriers have a ongoing revenue model, independent of the hardware, so dose Apple.

2. A growing OS.

With the announcement of the iPhone 3.0 software, Apple are paving the way for the next gen of iPhone and services, but in a bold un-smartphone-like move, they are going to make the upgrade available to the first gen phones as well.  This is in complete contrast to Windows Mobile 6.5 which should drop later in the year, but is only going to be available to new phones going forward and one or two as a upgrade.  Meaning that if you want the new software, you will need to pony up for new hardware, giving you the opportunity to look at the competition.

Again we see Apple not so much adding value, but making sure their revenue model is protected. That being said, if I had a earlier version of the iPhone, unlike the Windows mobile phone I do have, I would be pretty happy.

3. Valuing the Hardware.

Apple have been called many things when it comes to their approach to the hardware they sell. Even their approach to the features they include in their products has given them many a bad name, and angry blog post.  But for some reason, they are doing sales figures that any of their competition would sell body parts for.

Apple controlled the way the software works on their phones to the point of being over-conservative.  This had two effects, one was the outcry from the web voices and developers, especially once the App store was set up.  The other effect was a little more subtle, the phone worked and worked well.  Instead of the Android model which was to turn every feature they could find on and kill battery life and fill the memory so the device is unusable, like Windows Mobile phones, Apple tried "let's start with a working device and add to it the features that the users want, and that then adds to the experience".

To be honest my personal approach is "give me everything, and I'll decide what I don't want/ need".  But as more and more people I know and respect get iPhones "because they work and have a great interface", I am beginning to think that my "personal approach" is more that of a geek, than that of a consumer.

To many of us, a mobile phone is just another piece of technology, that will hopefully fit in with all the other pieces of technology we have.  But to the rest of the world, a mobile phone may be the piece of technology in their lives, and I think that Apple has created the smartphone to tap into that market.  And if nothing else, breaking into this market is what is going to change the industry forever.

Jason Remnant

if it is broken, add an App store...