picocosmos

It’s been obvious that the iPhone sets the new gold standard for smartphones, and simplifies the definition of smartphone as web phone. But other cell phone competitors so far seem content (Michael Malone’s analysis is that they’re unable to respond to a risk-oriented product strategy) to ignore the competitive threat.

A January 14, 2008 article in The New York Times by Miguel Helft (“Google Sees Surge in iPhone Traffic” [at Christmas]) notes that the iPhone is the first cell phone on which web browsing is useful enough to generate significant traffic on Google. Even though Symbian and Windows-based phones are 63% and 11% of the worldwide smartphone market vs. Apple’s 2%, traffic from iPhones surpassed traffic from them on Google over the holidays. Wow!

I’d add to that the notions that “it’s the browser, stupid,” not built-in applications, that create the iPhone’s potential for value; and that it’s wifi that enables you to actually realize that potential value.

Looking at my own usage, I get little use out of the vast majority of the iPhone’s built-in applications. I’m using the browser as my platform (ok, except for camera, alarm clock and, absent VoIP telephony, the “phone.”) With the 1.1.3 version of the iPhone software, to which I upgraded yesterday, I’m even more aware of the browser focus, because now I could move unused applications off the main screen and out of the way.

In addition to not using built-in applications like the iPhone’s “Calendar,” wherever I have a choice between “mobile” and “desktop” versions of browser access to an information service, as is the case with Google Calendar, I choose desktop. The iPhone hits the sweet spot in terms of display size. Together with being able to stretch or squeeze the display to zoom or unzoom, what’s great about the display size is that you can have the convenience of fitting it in your pocket without giving up the convenience of being able to read web pages.

So how long will it be before other cell phone competitors make wifi standard and go to an iPhone-style display?

Wordpress, Google Calendar, and Apple’s iPhone have a disarming simple-mindedness that is one of the keys to their market leadership.

In certain respects they’re so simple you have to wonder why a lot of people wouldn’t just be infuriated and give up on them, and yet their simplicity is cute in a way that encourages customers to advance their cause way beyond what is normal.

In the case of Wordpress, an open-source blogging tool which you use either by installing it on your own server or by creating an account on a Wordpress server, one element of its simplicity is that every new blog entry you write is posted by default with the posting date/time to the top of a stream of entries going down (or back) from the present. Further, many Wordpress templates provide a calendar widget on which entry dates automatically are highlighted with links to these entries. That’s basically it; there isn’t much more to the usage model, although there are a lot of tweaks and management you can carry out fairly intuitively by poking around in the Wordpress dashboard page.

With Wordpress, there’s a lot more you COULD do, but it isn’t necessary. So I and millions of other users recommend it to everyone contemplating starting a blog because it’s so simple that there’s very little downside in doing so.

Google Calendar’s simplicity is that there’s very little to using it and you can access it (log into your version of it) from a browser anywhere — home, office, laptop, cell phone (you do have a cell phone with a web browser, don’t you?) — so it extricates you from the 90’s problem of synchronizing your calendars, some of which would have been Outlook. Like Wordpress, the basic model in Google Calendar is ridiculously simple. Just click on the calendar to pop open an entry line and type something that seems like it could be interpreted as an entry, say “11/2 12pm R. Cheung – Sungari 1st and Yamhill” and it will show up in the calendar at that date/time from any browser.

Google has not needed to do anything to market Google Calendar (which has been “BETA” for a long time), because, again, I and millions of people recommend it to everyone we know as a calendar solution, because there is very little downside and every chance that people will stop needing support for Outlook. In a lot of cases, people may still be required to run Outlook in their offices, but Google Calendar can blow right past all of that by word of mouth.

In the case of Apple’s iPhone, most of the functions are laughably simple. For example, the “camera” tool has no zoom or any other controls, and the “iPod” tool has no back or forward control, so all you can do is start/stop play, etc. But this also makes it impossible for me and (now) over a million other people not to demo it to everyone who asks, because it is so simple to demo.

Some cell phone makers seem to have expected they could ignore Apple’s market entry, because there really are no new functions on Apple’s phone and the thinking was that what you can do on a cell phone is pretty limited, anyway. But by making the Apple cell phone basically ALL DISPLAY, and a dramatically larger display, and finger operated, which is incontrovertibly cute, it would be demoed like crazy compared to other cell phones.

So in all three of these cases, simplicity is part of a strategy of redefining the market’s expectation of how to carry out a task in a way that the standing competitor(s) can’t begin to match for marketing-less viral promotion.

Competitive Positioning:

“The coolest upscale smartphone you can get; applies minimalist design with a vengeance.”

As it happened, when I purchased my iPhone the first week they were on the market back in June, at the same time I bought and then dropped two other cell phones with very different positioning:

- AT&T (HTC) 8525 phone running Windows and supporting UMTS high-speed data connections on the cellular network, as well as wifi. Curiously, Windows was a constant “in your face” nightmare on this phone. In contrast, I set my wife up on HTC’s Windows-based 3125 (on Cingular -> now AT&T) last year and, after an hour or so of configuration to get rid of things she was not going to use, it has been great. I really wanted to like HTC’s phone because of the speed and because HTC makes a wide-array of very slick cell phones, but they’re all sold with Windows.

- Motorola A1200 “Ming,” which is the third generation of Chinese-designed Motorola cell phones running Montavista Linux. Curiously, there is only a slower GPRS data connection on the A1200. Its predecessor, the A780, my main cell phone for the past year, had the faster EDGE data connection. I really wanted to like the A1200 and find it useful, but Motorola’s failure to open up its open-source based platform and dropping of an intermediate speed for an even slower speed data connection just killed the deal.

- iPhone — well, it’s the one of these three phones that I decided to stick with, but if it weren’t for wifi support, I would have taken it back, too, in favor of sticking with my Linux Motorola A780 (bought it on eBay; came out in China in 2004), on which reading web pages over AT&T EDGE data connections is no better and no worse. But the network connection for voice is better on the iPhone and the A780 was becoming unreliable, shutting itself off or freezing for no reason. Side note: Apple should have a marketing group whose only charter is to open up wifi access in public places, especially the coffee chains and airports, without sign up, registration, monthly fees, or whatever. Just show them the NY Times story from 9/18/2007 about The Times giving up on charging to read the paper’s columnists online and instead going to an advertising-supported (aka Google) model. The 4-5 top reviewers that Apple lined up for initial product reviews basically all said “nice phone; AT&T EDGE is terrible.”

Evaluation of features (aka “What do you demo?”):

+ Camera (see panorama from a series of photos above), photo browsing, finger-based operation, wifi web browsing and email, great display, generally keeps going two days on battery charge with moderate use; one day with high use.
- Need to type? Forget it, you are going to read not write email on this. Youtube? Not really, the iPhone has a very limited subset on old technology. Music? I had classical CDs and Chinese and Japanese language recordings on my A780, but haven’t tried getting that on the iPhone, yet. The biggest minus is the AT&T EDGE data network: was barely adequate 5 years ago; now it’s a national embarrassment; we’re about 20th internationally on cellular data speeds, as well as digital cable bandwith, but that’s all another whole topic. Furthermore, back on the Apple-controlled part of what doesn’t demo so well, the information model is old-school in the sense that you’re looking at information that you’re going to try to sync between applications on the phone and applications on the desktop. “Web cloud” apps, like gmail, Google Calendar, Flickr, Google Maps, Google Docs make more sense, but that’s not where this phone concept is.

Also, unfortunately, only a subset of AJAX (“Web 2.0″) capabilities are supported in the iPhone’s web browser. So Google Docs don’t work. Google Maps don’t work. Gmail sort of works.

Channels and Strategy:

Finally, even though the phone’s software is based on 50+ open-source projects, the phone is not set up to facilitate open-source software, but instead to lock up the software environment.

That is missing a big opportunity, I think. Meanwhile, the open source community is busy working to “liberate” the iPhone on the one hand, and Chinese / Taiwanese electronics manufacturers (the iPhone is manufactured in Shenzhen) are bringing out clones.

The New York Times just published a thought-provoking commentary by Randall Stross (9/16/2007, “A Window of Opportunity for Macs, Soon to Close”) asking why Apple is thought of as doing well when they only have 3 percent of the computer market now vs. 14% more than 20 years ago. In comparison, Apple’s iPod product line has been much more dominant. What will be the case with the iPhone? In each of these three areas, Apple basically has had a strategy of trying to redefine the category up a notch (DOS PC -> graphic Mac; generic MP3 player -> “iPod” as the category; smartphones -> “the” iPhone) and to control very tightly the evolution of marketing messages in (or by also controlling, like 185 Apple stores in the U.S. vs. HP computers for sale in 23,000 U.S. retail locations) the sales channel.

Probably the four biggest potential changes that I think will have an impact on the global wireless information market over the next few years are 1) wifi and other short-range wireless, 2) moving cell phone-based information applications onto open source, 3) the size of the Chinese and Indian markets, and 4) 3G cellular data.

Five years ago Japan and Scandinavia were the “happening” cell phone markets. While most people in U.S. couldn’t conceive of typing emails on cell phones with their thumbs, there were already 30 million people in Japan using cell phones for messaging and web-based services. It was just more convenient to have Internet access on your phone. And in the Scandinavian countries everyone was doing SMS short messaging. Cell phone markets worldwide were quite different from each other, primarily due to one combination or another of culture, policy, and the state of prior communications systems.

Today, we’re a long way from homogenization, but potential changes over the next few years go across local markets and will have a huge effect.

Wifi in cell phones may just mean lower and lower average cost for more and more value on cellular service. As users get more and more for less and less, market growth may be fastest for the cellular providers that are quickest to incorporate wifi. It’s a chance for new leaders. Current leaders like Verizon in the U.S. and China Mobile in China may resist breaking down their “silo” business model where they want a percentage of any monetary transaction that happens over their service, like using a cell phone to buy using PayPal.

As for open source, I think it will rapidly become the way cell-phone based, enterprise-style information flow is done — things like field service dispatch, on-site sales quotes for customers, basic CRM applications — will go to open source because the quality and turn around time for innovation will be better than for close-source products. If improvements can be made overnight, and there are millions of users and thousands of developers networked on projects, the application space can grow pretty quickly. That’s great for the cellular providers because right now their enterprise application business is weak

The bottom line on China and India is that whatever happens there is going to be influential everywhere else. With 500 million and 150 million cell phone users as of the end of 2006, China and India are not exactly out of room to grow, either. So what are some of the things that are different there? Motorola sold 1 million Linux-based cell phones in China in Q2 2006, a $50 phone with low-power electrophoretic display by Motorola started shipping in India at the end of 2006, and there are plenty of good wireless engineering design shops in China and Taiwan experimenting with different feature sets and capabilities on shorter and shorter development cycles.

Finally, 3G and China in a certain sense are one and the same topic. Because China has been stalling on 3G service to give time to develop a perhaps licensing-independent 3G technology – TD-SCDMA – Chinese business will be in a position to control the market. The size of the market means everyone else will have to be a player on TD-SCDMA.