GigaOM » iPhone at 5

Because of the iPhone, there is an app for that

Ryan Kim — Fri, 29 Jun 2012 12:00:58 +0000

Dennis Crowley, co-founder of the groundbreaking location-based mobile startup, Foursquare, earlier this week recalled the urge to give his interest in location-based services another go after his startup Dodgeball was bought by Google in 2005. But he knew that developing a mobile app meant courting a lot of heartache: endless versions for numerous devices, fees to get certified by carriers and ultimately no sure way to distribute the apps.

It was worse than the Wild Wild West, he said in an interview with GigaOM this week, explaining his reluctance at the time. But then something changed: the iPhone.

The iPhone only offered web apps when it debuted in 2007. But the powerful hardware and unique user interface lit a fire of demand among developers for a software development kit. Apple obliged a year later and also introduced the App Store, kicking off the modern mobile app era. That market is now worth $8.5 billion and is expected to grow to $46 billion in 2016.

As we celebrate the five anniversary of the iPhone’s launch on Friday, the true impact of the device can’t be measured without talking about the era of mobile apps it spawned, creating success stories like Instagram, Angry Birds, Foursquare and many others. Suddenly, “apps” became an easy way of understanding software, opening up opportunities to thousands of eager developers who could sell directly to a fast growing base of users. And that has in turn changed the way people compute, weaning them off of PCs to smaller devices: first smartphones, and now tablets.

“Everything got flipped on its head (with the iPhone),” said Crowley, who has built a business worth an estimated $600 million thanks to the iPhone. “This app ecosystem has been built from scratch and now anyone from a 30,000 organization to a 10 person team can create things that are valuable to all. You could have never imagined this.”

Tapping into apps

Apple’s App Store now boasts 650,000 apps, including 225,000 for the iPad. Apple users have downloaded 30 billion apps from the App Store, generating $5 billion in revenue for developers after Apple’s 30 percent cut. To be sure, there were mobile apps prior to the iPhone, but they were either found on third-party app stores or they were controlled by carriers, which chose which apps got to appear on phones sold for their networks.

That market was so quiet, it really didn’t attract a big community of developers, said Ge Wang, the co-founder of music app maker Smule. But he said the combination of the iPhone’s great hardware, the SDK and development tools, a critical mass of users and the distribution power of the App Store suddenly opened a lot of eyes, from experienced PC developers to newbies excited at the possibilities. They quickly realized they could make a new form of portable and casual software that addressed the mobile lives of users.

“More than anything else in the last 20 years, (the iPhone) made people feel that it was possible, and not that hard, to take an idea and turn it into a piece of software that could be distributed to 100 countries around the world,” said Wang, whose company now boasts 60 employees and has generated 50 million app downloads. “I guess it’s not surprising that this happened, but the magnitude and speed [at which] it all happened is still shocking.”

Apple’s App Store isn’t the only marketplace for mobile software. Android also launched in 2008 and introduced the Android Market, now renamed Google Play, which now hosts 600,000 apps with more than 20 billion app downloads. The mobile app market earlier this year eclipsed 1 million apps overall, with platforms like Windows Phone and BlackBerry struggling to catch up.

It’s hard to quantify the exact impact of the mobile app market but according to one study, 466,000 jobs were generated by iOS, Android and Facebook apps. TechNet, a technology group, reported that 311,000 app-related jobs were created and another 155,000 jobs were indirectly created from the app boom. Whether that’s completely accurate is difficult to know but the impact has been dramatic, said Marco Arment, the former Tumblr CTO who built Instapaper into a profitable company.

“The App Store has made it very easy for far more developers than ever before to make a living by working independently,” Arment told me.

Apps create opportunities

And it’s also spawning a new market for app developer services, everything from app discovery, monetization and distribution to back-end support, retention tools and analytics. Advertisers have also found a new way to reach consumers via mobile ads in apps and on mobile websites. eMarketer expects mobile advertising revenues to hit $1.8 billion this year and will grow to $10.8 billion by 2016.

“The growth of the app economy has given marketers new environments to engage their target audiences, and mobile advertising has become the growth driver that enables developers to monetize and further grow the ecosystem,” said Matt Gillis, SVP of Global Monetization Solutions for Millennial Media.

The whole app era has also changed the way people approach the Internet. Increasingly people are spending more time in connected apps than in a browser, using dedicated commerce, search, entertainment and news apps to do what used to take place in a browser. App analytics firm Flurry noted that earlier this year that people are spending an average 94 minutes in apps a day compared to 72 minutes in a mobile or desktop browser.

Apple didn’t just help create the larger mobile app market, it also helped shape what users have come to expect from a mobile app and an app store. That leadership role, along with a great store, stellar hardware and the returns developers see from investing in iOS, has helped keep developers loyal to iOS over Android and other platforms. Even now, iOS holds a 3-1 advantage in revenue for developers over Android, making it the primary platform for the development for most developers. That has helped fuel sales of the iPhone and iPad, which are known for the quality of their apps. And over time, the investment people make in apps for the iPhone and iPad also serve to lock-in many users into the platform.

The iPhone is now being outsold by Android, which is also closing the gap on Apple’s app lead. Microsoft and Research in Motion are also still trying to compete by touting their developer ecosystems, although they might be moving in different directions. All are trying to recreate the success Apple has had with mobile apps because they realize the truth Apple brought to light. The modern era of mobile computing has been defined by software, not hardware.

Ki-Mae Heussner contributed to this report.

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The iPhone at 5: a GigaOM retrospective

Tom Krazit — Fri, 29 Jun 2012 12:00:56 +0000

To live and work in the technology industry is to be obsessed with the possibilities of the future, and to not spend very much time thinking about the past. But there are some historical events that deserve reflection, and we at GigaOM are proud to present our thoughts on the fifth anniversary of the launch of the iPhone.

Few of us who were in this business that day — June 29th, 2007 — will forget the sense of anticipation and history that accompanied the countdown to the release of the iPhone. There was certainly a lot of silly hype, and a lot of bemused condescension from mobile companies such as Palm (now dead) and RIM (which might as well be). But the difference between the launch of the original iPhone and just about every other tech event before or since was the degree to which average people realized just how much this new product would change their lives.

Erica Ogg examines how the iPhone turned Apple into the most powerful technology company of the 21st century. Mathew Ingram, as big a news junkie as there is, looks back at how the mobile revolution uncorked by the iPhone has changed how we consume (and produce) news. Wireless carriers tried for years to do what Apple accomplished in a very short time but couldn’t put the pieces together, as described by Kevin Fitchard. It’s not just Apple who has reaped the rewards of the iPhone: Ryan Kim looks at the huge multimillion dollar businesses that have emerged from software development atop the iPhone.

And as only he can, Om Malik serves up a history lesson on mobile technology from the perspective of a guy who has heard every good pitch and every bad idea the mobile industry has come up with over the past decade.

Please share your iPhone launch day memories with us below, and take the time to read our thoughts on what has followed in the years since we all witnessed what will go down as one of the most important days in the history of computing.

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Touched by greatness: The iPhone years

Om Malik — Fri, 29 Jun 2012 12:00:41 +0000

It has been five years since Apple and the dearly departed Steve Jobs introduced us to arguably one of the more revolutionary devices ever, the iPhone. And as Tomi T. Ahonen put it, the history of mobile industry will always be divided into two eras — before the iPhone era and after the iPhone era.

The “after iPhone” years have seen the landscape of the mobile industry redrawn and reconfigured. The cash-cows of yesteryears — Motorola, Ericsson, Nokia, Palm and Blackberry — have started to fade into the horizon. New powerhouses like Samsung have surged. The fifth anniversary of the iPhone took me down the memory lane.

Before the iPhone

My first introduction to the world of mobiles was that as a young reporter in the 1990s. It was then I got to spend a lot of time with folks from companies such as Qualcomm, Ericsson and Nokia. (Motorola would come later.) It was fun to watch the launch of the original Motorola Startec and see it become a phenomenon. Nokia, Ericsson and others came out with their own phones. And while the whole industry was optimized around charging for voice minutes there was a lot of optimism when it came to the mobile Internet. A lot of people seem to have forgotten the time when mobile operators acquired 3G spectrum licenses by spending like drunk sheikhs in Las Vegas.

A long time ago, I remember watching The Saint starring Van Kilmer, who was standing in the middle of Red Square, Moscow and using his Nokia Communicator doing clandestine banking. I think that scene had such an indelible impact on me that I became a believer in the mobile Internet and small pocket-sized computers. I tried every device that came out — Microsoft WinCE devices, Blackberries. And eventually when I got the Nokia Communicator and some early versions of Nokia smartphones phones, I was hooked. I loved the ability to check email, surf the web, check ESPN scores from wherever I was. I knew it was going to be the story.

When I joined Business 2.0 in March 2003, I tried to convince my editors that he should let me work on a story about the coming era of mobile computing. They were not buying into what I was selling. But I kept haranguing them and wore them down and eventually ended up writing the story, I wanted to write.

Mobility Rules

After mucking around with phones and hearing enough experts talk, I had come to a somewhat simple and very obvious conclusion — without wires, our productivity and entertainment options would not be hindered by location and space. Just as the wheel made it easy for society to become more mobile, the elimination of wires would redefine time and location. Of course, the mobile services and devices had to become really cheap in order to cause societal change.

And because we could call anyone from anywhere (okay, I was being over-optimistic), mobile phones ended up being a vehicle of change. They changed how we communicated (text messaging). They changed social mores. They changed how we dated, how we made excuses to our spouses and better halves. They redefined how we worked and even when we worked. This was a truly transformational technology.

To me, the mobile Internet represented that same idea, except amplified many times over. If we had a mobile computer in our pocket, the very idea of life could and would be redefined. And that is why I wrote in that Business 2.0 article:

All big technological leaps build on the advances that came before them. Watt’s steam engine, for instance, was based on a coal-mining pump designed by the now largely forgotten 18th-century inventor Thomas Newcomen; ultimately it was the combination of the steam engine and that classic of early invention, the wheel, that revolutionized transportation and brought us the industrial age. In the case of the fifth wave, the springboards are a set of familiar but, historically speaking, relatively new technologies that now have matured enough and found a large enough audience to create a wholly new tech terrain…..wave puts computing everywhere. It offers access to limitless amounts of information, services, and entertainment. All the time. Everywhere…..

When I was working on that story, the browsers, location and other sensors were not fully evolved, though if you talked to enough chip makers, you knew where the industry would end up. Nokia was selling millions of N-Series and E-Series phone and was the king of the smartphones.

The problem was that they were all still phones – engineered around the idea of phone calls and text messages, two major revenue streams for the phone companies. Established players had no interest in ending the status quo. The phones, despite being so personal, had the personality of steel and stone. They were inanimate. It was clear that someone who was not beholden to the ecosystem would have to rewrite the rules of the game for the Internet to move forward. And that someone turned out to be Apple.

After the iPhone

Everything changed when I saw the iPhone for the first time. That was five years ago today when Steve Jobs and Apple released their mobile intentions. It was as if he took the mobile business by the scruff of its neck and shoved it into a time machine and forced it to a brand new future. Apple showed everyone a new way of thinking mobile.

To be honest, it wasn’t that what Apple showed off hadn’t been tried before. Many of the technologies they used had existed and were used in several of the high-end smartphones, especially those made by Nokia. And yet, it was the entire package was wicked cool. Sure it ran on a slow network. It was a terrible phone and constantly dropped calls. Telecom executives and handset makers dismissed it as a toy. Others thought that the lack of a keyboard was a non-starter.

What they didn’t realize or didn’t see was that iPhone had this one magical quality — touch, the most human of all senses — that made it the most personal of all computers. Think about it — we shake hands to confirm our relationship. We touch and hug to show our love. We caress to tell someone we care. So when we touch that phone, we don’t just touch a device and its screen, we make it part of ourselves. The internet is not a strange, cold, uncomfortable, cluttered space. That touch is what turns an inanimate object from metal and plastic to an extension of ourselves. (And that is why Apple worked really hard to get the touch right.)

The touch-ability is what prompts people to use the phone again and again. And in the process, it transforms our relationship with the network. Corporations that eschewed Wi-Fi now can’t seem to get enough of it. Telecoms that mocked Wi-Fi are setting up hot-spots so that we can get Internet everywhere we go. Why?

“The iPhone is doing to the mobile world, what the browser did to the wireline world,” networking gear maker Juniper Networks founder Pradeep Sindhu told me in an interview. Most of us want “to consume information and information services anytime, anywhere, with no limitations, and preferably in the same way across all devices,” Sindhu said.

Today, we don’t think much of calling up an app and ordering a car service, getting take-out dinner, making a video call to our mothers, or simply staying connected to our office. Snapping pictures, checking Twitter, recording how much we have walked or the level of our blood sugar are just routine things we do. We stand at the bus stop and turn the iPhone into our morning newspaper. At lunch, it becomes a recommendation engine. It changes as we change. It adapts as we adapt. It just is us.

The ironic part is that today’s iPhone packs more sensors that mimic more human senses. And we don’t know how to put those sensors to good use. Even five years after the launch of the iPhone, it seems we have have just started. I can’t wait to see what comes next.

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How the iPhone shaped the wireless industry — for better or worse

Kevin Fitchard — Fri, 29 Jun 2012 12:00:30 +0000

I’ve been covering the wireless industry for 12 years, and for seven of those years I was sort of an unofficial wireless consultant for my decidedly non-technical friends. Every few months, I’d get asked my opinion on what phone to buy, and I would go on about 2G versus 3G, Symbian and BlackBerry vs. Java and BREW. Usually after a few minutes, my friends would cut me off and impatiently ask “which phone makes the best phone calls?”

I say “for seven of those years” because around five years ago those questions stopped. Sure, I would have conversations with friends about devices and the merits of different carriers, but my supposed expertise was no longer needed. Suddenly all these lawyers, teachers, cooks, writers and artists – and even some of their children — were no longer mystified by smartphone or mobile data services. They stopped asking questions about voice quality because the phone was no longer a mere telephony device.

What happened, of course, was the introduction of the iPhone. It certainly wasn’t the first smartphone to emerge in the wireless industry, but it was the device that bridged the gap between the technical and the consumer classes. Through Apple’s innovations with the Safari mobile browser, the touch user interface and the App Store, the iPhone first demonstrated that more than just a rudimentary Internet and computing experience could be had on our handsets.

It may have had precursors, but it was the iPhone that kicked off the mobile data revolution. The astonishing thing is Apple succeeded where the rest of the wireless industry had failed. Carriers, network vendors, handset makers and OS developers had the same vision as Steve Jobs and Apple. They just couldn’t execute it.

The first 3G network went live in 2001 in Japan. What followed was six years of missed opportunities and dashed expectations. Palms and BlackBerrys and Symbian devices – as well as the hordes of feature phones — added some traffic to the network, but few people were signing up for data plans, and those that did were only willing to pay a handful of dollars a month.

In Europe, carriers began grumbling that they had far overpaid for their 3G spectrum. The biggest single source of mobile data revenue for operators was SMS – a 2G service. That cockamamie idea — the unlimited plan — was born, haunting operators to this day. At the time carriers’ 3G networks were still largely unused and no one could conceive of a smartphone consuming more than 100 MB a month. Why not open up the spigot?

Well, the wireless industry got what it wanted, and now it’s drowning in its own riches. The iPhone, followed by Android, has precipitated an explosion of traffic on their networks. But it was hardly a controlled reaction. The mobile apps and services that now abound aren’t the voice, SMS, ringtones and wallpapers that carriers could easily monetize in years past. Instead they’ve become dumb pipes, and though their networks are carrying far more data than voice traffic, they’re still largely dependent on old-school voice and text revenue for their profits.

What’s more, that explosion in traffic quickly filled up their 3G networks, forcing them to invest billions in 3G upgrades and accelerate their 4G plans. If mobile data, however, continues to grow at the pace that Cisco Systems, Ericsson and independent analyst firms claim it will, then those investments will hardly be enough. Operators will need to radically change the fundamental designs of their networks – and grab as much spectrum as they can – to meet that demand.

Ironically, carriers once again find themselves dependent on Apple to keep the mobile data revolution going. The mobile data boom is now much bigger than the iPhone, but Apple’s devices are so pervasive that the choices it makes in radio technologies will have big repercussions throughout the industry. As I wrote in a recent GigaOM Pro analysis piece (subscription required), so long as Apple continues to make 3G iPhones, operators will be forced to continue investing in 3G networks.

I know some of you are going to accuse me of exaggeration here – that I’ve minimized the contributions of Palm, RIM and Nokia. I give those companies their due credit for some of the key innovations that led to the modern smartphone. But none of this produced a seismic shift in the mobile industry. The iPhone was the fault line, and ever since its first tremors issued forth in 2007, wireless has never been the same.

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Five years later: How the iPhone reinvented Apple

Erica Ogg — Fri, 29 Jun 2012 12:00:30 +0000

The mob scene outside the SF Apple Store just moments before the original iPhone went on sale.

June 29, 2007, is the day I’ve come closest to being trampled to death. I blame Steve Jobs for this.

As the countdown clock in the Apple Store window on Stockton Street in San Francisco neared zero, hordes of reporters from all over the world, customers — some who’d waited in line for two days — and curious passersby all at once surged toward the glass to get a better view as the doors opened for the first time to sell the smartphone that has revolutionized mobile computing: the iPhone.

Friday marks the five-year anniversary of that day. No product launch has ever come close to the crazy spectacle we saw (and survived) that day. A lot has changed about iPhone launches since 2007. People still line up, some media still cover it, but it’s more orderly now because waiting in line for an Apple phone is not considered unusual, and because iPhone distribution has expanded to include online channels and three major U.S. carriers.

The mobile world into which the original iPhone was born has seen other, vast changes in the last five years: Virtual keyboards are now standard; wireless operators changed the way they do business; and a company formed around an app designed on and for the iPhone platform has sold for a billion dollars.

Nothing, however, has changed more in those five years than Apple itself.

The iPhone, at first looked upon skeptically by some as an overhyped toy, has catapulted Apple to the top of the technology and business worlds. Apple is valued today at more than $530 billion, which, for those counting, is worth more than two Microsofts and almost three Googles. Amd it could buy both of the mobile powerhouses of 2007, Nokia and RIM, outright. That is if it wanted a piece of the disasters that have unfolded in Finland and Canada since the launch of the iPhone.

Apple stock growth from July 2007 to today. (Source: Yahoo Finance)

The stock chart for AAPL has pushed steadily upward and to the right since Apple introduced its combination iPod, phone and mobile Internet device. The Monday after the iPhone launch in 2007, Apple stock opened at $132.30. Yesterday it closed at $569.05.

Apple’s balance sheet, too, has been transformed by the iPhone. The device has become the engine for an incredible profit machine that drives the whole company. Apple has sold somewhere around 250 million iPhones in five years, according to Strategy Analytics, which is estimated to have added $150 billion in profit alone.

Apple hasn’t just sat on its enormous profits, however. It’s put some of it away — it had $7 billion in cash in July 2007, in April it had $110 billion. But it’s put much of it right back into the business of making and selling its phones, iPads and computers and building out its physical stores that help drive more device sales. More recently Apple has opened a series of gigantic state-of-the-art data centers to power the post-PC dream world it has largely created.

It uses that money to ensure product supply and ramp production to meet demand, which has the nice side benefit of blocking out potential competition by buying up, for example, the world’s supply of touchscreens. It helps Apple outfit the factories of partners like Foxconn with crazy-expensive, custom laser tools to keep its products differentiated in small but important ways. All of these are strategies that are core to the Apple way. And under Tim Cook’s direction of its operations have been perfected and expanded during the iPhone era.

The iPhone, of course, is not just about money. It’s also about vision. The iPod made Apple Computer into a consumer electronics player. But the iPhone altered the company’s destiny and turned Apple into a mobile company — it dropped “Computer” from its name the same day it initially introduced the iPhone in January 2007. No other traditional PC company has managed to make the same switch, and, as noted above, two pre-iPhone mobile giants — Nokia and RIM — are struggling in this new era while the seminal mobile company, Palm, is dead.

And since deciding to embrace being a mobile company, Apple’s computer business has, ironically, flourished. Almost every quarter in the past few years has included the phrase “best Mac quarter ever” from an Apple executive’s lips. People likely drawn to its stores for iPhones, and now iPads, are trying out Macs — half of the Macs Apple sells every quarter in its stores are to first-time Mac buyers.

The iPhone was also the defining product of Steve Jobs’ amazing career. By proving to Apple, the software development industry and the public that the company understood what mobile users wanted with the iPhone, it made way for the iPad, which was Jobs’ original dream device for mobile computing. It’s fair to say that without the iPhone, the iPad would have been a very tough sell — pre-iPhone, Jobs did not have the influence in the mobile world or the millions of third-party mobile apps that he did in late January 2010, when he first laid out his vision for a 9.7-inch, $500 touchscreen tablet.

Without the iPhone, we wouldn’t have Apple pushing innovation in all kinds of areas – App Store, Siri, mobile gaming, how we consume media content and much more — and it’s bringing its chief rivals like Google, Amazon, Microsoft and Facebook along with it. Because of the iPhone, Apple is, right now, the planet’s leading technology company.

That success has brought competition on many fronts. But the tech world has never been the same since June 29, 2007, much the same way the debut of the PC and the Mac ended the reign of computing giants like Data General, Wang and Digital Equipment.

And for that, we can blame Steve Jobs.

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