4 ms·

He's missing the #1 area where you can compete with Apple (at least for now) and why I think the Palm Pre will do well: carriers. Most people, even high-end sma

He's missing the #1 area where you can compete with Apple (at least for now) and why I think the Palm Pre will do well: carriers. Most people, even high-end smart phone users, choose their carrier first and their phone second. You'd lose sight of that reading TechCrunch or Engadget too much, but talk to people in middle America and you realize it's overwhelming. Be it due to laziness, marketing, employer discounts, customer satisfaction, not understanding how simple number portability has made it, whatever. I'd bet for every person who has bought an iPhone there are 1 or 2 who at least would consider it if it were on their network. The Palm Pre and Android are both at a huge advantage here. That may not be true when Apple's deal with AT&T runs up though, but for now it's easily the biggest competitive edge available.

qhoxie 17y ago
Most people, even high-end smart phone users, choose their carrier first and their phone second. I think there is a lot of truth to that, but I also have seen a big shift since the iPhone. Countless friends and colleagues of mine have said something along the lines of "I would never use AT&T if it were not for the iPhone."
- mattmaroon 17y ago
  The numbers indicate that it's a small shift at best. People switch carriers every 3-4 years on average (usually citing employer discounts, pricing plans, family networks, etc,) meaning that for any given phone, you'd expect 25-33% of purchasers to be new customers. The iPhone is somewhere between 30-40%, meaning that it's probably outperforming the average by 5-10%, which is great but not indicative of a sea change in consumer habits. It's probably more effective at keeping people on AT&T who would otherwise have left than in bringing new people on.
  - stcredzero 17y ago
    Hmm, aren't you forgetting the mathematics of compound interest? A 5 to 10% conversion advantage over your competitors, combined with a higher retention rate -- this is going to really hurt competitors after several years. After 10 years? Ouch! It's a good thing that AT&T sucks so much. Otherwise, the iPhone would be unstoppable.
    - mattmaroon 17y ago
      Oh it's great, and if I'm a shareholder in AT&T or Apple I'm pretty damn happy about it. (The retention rate is a total unknown for a device that's 2 years old. Even a shitty free-after-contract clamshell has a 2 year retention.) But it's not a massive change in the power balance between carriers and phones. Carriers aren't going to offer massive concessions for something that brings in a few % more users than the other 50 phones in their lineup average. Don't forget that overall, the iPhone isn't even in the top 10.
  - qhoxie 17y ago
    Similar to the sibling, I see 5-10% as being a fairly solid impact.
mechanical_fish 17y ago
the #1 area where you can compete with Apple (at least for now) Your qualifier here explains why Gruber doesn't dwell on this. He wants a competitor to Apple that can succeed in the long haul, not a bunch of scavengers who survive for another year or two, picking off the edges of the market that Apple hasn't gotten around to steamrolling yet. Indeed, my off-the-cuff take on the state of the market is that Apple's carrier exclusivity is a positive danger to the competition. Because it means that the market sends all the wrong signals. You put out an iPhone knockoff that runs on another carrier, and a bunch of people sign up. Your product is a success! But: The reason your product is succeeding is that the playing field isn't level. And it's non-level in a way that Apple can fix, just as soon as the agreement with AT&T runs out. My take on the smartphone market in the USA is that Apple's competition needs to race to come up with a product that can survive the day when iPhones are being offered on every carrier. Because I see no reason to believe that such a day will not come.
- raganwald 17y ago
  +1 In the book "Marketing Warfare," Reis and Trout emphasize that a strategy should attack a competitor's strength, not its weakness. Weaknesses will all be fixed over time, so attacking a weakness is simply making hay while the sun shines. Of course you should do it, but it shouldn't be a cornerstone of your strategy. It costs your competitor nothing to fix a weakness, they simply fix it and get better. When you pick a competitor's strength and attack the strength, your competitor has a problem. Fixing the strength will cost them customers. For example, it's a strength of Apple that they control the hardware and the software, so having Android run on multiple hardware devices from different vendors is attacking iPhone's strength, much as Windows attacks Macintosh's strength by running on commodity PCs. Offering iPhone on other devices would cripple the user experience, so Apple can't respond without weakening itself. The AT&T deal, OTOH, is just a wekness. When it expires Apple loses nothing by offering iPhone through other carriers.
  - mattmaroon 17y ago
    Is it just a weakness? They presumably get a lot from the AT&T deal. The right to exclusive Apple branding on the phone. Visual voicemail, some untold but presumably high % of monthly contract fees (allowing them to plow tens of millions into ads, creating the virtuous cycle of users and app developer growth), an unprecedented degree of freedom over app distribution, commitments to building out the cell network, etc. Building the hardware and software themselves gives them better quality control over the end product, having tremendous upper hand in an exclusive deal with a national carrier performs a similar function. I'm guessing that had they given in to whatever the hell Verizon requested, and has no reason to discontinue requesting, you'd be looking at a much different phone. That's why I still don't believe we'll ever see a CDMA iPhone.
sp332 17y ago
The latest Hak.5 episode (The Content-Free Episode http://www.hak5.org/episodes/episode-526 http://www.hak5.org/episodes/episode-526 - Skip to 9:30) has instructions to fix this. Hint: it's a MiFi http://www.engadgetmobile.com/2009/05/13/verizon-mifi-2200-review/ http://www.engadgetmobile.com/2009/05/13/verizon-mifi-2200-r...
whatusername 17y ago
The Palm Pre runs on 2 major US networks. 2. And just about no-where else in the world. I can go to Optus, Telstra, Vodaphone, Virgin, 3 - and get a subsidised phone (even free upfront). Or I can even go to http://www.apple.com/au/iphone/buy/ http://www.apple.com/au/iphone/buy/ and buy one - and put in whatever random sim card I like. While googling for this comment I found that palm are looking at releasing a gsm phone soon - that might change things - but for now - the iPhone has a major advantage in carriers - it's called GSM.

qhoxie 17y ago

Most people, even high-end smart phone users, choose their carrier first and their phone second. I think there is a lot of truth to that, but I also have seen a big shift since the iPhone. Countless friends and colleagues of mine have said something along the lines of "I would never use AT&T if it were not for the iPhone."

mattmaroon 17y ago
The numbers indicate that it's a small shift at best. People switch carriers every 3-4 years on average (usually citing employer discounts, pricing plans, family networks, etc,) meaning that for any given phone, you'd expect 25-33% of purchasers to be new customers. The iPhone is somewhere between 30-40%, meaning that it's probably outperforming the average by 5-10%, which is great but not indicative of a sea change in consumer habits. It's probably more effective at keeping people on AT&T who would otherwise have left than in bringing new people on.
- stcredzero 17y ago
  Hmm, aren't you forgetting the mathematics of compound interest? A 5 to 10% conversion advantage over your competitors, combined with a higher retention rate -- this is going to really hurt competitors after several years. After 10 years? Ouch! It's a good thing that AT&T sucks so much. Otherwise, the iPhone would be unstoppable.
  - mattmaroon 17y ago
    Oh it's great, and if I'm a shareholder in AT&T or Apple I'm pretty damn happy about it. (The retention rate is a total unknown for a device that's 2 years old. Even a shitty free-after-contract clamshell has a 2 year retention.) But it's not a massive change in the power balance between carriers and phones. Carriers aren't going to offer massive concessions for something that brings in a few % more users than the other 50 phones in their lineup average. Don't forget that overall, the iPhone isn't even in the top 10.
- qhoxie 17y ago
  Similar to the sibling, I see 5-10% as being a fairly solid impact.

mechanical_fish 17y ago

the #1 area where you can compete with Apple (at least for now) Your qualifier here explains why Gruber doesn't dwell on this. He wants a competitor to Apple that can succeed in the long haul, not a bunch of scavengers who survive for another year or two, picking off the edges of the market that Apple hasn't gotten around to steamrolling yet. Indeed, my off-the-cuff take on the state of the market is that Apple's carrier exclusivity is a positive danger to the competition. Because it means that the market sends all the wrong signals. You put out an iPhone knockoff that runs on another carrier, and a bunch of people sign up. Your product is a success! But: The reason your product is succeeding is that the playing field isn't level. And it's non-level in a way that Apple can fix, just as soon as the agreement with AT&T runs out. My take on the smartphone market in the USA is that Apple's competition needs to race to come up with a product that can survive the day when iPhones are being offered on every carrier. Because I see no reason to believe that such a day will not come.

raganwald 17y ago
+1 In the book "Marketing Warfare," Reis and Trout emphasize that a strategy should attack a competitor's strength, not its weakness. Weaknesses will all be fixed over time, so attacking a weakness is simply making hay while the sun shines. Of course you should do it, but it shouldn't be a cornerstone of your strategy. It costs your competitor nothing to fix a weakness, they simply fix it and get better. When you pick a competitor's strength and attack the strength, your competitor has a problem. Fixing the strength will cost them customers. For example, it's a strength of Apple that they control the hardware and the software, so having Android run on multiple hardware devices from different vendors is attacking iPhone's strength, much as Windows attacks Macintosh's strength by running on commodity PCs. Offering iPhone on other devices would cripple the user experience, so Apple can't respond without weakening itself. The AT&T deal, OTOH, is just a wekness. When it expires Apple loses nothing by offering iPhone through other carriers.
- mattmaroon 17y ago
  Is it just a weakness? They presumably get a lot from the AT&T deal. The right to exclusive Apple branding on the phone. Visual voicemail, some untold but presumably high % of monthly contract fees (allowing them to plow tens of millions into ads, creating the virtuous cycle of users and app developer growth), an unprecedented degree of freedom over app distribution, commitments to building out the cell network, etc. Building the hardware and software themselves gives them better quality control over the end product, having tremendous upper hand in an exclusive deal with a national carrier performs a similar function. I'm guessing that had they given in to whatever the hell Verizon requested, and has no reason to discontinue requesting, you'd be looking at a much different phone. That's why I still don't believe we'll ever see a CDMA iPhone.

sp332 17y ago

The latest Hak.5 episode (The Content-Free Episode http://www.hak5.org/episodes/episode-526 http://www.hak5.org/episodes/episode-526 - Skip to 9:30) has instructions to fix this. Hint: it's a MiFi http://www.engadgetmobile.com/2009/05/13/verizon-mifi-2200-review/ http://www.engadgetmobile.com/2009/05/13/verizon-mifi-2200-r...

whatusername 17y ago

The Palm Pre runs on 2 major US networks. 2. And just about no-where else in the world. I can go to Optus, Telstra, Vodaphone, Virgin, 3 - and get a subsidised phone (even free upfront). Or I can even go to http://www.apple.com/au/iphone/buy/ http://www.apple.com/au/iphone/buy/ and buy one - and put in whatever random sim card I like. While googling for this comment I found that palm are looking at releasing a gsm phone soon - that might change things - but for now - the iPhone has a major advantage in carriers - it's called GSM.