hans.gerwitz.com

Just like the last time

Five years ago, the Motorola Razr was the top-selling phone. Imagine trying to sell 6 million of them today. Jonathan Chaplin, quoted in the WSJ

This feels like a fair comparison. At its height in 2006, the RAZR held a 22% market share. The iPhone has recently been estimated at 27% among smartphones.1

Yet consider how the RAZR's popularity fell off. It was dominating the high end of a category (now called "feature phones") that had its top end chopped off by the iPhone and the other pocket-tablet phones it spawned. It was designed as a skunkworks project within Motorola, and after launch the only innovation the Motorola product machine brought to it was new colors and sacrificing profit to address the mass market. Apple, in contrast, no longer needs irreproducible skunkworks to develop disruptive products. While Motorola had to lower their margins to drive RAZR sales, Apple is profiting handsomely from the iPhone and will remain motivated to develop it.

What's most troublesome about this sort of analogy, though, is the framing. Among mobile telecommunications industry analysts, Jonathan Chaplin is rather astute2, but is still a member of an old guard that has learned to analyze an industry that has undergone dramatic change. They are working with an obsolete model where consumers visit carrier-sponsored storefronts, find a phone that matches their coat, and then settle on a service contract under the guidance of sales staff.

Today's market is quite different. Many consumers are choosing a device based on its own features and perceive the carrier as a service provider. Each carrier is struggling to preserve its status as a direct marketer of handsets, and they have all failed to establish themselves as a credible provider of services beyond wireless data and, for now, voice communications.3

Device choice is leading consumer choice4 and arguably the most compelling feature is application platform. Which is why I don't advise much attention to analysts that are veterans of the telecom industry, who have only managed to add "OS" to their box of phone features. Listen, rather, to those who see platforms and understand, for example, that the Amazon app store is a platform that has some cross-benefit with Google's but should not be simply confounded as "Android".

Except even these voices are lazy and want to believe this market will be a repeat of the Mac vs. Wintel history, or the iPod vs. everyone else history. Better to just remain suspicious of historical analogies.

  1. http://blog.nielsen.com/nielsenwire/?p=28237

  2. He's one of very few who forecast Verizon's iPhone sales growing from their own customer base, rather than AT&T; turnover.

  3. Which is hard in a world where other business models support "free" services, and when your organization is built only for servicing a utility and reselling. But that's another article.

  4. Why else would Sprint attest that iPhone-seeking is their #1 attrition driver?