10 Years Old and 1.2 Billion Sold: The Business of iPhone
Before the iPhone landed like a meteorite in 2007, it wasn’t clear that a revolution in mobile phones was coming or even necessary, says Benedict Evans, partner at Andreessen Horowitz. Back in 2006, it seemed that the devices, like cars and cameras, were making slow and steady progress with incremental improvements in design and technology. Desktop computers were dominant, but mobile phones also had features and apps, though they were expensive and distribution channels restrictive. Text messaging was possible but cost a lot, and users could browse the internet, although it was so difficult many didn’t bother. The iPhone changed all that.
This talk is the last in a four-part series undertaken for the Exponential Center’s iPhone 360 Project. The series of talks took place at the Computer History Museum throughout 2017, on the occasion of the 10th anniversary of the iPhone. Organized by the Exponential Center, in collaboration with curators and other team members across the Museum, previous panels explored the prehistory of the iPhone and the design and development of its hardware and software. This panel considers the impact of the iPhone on the economy and business. The groundbreaking device integrated apps into software in a holistic design that also created opportunities for new business models. The App Store created a novel platform to monetize the creation and distribution of content. In 2016 1.3 trillion dollars in revenue were generated by the app economy.
Unprecedented integration across all features on the iPhone essentially changed the way that communication could happen. An app suddenly had access to a user’s address book and location, a camera, and countless other information all at once. Now, the phone wasn’t just used to speak to someone, communication could also take place through text, images, video, and social media. However, it took time to understand how to create new businesses around different aspects of the smartphone.
In the case of social media, the presence of address books and photo libraries and push notifications on the smartphone that are seamlessly accessed by different apps makes the experience of engaging in social media much easier than navigating through multiple websites on a desktop. The smartphone itself has become a social platform, radically unbundling more complex websites across a number of apps. In the case of Facebook, for example, the purchase of native apps such as Instagram and WhatsApp allowed the company to adapt to the new circumstances created by smartphones. These features are all easily accessible as icons on the smartphone. What this means for the user is that you don’t have to access the internet, open a webpage, and navigate to what you want to do—you just click once and there you are.
Ten years after iPhone’s debut, billions of people own smartphones in an ecosystem large enough to support competing operating systems. While Apple aims to supply expensive devices to affluent users and has captured the bulk of the profits, Google’s Android phones target the mass market. China has benefited from its position as the hub of the global supply chain, and the country is also the site of countless copycats and ferocious competition. Though carriers may have lost control over the features offered on their customers’ smartphones, they have adapted their business model to charge for data rather than phone service alone. This proved to be a wise move; in 2017, smartphones used 42 times more data than voice. But, inevitably, some in the ecosystem were unable to adapt. Companies like Nokia, Palm, and Blackberry had been early innovators in the mobile market, but they developed their platforms at a time when memory and bandwidth and power were the greatest concerns. They lost out when the revolution came.
Because of the revolution sparked by its iPhone, Apple itself has changed, transforming almost overnight from a much-loved PC company with a small but devoted market to the most valuable company in the world. Over 60 percent of Apple’s $216 billion in revenue is contributed by the iPhone. The iconic smartphone even leap-frogged over other Apple products. Enthusiastic buyers have not been tempted to buy iPads, iWatches, and Apple TV in large numbers—they’ve got everything they need on the computers in their pockets.
Related iPhone 360 Events
- Computing in Your Pocket: The Prehistory of the iPhone in Silicon Valley, March 2, 2017
- Computing for the Whole World: A Conversation with iPod & iPhone Inventor Tony Fadell, May 10, 2017
- Putting Your Finger On It: Creating the iPhone—Original iPhone Engineers and Software Lead Scott Forstall in Conversation with Museum Historian John Markoff, June 20, 2017
Watch the Full Conversation
About iPhone 360
The iPhone 360 explores the story of iPhone, from its prehistory, inception, and launch, to its evolution and impact. Coinciding with the 10th anniversary year of the iPhone launch in 2007, iPhone 360 includes integrated initiatives across the Computer History Museum to create new collections of artifacts and oral histories, scholarly research and insights, dynamic events, and educational content and curriculum.
The iPhone 360 Project is part of the Exponential Center 360 series focused on transformational companies and products that have changed the world through technology innovation, economic value creation and social impact. This series supports the Museum’s overall interpretive strategy to explain computing’s history and its transformational impact on our world.