
Apple iPhone Will Fail in a Late, Defensive Move (2007) - JoeCortopassi
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aRelVKWbMAv0&d=2007
======
downandout
The best quote in the article:

 _" The iPhone will not substantially alter the fundamental structure and
challenges of the mobile industry," Charles Golvin, an analyst at Forrester
Research Inc., said in a report this month.

There are three reasons that Apple is unlikely to make much of an impact on
this market -- and why it is too early to start dumping your Nokia shares._

This is comedy gold, but is also a good reality check about the mainstream
news we read today. Not all predictions made by supposed experts will be
accurate.

~~~
Aloha
""The iPhone will not substantially alter the fundamental structure and
challenges of the mobile industry," Charles Golvin, an analyst at Forrester
Research Inc., said in a report this month."

I'd actually argue that the quote above is substantively correct (in the US).

2006: Phones are sold largely on contract, by various retailers, including the
manufacturer; churn is driven largely on pricing, network performance, and
network-effect factors.

2014: Phones are sold largely on contract, by various retailers, including the
manufacturer; churn is driven largely on pricing, network performance, and
network-effect factors.

The iPhone changed the experience of using the mobile phone, and what we did
on our mobile phones - not how we buy them, nor did the change the base reason
people switch carriers - not in the long game anyhow, people still switch
because of dissatisfaction with their existing provider, or that the grass
appears greener on the other side.

~~~
hayksaakian
Data became significantly more important.

We went from being nickel and dimed on minutes and SMS with unlimited data to
being nickel and dimed on data with unlimited minutes and SMS.

~~~
josephlord
And before the iPhone data charges where horrific, £/$/€'s per MB (not GB). If
you were only nickel and dimed you were doing well. To get the initial
exclusive iPhone contracts the telcos had to offer unlimited data which made a
smartphone useful in a way that the earlier models weren't.

That is how the iPhone changed the market for the better at least in the UK
and even if you don't have one. Competitive pressure may have caused it to
happen eventually but we can all thank Steve Jobs for speeding up that
important change.

------
NaOH
It's easy to say this writer and those cited in the article were wrong. More
broadly, reading this reminds me of an Economist article from a couple years
ago discussing how Fuji and Kodak took different paths when digital cameras
took off, and the choices made then led to the companies' positions today (one
defunct, one doing well).

What I took from that Economist piece wasn't just the history lesson, but the
reminder that what looks wise in the near term (what Kodak did) isn't
necessarily best in the long term, and vice versa. In fact, Kodak likely sowed
the seeds of its demise when they took the lead position in the digital camera
space. So re-reading this iPhone piece merely reminds me how difficult it is
to prognosticate, and that’s an important lesson for those of us in guiding
roles, both personally or professionally.

[http://www.economist.com/node/21542796](http://www.economist.com/node/21542796)

~~~
npunt
I generally agree that hindsight is 2020, and its hard to tell who's wise vs
just throwing darts.

However, not all types of prognostications are created equal. A big part of
identifying trends and devising strategies is being able to sort out what's
worth getting on top of, just watching, or dismissing outright. Same for
journalism.

This article was a typical counter-hype pageview driver pounded out for a
deadline. The writers job was to make a plausible-sounding story for the
opposite side.

Its the plausible-sounding story part thats tripping people up here. Here's
what he did: * He says everyone is going gaga over it * He gives a bunch of
reasons why they'll have a tough time in the market * He cites a random
analyst * He muses his personal take on its market feasibility and makes a
strawman argument about it being a 'defensive product' that he summarily
knocks down * He concludes, decisively, that nothing is going to change

We've all read this article. Its like the 5 paragraph essay from grade school.
And like the 5 paragraph essay, it can be graded for how much it makes sense.

Just on cursory view, he clearly hasn't done his homework on Apple or consumer
trends. Namely, he doesn't address the success factors and relevant details of
the iPod.

1\. He cites price as an issue (but the iPod was almost the same price,
anchoring high end value before dropping in price to get mass market scale).

2\. He mentions people really excited about the iPhone but later muses he
doesn't know who its targeted at (how does he think Apple sells things? tech
specs?).

3\. He suggests the playing field is level against competing models (ignoring
the demonstrated ecosystem power of iTunes, the fact that no ecosystem exists
in phones, and of course, ignoring the holyshit demo that showed iPhone's
superior usability).

4\. He says at the end an outside player may come provide competition but
they'd have to bring some new tech or different user experience (ignoring the
_decades_ of R&D groundwork and IP portfolio that Apple laid for the iPhone,
all the way back to tech demos in the 80s and the Newton in the 90s).

In other words, he's probably dodging the issue or doesn't know anything. This
quote is great:

"Likewise, who is it pitched at? The price and the e-mail features make it
look like a business product. But Apple is a consumer company."

He's grappling aloud with a square peg in a round hole of his own making. Like
the rest of the article, nowhere in there is the author demonstrating an
ability to imagine something that does not exist today - the basic skill
required to understand the history of technology.

To a reader without any industry knowledge, at the very least the context of
what type of article this is (a counter-hype story), the logical
inconsistencies within the arguments, and the complete lack of imagination
would raise a flag about how valid this piece is.

To a reader with industry knowledge, they'd see points 1-4 not covered and
think this guy shouldn't have his job.

\-- Now to your example, I don't think these are the same type of prediction.

That the iPhone would be a general market success was an easy prediction,
because the playbook and success of the iPod was right there, and it was easy
to see that phones were going to be like the iPhone once it was shown, because
it was that much better.

The Fuji vs Kodak is a hard prediction, because those companies are having
their core business models threatened by an external change looming over them.
The change here isn't about the success or failure of a product, it's about
whether companies can manage a transformation. Transformations are hard and
messy, and hard to predict.

I see the 'its hard to predict the future' argument as more than a little bit
similar to "correlation is not causation" that seems to pop up here
occasionally. Yes, correlation is not causation, but it can imply it,
depending on the circumstances, measurements, R^2, etc. Similarly, the
conditions for a future prediction depend on what information we have, what
the context is of change, what we're trying to predict, etc.

The only thing I think where the iPhone prediction was difficult was just how
_crazy_ a success it was. But whether it was going to be a general success or
general failure? For anyone who knew a bit about the iPod, that should have
been answered the moment they saw the demo.

EDIT: All this said, I definitely agree with the important lesson to balance
short/long term and not try to over-predict the future, especially when it
comes to the path individuals are on. I think thats what you were getting at
at the end. Wisdom of this kind is important in this (young) community.

~~~
Kesty
A lot of people saw the potential but in 2007 there still were worries. Apple
whould have been crazy not to let people develop app for the device but it
wasn't possible until july 2008. Also many programmers were worried on how who
apple would run their store as soon as they annunced it on march 2008 soon.

And I would say that at least until iOS4 (2010) the jailbroken version was
still better than what apple was doing.

------
dbroockman
The author subsequently scored a gig at the WSJ with multiple columns.[1]
Funny how the ability to accurately comment on industry is not a useful
qualification for being employed to comment on industry. :) (Written somewhat
tongue-in-cheek obviously, I'm sure he has gotten lucky before with
predictions before too.)

[1] [https://twitter.com/mattlynnwriter](https://twitter.com/mattlynnwriter)

------
nulagrithom
I love that this article wasn't just wrong, it was _spectacularly_ wrong. I
remember thinking many of these same things at the time. This especially
would've rung true:

Will your accounts department stump up for a fancy new handset just so you can
listen to Eminem on your way to a business meeting?

At the time? Of course not! Today? Standard equipment.

------
discordance
I'm curious as to why this doesn't affect the credibility of the writers that
publish this sort of garbage? Matthew Lynn, the author, has continued on over
the years to publish stories for the WSJ and HuffPost.

~~~
djur
Do you expect to get fired from your job if you make a single wrong decision
or prediction? I can't speak to this particular writer but a lot of very
intelligent, insightful people have been very wrong about important things and
still managed to maintain their credibility by being right about other things
(and for being wrong for credible reasons).

The big thing that helped the iPhone take off, the App Store, wasn't out yet.
Things changed rapidly.

------
coreymgilmore
Apple stock when this came out: ~$94.00. Gains to date: ~456%.

Doesn't look to bad to me! Now lets look at the cash hoard Apple has: it is
enough to buy Nokia and Motorola numerous times over.

Now if only the author of the article would have written about 'apps'. Would
he have labeled them as niche as well? I would have loved to see an argument
in 2007 for the multi-billion valuation developers are getting now.

~~~
craigc
When the iPhone first came out there were no native apps. Only web apps. There
is no way people would be making this much money if Apple hadn't opened up the
platform.

~~~
arrrg
In fact, I seem to remember that people were pretty much immediately
complaining that there was no (official) way to bring third party apps to the
iPhone (except for web apps).

If I remember this was also a major criticism: Some other phones at the time
could install third party software, the iPhone could not.

However, despite the ability of installing third party apps existing in many
phones, that never really took off before the iPhone SDK came out.

(Also, the iPhone did have a relatively slow start. It sold well and along
with what Apple was publicly stating as its goal, but it took a generation
before the phone really did take off like a rocket.)

~~~
abruzzi
I've heard some claims recently (perhaps true) that Jobs didn't want third
party apps, but at the time the interface was so obviously suited for apps
that I assumed that they simply hadn't had time to put together what was
needed for third parties to build apps. At the time they talked about web
apps, but it felt like stalling, then a year later the app store launches.

~~~
Nashhhh
It's true (apple fanboy here, I remember it well). He was adamantly against
them. If you look around, he did a whole keynote where he tried to present web
apps as just as good as native apps-- it was ridiculous.

He'd been dead wrong before as well: just a few years before the iphone, when
people wanted to see an ipod with video capability, he said nobody would ever
want to watch video on a mobile device.

It really bugs me that apple makes these "nobody would ever want"
proclamations and then reverses itself without saying, "we goofed". The next
one coming is 5+ inch screens for the iphone. They'll make no mention of the
fact that they criticized large screen phones before ("look, my thumb goes
from corner to corner!"). Oh well.

~~~
mcphage
> It really bugs me that apple makes these "nobody would ever want"
> proclamations and then reverses itself without saying, "we goofed".

Apple doesn't like to tell people what it's doing. So if they say "We're not
doing X", it might mean they're not doing it. Or, it might mean that they are
doing it, and don't want anybody to know yet.

With the iPod Video, they ixnayed it in public up to a few weeks before they
released it.

In the case of the App Store, it seems pretty obvious that Apple intended to
let developers write apps for it, but the APIs weren't stable enough to have
3rd party developer depend on them. So they stalled for a year, depending on
superior hardware to keep momentum going until the OS settled down some.

~~~
Nashhhh
You're right.

------
outside1234
What he didn't foresee then was the app store (it hadn't been invented yet).
That is really what changed everything.

~~~
t1m
Well, the iTunes store came online in 2003. Not much of a stretch to foresee a
marketplace for apps much like the marketplace for music. Whether it would be
successful or not is another thing.

~~~
fvrghl
I disagree; apps were never a guarantee. Steve was adamant about not having
3rd party apps on the iPhone for a long time. However, with 20/20 hindsight
it's easy to see.

~~~
guywithabike
Steve was also adamant about not doing a phone in the first place, not doing a
tablet, etc. The point being that Steve always publicly denied wanting to do
something that privately he was already investing significant resources in
doing.

~~~
bluthru
From what I've read it's much simpler than that. Steve would argue
passionately for both sides of an issue before reaching a conclusion.

------
ChuckMcM
This is one of the fascinating things I think folks born in the 90's are
really going to regret. So much of what they say and opine about has become
embalmed in the amber that is the Internet that as time passes and looking
back reveals how little they knew in spite of their ardor to the contrary is
going to start haunting them and become a modern albatross[1]. When I think
about the some of the really silly things I believed when I was in college to
be absolute truths, only to find in the passage of time they were simply
projections of my dreams and fears on to the events of my day. It seems to me
there is a particularly vulnerable group there in the middle somewhere, too
early to recognize what things like Google would do to data retention, but
late enough that their thoughts and views made it into those archives. Ouch.

According to his LinkedIn page[2] Matthew Lynn has continued to be fairly
successful as a strategist so perhaps for him it is a non-issue.

[1]
[http://en.wikipedia.org/wiki/Albatross_(metaphor)](http://en.wikipedia.org/wiki/Albatross_\(metaphor\))

[2]
[http://www.linkedin.com/profile/view?id=3770629&authType=NAM...](http://www.linkedin.com/profile/view?id=3770629&authType=NAME_SEARCH&authToken=z62X&locale=en_US)

------
keeptrying
Great Quote: "Don't let that fool you into thinking that it matters. The big
competitors in the mobile-phone industry such as Nokia Oyj and Motorola Inc.
won't be whispering nervously into their clamshells over a new threat to their
business."

Nokia and Motorola and clamshells ... :)

------
Kesty
As much as people like to bash everyone who said in 2007 that the iPhone was
nothing more than an expensive toy has to remember that the iPhone didn't have
an application store (other than the jailbreak version) until July 2008.

And without the app store it was a great pice of engineering but if you didn't
saw a jailbreaked version it was a big phone (for the time) where you can play
music, watch videos and go to a completely non mobile friendly web with a
crappy browser. Add to that how expensive it was compared to other phones how
low the battery lasted and how fragile it was you can see why not everyone was
that impressed.

It's too easy to say 7 years later, look at this fool he was wrong.

------
kin
I remember this time. I, like many others, hated the iPhone. The app store was
young. There was no basic functionalities like copy & paste. There was no
multi-tasking between apps. You only had the option of one carrier (AT&T). The
list goes on. I stuck with the Blackberry. Then, Apple executed. It delivered
on hardware, and the app store blew up.

~~~
mark_integerdsv
I never understood you guys.

Blackberry had no apps so interoperability and copy and paste barely had any
use cases.

The other smart phones of the day were Windows powered bricks like the i-Mate
line which were so dog slow,and hideously unreliable that frankly I might as
well not have had a phone for the two years I used a K-Jam.

iPhone came on the scene and it was like for the first time it made sense to
lug around a larger device.

Best iPod ever on that thing. Big screen for videos, real browser and
everything it did do worked. Not like the Windows phones which had tech spec
as long as your arm but crashed if you tried to perform a most if the
functions.

Seriously, I remember having to remove the battery to reboot my device after
simply trying to connect via Bluetooth to a samsung flip phone. I didn't care
if the iPhone couldn't do that because I knew that the others couldn't even if
they said they could.

Caveat: I'm from South Africa and we never got the Palm phones this side.

~~~
easong
I was a big iPhone hater at the time. Still kind of am.

1\. It was really, really expensive when it first came out - there was a
several hundred dollar price drop before it really took off, IIRC.

2\. I had a windows mobile (HTC TyTN II) which was actually sweet.

2a. The slideout keyboard was way more accurate than the software keyboard on
the iPhone, and Apple hadn't entirely figured out autocomplete (I think their
keyboard is still poor compared to swipe etc, tbh).

2b. It was durable - it never died after being thrown off stairs, slammed on
the ground, crushed in backpacks, stepped on, getting dropped in a river, etc
etc. Towards the end of its lifepan, when I wanted to get an Android phone, I
found that I couldn't easily kill it even if I tried. On the other hand, my
friend shattered their iPhone by bumping their pocket into the corner of a
table.

2c. 3g, and ATT only. 2g is basically unusable for browsing the desktop web,
and ATT sucks.

2d. Anybody could, and many people did, publish whatever apps you wanted. I
was able to download a full offline database of German public transit
schedules and navigate flawlessly in cities I had never been to (which was a
big deal), SSH into servers in emergencies (using the aforementioned full-size
keyboard), full offline GPS of the continental US (something that's difficult
to come by even today!) and so on and so on. The iPhone on launch was
basically an expensive consumer toy, had no allowances for third-party
developers, and Steve was telling everyone that they were better off without
them.

In an expansion of my last point, myself (and a lot of other people) didn't so
much think that the iPhone was going to fail as dread its success. The iPhone,
and really Apple, represent and drive the trend of consumerization and broader
locking down of computing.

And I think that we were right to do so - the broader population largely
thinks of their handheld general-purpose computers as texting and passive
content consumption devices, because that's all they're allowed to be. And
that's sad.

------
markb139
I worked (contracted) in the Nokia world at this time. The big game changer
the iPhone bought and I think was missed by Nokia and others was the inclusive
and easy to use data. In the uk data on phones was very expensive and in some
cases you had to configure the apn yourself. iPhone changed all that virtually
overnight

------
krisgee
>The mobile-phone industry is becoming a cozy cartel between the network
operators and a limited range of manufacturers. It could certainly use a fresh
blast of competition from an industry outsider.

HA! Yeah that really worked out eh?

~~~
IBM
It certainly did but only for Apple. Everyone else doesn't have the market
position to make the same demands on carriers.

~~~
adventured
Has worked out extraordinarily well for Samsung. They're making $30 billion a
year in profit now, a drastic increase from five years ago. They have as much
clout as Apple does these days, if not more given their position in
manufacturing components.

------
jawaddeo
With hindsight it's almost funny how the author has managed to write this
nonsense with such self-assured tone, but at the time this view was quite
prevalent. Working at the time for Symbian, I remember meetings where Apple
were openly mocked by senior managers and technical leaders. The only
competition that mattered was from Microsoft and Android. The iPhone it was
believed, would never be sold beyond the niche high-end market. The most
silly, almost insincere, part of these beliefs was the fact that one could
walk down the street from our offices and pick up an iPhone at a price
fractionally higher than an average Symbian phone (with a contract of course).
There were many other reasons for the demise of Symbian as a platform (the
leadership was naïve, but had the most inflated egos in the whole of industry
due to their earlier success in 'scoring' Nokia), but the bottom line was that
they had no idea what consumers wanted. Boring old men still nostalgically
carrying their Psion 5s, whom I respected then and respect now for their
technical expertise, but not for their business or even technological vision.

A small minority that I was part of tried quite hard to convince our peers
that Apple were a serious threat. Everyone laughed at us, we were called Apple
fanboys and were never taken seriously. I left soon after in a state of
disillusion, but had to watch from the sidelines one of the most promising
British 'startups' disintegrate into absolute irrelevance. The managers who
ran this company into ground when it was the only one in leadership of that
industry should hang their heads in shame. Nothing to take away from great
designers at Apple and from the leadership of Steve Jobs, Apple owe a lot to
the incompetence of Symbian leadership.

------
avaku
It's easy for us to judge now. But if you read this article when it came out,
you wouldn't be so sure. This is the reason why not many analysts publish
reports that are contrary to "common" opinion. Because if everyone is wrong,
then it's fine, but if it's just that analyst - that's not good for them. We
should appreciate that this analyst tried to have a critical point of view.

------
poopsintub
I read similar articles when the Z10 by Blackberry was being release a year or
so ago. You had opinions of flops/world domination swinging both ways.

------
asharpe
Wow - how could they be so wrong. I especially like the incumbents: Nokia and
Motorala ... where are they now?

~~~
Navarr
Motorola just finished launching their what appears to be fairly successful
Motorola X and G lines under the Google name (after being purchased by Google)
and is being sold to Lenovo.

Motorola is making the best phone I've used to date.

Nokia is making amazing camera phones with Microsoft.

In my world it's "where is apple now?" None of my coworkers were super pumped
about the new iPhone. Before they left the company they were pumped about iOS
7 but just barely ("thank god they got rid of skeumorphism").

To me, despite how wrong this article was, the headline itself looks like
it'll be coming true. Apple has been playing defense these last two or three
years. Immense props for their initial creation, but the movement it spawned
will end up much more wildly successful than Apple will. And the iPhone will
fail in a late, defensive move.

~~~
SG-
I haven't seen the new moto phone anywhere myself or heard it make any news
other than Verge type site reviews, so what does "fairly" successful mean?

Nokia isn't making anything amazing these days, i suppose they are making the
phone with the highest megapixels and phoney ads pretending it was shot on the
phone.

~~~
Gigablah
> Nokia isn't making anything amazing these days

Uh, what? I ditched my Nokia a while ago (I hated the ecosystem) but the Nokia
Windows phones are undeniably rock solid hardware.

~~~
SG-
I'm not saying the Nokia Windows phones are good or bad, but they aren't
amazing and rocking the market right now. But your comment brings up another
point, it's not just about the hardware these days like it used to be for
phones, software is just as important.

------
atmosx
Actually, I shouldn't blame the guy too much, except from the fact that he is
getting paid to state opinions at Bloomberg, so he should be way more careful
in the future.

I was sure the iPhone would be disruptive and the 6 month-early presentation
(if I recall correctly) was enough to show an interface that was like 30 years
ahead of Symbian.

That said, I was plain wrong on the iPad... It was way more disruptive than I
initially thought. But to me, creating content is important, that's why a
tablet would always lack something for me. But others apparently appreciate
the intuitive interface and ease of use in every day life.

~~~
pjmlp
Except Symbian had a touch screen UI in the form of Nokia 7710 a few years
before the iPhone, but Nokia killed it shortly after releasing it.

~~~
pavlov
Nokia wasn't the first. There were Symbian touchscreen phones with a full-size
display as early as 2000:

[http://www.gsmarena.com/ericsson_r380-195.php](http://www.gsmarena.com/ericsson_r380-195.php)

The Sony Ericsson P800 is probably the best-remembered in this category. (I
think I read somewhere that Steve Jobs once mentioned the P800 as an
inspiration for the iPhone -- basically he told his staff: "Let's do this kind
of device, but better.")

Anyway, the Symbian touchscreen devices were more like Pocket PCs than
iPhones. They didn't really manage to break out of the desktop UI mold.

Apple was the first with capacitive multitouch. They also invented the modern
mobile web browsing experience, where the window size is separated from the
viewport and you can zoom/pan around with realtime feedback. This seems
obvious now, but think back to what it was like to use the mobile web in
2006...

~~~
pjmlp
Yep, I forgot about Sony devices.

I used the mobile web since the early GPRS days. Remember WML?

Although they lacked capacitive multitouch, Symbian devices before 2006
already had zoom capabilities.

My N70 could already zoom in for content, if I remember correctly.

------
quanticle
As one of the people who fiercely defended Nokia on Hacker News when the
iPhone launched, I'm entirely willing to say I was wrong here. I drastically
underestimated how quickly Android powered smartphones would become cheap
enough to eat into Nokia's marketshare and profits, and I totally
overestimated Nokia's leadership's ability to pivot and deal with the
situation.

~~~
pavlov
I'm in the same boat. I believed that Nokia's market power would let them
react quicker and outgun everyone else on price when necessary. I thought that
Apple would treat the iPhone like the Mac, relegating it to a profitable high-
end niche with 3-5% marketshare.

Nokia was killed by their incompetence in software. Symbian was originally a
lightweight OS designed for constrained devices... But somewhere along the way
it got turned into a "worst of all worlds" operating system with enormous code
bloat, useless desktop-style features and several half-hearted touch UI layers
all rolled into one big ball of fail.

It seemed like nobody at Nokia noticed this. I guess the middle managers were
either afraid to pass the bad news up the chain, or more likely, they were
totally clueless about the ongoing code gangrene.

------
__david__
Failed predictions are very humorous to read in hindsight. This one is up
there with:

 _No wireless. Less space than a nomad. Lame._

------
cdooh
"The mobile-phone industry is becoming a cozy cartel between the network
operators and a limited range of manufacturers. It could certainly use a fresh
blast of competition from an industry outsider." This statement is still true
unforunately despite what ever else the article says

------
aneeskA
He almost says the reason why it will be a hit (the-best-of-all-world!)

"Instead of lugging around a phone for making calls, an MP3 player for
listening to music, and a Blackberry for checking your e-mail, you can do all
three on one device. Even better, you only need one charger."

But failed to understand it!

------
LeicaLatte
Of course no one saw it coming. Especially the media.

But "Will Fail"? Please. That stands as a terrible headline, no matter what.

------
dalek2point3
I like the byline:

(Matthew Lynn is a Bloomberg News columnist. The opinions expressed are his
own.) How he wished this was different ...

------
scrrr
Another example that shows that humans are not very good at predicting the
future.

------
curiouslearn
Thanks for sharing. This is an awesome read!

