"Seeding the Market" - June 30, 2007

The iPhone…simple in design, innovative in function, overpriced, and highly coveted.
Steve Jobs’ goal is to sell 10 million of these suckers by 2008. Challenging yes, but given that the wildly successful Motorola Razr sold 50 million in a year and a half proves people are maniacally obsessed with style and form factor. However, getting them to shell out $500+ for a phone that will never come with cell phone insurance (thank you AT&T policy) might prove to be harder than they think. Also worth noting, the average revenue per user reported by all the major wireless carriers is coming mostly from phone calls and text messaging. Middle America isn’t quite ready to surf the web, watch videos, moblog, and email from their cell phones, so convincing them they need a device that does just that will be tricky.

Beyond trying to saturate the cell phone market with iPhones, the real brilliance here is the strategy Apple is using to take over the PC and OS market, and make Microsoft and IBM a thing of the past. The iPhone is just one more step Apple has taken to begin to take back market share.

First off, Apple has given all of its employees that have been at Apple for more than a year, or any full-time employees, a free 8 gig iPhone. That’s roughly 17,000 free phones they are giving away. The intent is to ensure that these 17,000 people advocate the iPhone to their friends and family, and basically, it’s probably the most cost-efficient form of advertising Apple can do.

Secondly, Apple has managed to start to amalgamated programs such as iTunes onto Windows run PCs, giving those users the opportunity to experience the excellence and innovation in Apple programming. People will truly begin to appreciate the visceral application function and simple layout that Apple creates that eventually they will no longer want to deal with the middle man, a.k.a. Steve Balmer.

Finally, the deadly combo of giving non-Mac users the ability to play around with toys like the iTV, iPod, and iPhone is going to slowly persuade them into buying into the whole Apple product package, because hey, Apple products talk better to each other than an Apple to a PC, right?If the delightful design and easy to use experience isn’t enough to get them to buy Apple, then I guess Apple is screwed, but given that more and more students, business executives, and average day schmos are starting to buy Apple, I don’t think that Microsoft and IBM should be sitting around twiddling their thumbs.