Daniel Eran Dilger in San Francisco
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iPhone Grabs 27% of US Smartphone Market

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Daniel Eran Dilger
Last month, after Apple beat its announced goal of selling a million iPhones by the end of September a couple weeks in advance, Dan Frommer of Silicon Alley Insider announced that Apple was convolutedly “below plan” for meeting its 90 day goal in 74 days, and figured that Apple would only be able to sell about half of its longer term 2008 goal of 10 million phones. A month later, Frommer is now pointing out that Apple has 27% of the US smartphone market.


The Problem with Statistics.
Why the dramatic reversal? Back in September, Frommer calculated a fixed “run rate” for the iPhone that suggested sales would continue at the same pace as its first full quarter of sales. Of course, that’s not the pattern set by iPods, or game consoles, or really any other consumer device that has ever gone on sale.

Frommer arrived at his “run rate” number by subtracting the 270,000 iPhones sold in a day and a half in June from the million units Apple reported sold in early September, and concluded that Apple must have only 700,000 new phones over the previous 74 days, or about 10,000 iPhones per day.

Apple subsequently reported sales of 1.12 million iPhones for that quarter. If Frommer was right in his calculations, that means Apple sold another 420,000 iPhones in the remaining 18 days of the quarter, reaching a new pace of 26,250 iPhones per day, no doubt assisted by the price drop in early September.

200711211606

Why Dan Frommer and Scott Moritz Are Wrong on iPhone Sales

How Many iPhones?
Apple’s iPod sales historically tripled with every winter quarter. It seems hard to believe that Apple’s iPhone sales would triple this winter quarter, but it is obvious that Apple will sell more iPhones this winter and the next than it did in the previous quarter and that it will in each and every other quarter in between.

That inevitability has resulted in hot anticipation for finding what kind of sales Apple will earn this winter. Based on retail sales reports from NPD, Analyst Gene Munster of Piper Jaffray estimates Apple will sell 25 million iPods, eclipsing last year’s record of 21 million iPods sold in the winter quarter.

Apple doesn’t announce weekly sales results, and groups like NPD only factor in retail sales from outlets they obtain data from, which excludes Apple’s retail stores and online sales, the primary channel for iPhone shipments. NPD does calculate in estimates for other retailers it does not track, including WalMart and specialty vendors.

Those statistics provide a general overview of how large markets are, and how well individual vendors are competing in the market. They can’t provide accurately detailed monthly figures for the iPhone however, because NPD simply doesn’t have a first hand report of Apple’s sales until they are released on a quarterly basis.

Apple on track to sell 25 million iPods this quarter – AppleInsider

Frommer: iPhone Grabs 27% of the US Market.
For the last July to September 2007 quarter, NPD reported US sales of 4.2 million smartphones, a 180% increase over the same quarter last year, when only 1.5 million were sold. Of those 4.2 million units, Apple sold 1.12 million iPhones, representing 27% of the US market, Frommer noted. In other words, more than one in four smartphones sold in the US were iPhones.

The iPhone in Q3 2007 Smartphone Sales

It’s also interesting to note that a large chunk of the new growth in smartphones can be attributed to Apple. It’s hard to say whether that’s because the iPhone attracted a new audience to the smartphone market by offering an approachable product, or if Apple simply gobbled up a large portion of the existing demand that would otherwise have resorted to smartphones using software from Palm, Symbian, RIM, or Microsoft.

In either case, it makes it more obvious why competing phone vendors and service providers are attacking the iPhone in a frothy foam war that seeks to artificially associate it with all sorts of problems, from security to price to the recent meme that tries to suggest that the iPhone’s onscreen keyboard somehow injects typing errors that flummox users with calamitous troubles.

Smartphone Sales Soar, iPhone Grabs 27% Of Market – Silicon Alley Insider
UnWired! Rick Farrow, Metasploit, and My iPhone Security Interview

It Keeps Getting Better.
Overall, NPD counted 38 million mobiles sold in the US in the same quarter, which gave Apple almost 3% of all of the nation’s new phone sales in its first full quarter of sales. Incidentally, in just a day and a half of sales in June, Apple sold over 1% of the phones in the previous quarter.

Apple’s 3% US market share among all phones means the iPhone already has three times the penetration in the US, its first market, as the public 1% goal Steve Jobs set for worldwide iPhone sales by the end of 2008, even before heading into its important first holiday quarter.

Sales outside the US will likely be more difficult, as the competition is more credible in Europe and Asia, and the service expectations are different. As Apple attempts to break the stranglehold service providers have over the mobile market, challenged providers are fighting back.

Vodafone Attacks the iPhone.
After Vodafone refused to meet Apple’s demands for reduced service fees in order to become the exclusive provider of the iPhone in Germany, Apple teamed up with T-Mobile. Vodafone–which owns half of Verizon Wireless in the US–has since attempted to force Apple to give it access to iPhone users without lowering its prices by suing T-Mobile in court to stop sales of iPhones tied to its rival provider in Germany.

The result is that T-Mobile now sells the iPhone in Germany without a service contract for an additional premium of 600 Euros, or about $885. That’s the same unlocked price premium that will be offered by Apple’s partner Orange in France, according to sources familiar with Apple’s plans for dealing with mobile regulations in France.

Customers are unlikely to volunteer en mass to pay such a premium just to use the iPhone on other carriers, allowing Apple to continue to leverage its partnerships with providers that will agree to offer lower service plans, customized mobile features, and to subsidize the hardware cost of the iPhone in order to gain new subscribers.

Industry attacks iPhone sales strategy – Heise

The iPhone Engine.
Combined with the fact that iPhone users consistently report high satisfaction ratings, Apple’s early strong entry will mean that the iPhone will sail into the winter quarter with hot word of mouth advertising. Existing buyers purchased the iPhone based on its advertised features; iPhone users are now talking to their friends about it, which will result in snowballing sales.

According to market research by Changewave from last month, RIM’s popular Blackberry was the only other mobile besides the iPhone with more than 50% of its customers reporting they were very satisfied with their phone. Apple earned a very satisfied rating from 82% of its users, up from 77% in August.

iPhone Satisfaction

Apple Doesn’t Disappoint – Changewave
Early iPhone Adopters Extremely Satisfied – Seeking Alpha

Add in the new iPods and phenomenal growth in Mac sales, and Apple has three hot engines to attract shoppers, each of which acts as an advertisement for Apple’s other products. And the competition? There is no standout competitor to the new Nano and Touch, there are few strong competitors to the iPhone, and PCs running Vista are looking more like a Mac advertisement than a competitive factor.


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35 comments

1 osViews | osOpinion { 11.22.07 at 11:30 am }

iPhone Grabs 27% of US Smartphone Market…

iPhone Grabs 27% of US Smartphone Market
Last month, after Apple beat its announced goal of selling a million iPhones by the end of September a couple week…

2 Baroosk { 11.22.07 at 12:48 pm }

Wow! No offense, but is that a ClarisWorks 4.0 chart? it looks sooo retro– almost outta place in an atricle on the latest (& greatest) 2007 brilliantphone.

I still love how efficiently such a graph presents info tho…

Just my 2 1/2¢
John
Fairbanks, AK

3 Rich { 11.22.07 at 3:18 pm }

“Sales outside the US will likely be more difficult, as the competition is more credible in Europe and Asia, and the service expectations are different.”

I can’t wait to see the numbers from Europe. From what’s been reported, and from what I’ve seen in stores, it’s been a relative flop compared to the US launch.

Judging by the feedback I’ve heard, it’s for a number of reasons:

– The tariffs being offered are very poor value for money. O2′s basic iPhone tariff is twice as expensive as the equivalent tariff (inc. unlimited data) on Three.
– Europeans are not used to paying for their phones. The iPhone has the double whammy of being an expensive phone on an expensive range tariff.
– The SMS support is poor. Poor SMS support might not be a deal breaker in the US, but 1 billion SMS are sent per week in the UK alone. SMS functionality has got to be fantastic.
– There’s other phones with more features available for less money. The obvious contenders at the Nokia N95 8GB and the Sony Ericsson K850i.
– No 3G. 3G might not be a big buzz word in the US, but everyone in Europe knows what 3G means and what its benefits are. Sprite even branded their energy drink “Sprite 3G”.

I wonder how much of this will be “fixed” when the iPhone v2 is released.

4 Silencio { 11.22.07 at 4:38 pm }

That is a fugly bar chart for sure, but Daniel didn’t make it. It was part of Changewave’s report, so blame them for the “quality” graphics.

As for the sales reports from Europe: I’ve only seen the one from The Register that claimed that customer turnout for the first night of iPhone sales was pretty dismal. However, the CEO of O2 claimed they had sold “hundreds of thousands” of iPhones in the first week of sales in the UK.

http://money.cnn.com/news/newsfeeds/articles/newstex/AFX-0013-20911760.htm

One thing Apple proved decisively with the iPod: people will flock to your product if it has the features they really want and you make them easy and fun to use. The Nokia N95 and S-E K850i, for all the bells and whistles they pack, are still way too clunky and awkward to use IMO.

5 danieleran { 11.22.07 at 7:10 pm }

@Rich,

We already know the iPhone is selling well in Europe. O2 described it as the fastest selling phone ever. There may not have been the launch lines like the US Apple stores, but there were not launch lines at AT&T stores in the US either. There are few Apple stores in Europe.

How does O2′s tariffs on the iPhone vs other phones compare? How can you compare unrelated items?

Americans are not really used to paying for phones either. While a few phones have debuted at $500, the advertised cost is almost always $99-150 with subsidies. This is really advertising fraud on the part of mobile companies.

iPhone SMS service is not poor.

The N95 and the K850i have some impressive features and are the very best that Nokia and Sony Ericsson deliver. They do not match the usability of the iPhone. The fact that you can find competitors does not mean the iPhone is not competitive.

Verizon and Sprint heavily market 3G EvDO in the US, and AT&T does offer 3G UMTS, so its not like Americans don’t know what it is. The problem for 3G is that most mobiles are so bad that they nullify the speed potential of 3G networks. That is why Apple partnered with the Cloud, as you are aware.

It would obviously be an advantage to have faster ubiquitous network access on the iPhone, but its battery life, WiFi, and serious applications provide a strong competitive check to crappy phones that can only advertise “being 3G” and “being able to juggle new batteries for” while lacking much actual practicality.

I don’t think its credible to “wonder” if the iPhone will be upgraded. Apple announced that it would support 3G networks in late 2008.

6 avocade { 11.22.07 at 11:20 pm }

Wow, Daniel, as a European (living in Germany currently) I really have to take offense with some things you commented on here:

“How does O2’s tariffs on the iPhone vs other phones compare? How can you compare unrelated items?”

It’s a phone. The €399 price means it’s an expensive phone, but of course the price is worth it for all the extra functionality. There’s nothing out there like it, and it’s priced like that from the get go. I still think it would be worth €599. Now, for the other part of the TCO…

The tariffs from O2 and especially from T-Mobile (hardly any minutes included in the low-priced plan) are quite ridiculous for European carriers. We’ve had flat-rate data plans for quite a while now (3G data plans), as Rich said, from e.g. 3.

I wouldn’t take offense with the tariffs nearly as much if I could change SIM-card when I went outside the country. This is what’s holding a great deal of people back still, not wanting to go personally bankrupt forgetting to turn off the email-checking going on a one-week holiday.

“iPhone SMS service is not poor.”

Then I guess you don’t use it like many of us do. Not being able to send to multiple recipients is a mind-numbingly weird decision. I can see how the iChat-interface would be a bit harder to figure out, but this is still Apple we’re talking about, no?

7 kennmsr { 11.23.07 at 12:00 am }

Don’t know what AT&T lines you were referring to, but at the AT&T store line I waited in there were over 100 people when the doors opened at 6PM and they sold out of their 60 phones in 40 minutes even though the staff had been asked to work late until 10PM. They didn’t even have a demo. I left the store activated the phone (you were not allowed to open the iPhone in the store) from my Apple laptop using my AT&T wireless card and returned to the store to demo the unit for the staff that was stuck there for 3 more hours.

8 Rich { 11.23.07 at 2:41 am }

“How does O2’s tariffs on the iPhone vs other phones compare? How can you compare unrelated items?”

£35 gets you 200 minutes, unlimited EDGE data and Cloud wifi access on the iPhone’s basic O2 tariff.

£20 gets you 300 minutes and unlimited HSDPA data on 3′s Mix’n'Match tariff. Even their 1100 minute tariff is £3 cheaper than o2′s cheapest iPhone tariff.

3 don’t have the Cloud WiFi access but I’ve used Cloud in the UK and it’s really slow. It’s faster and simpler just to use my HSDPA phone as a modem.

“Americans are not really used to paying for phones either. While a few phones have debuted at $500, the advertised cost is almost always $99-150 with subsidies. This is really advertising fraud on the part of mobile companies.”

Here’s an example:

I can get the Nokia N95 for free on a £35 per month contract. I can then spend the £269 I saved on a 16GB iPod touch. I’ve suddenly got two devices, but I’ve also got the best of both worlds.

“iPhone SMS service is not poor.”

From a European perspective, it is poor. As I said, 1 billion SMS are sent in the UK each week. It’s already been highlighted that the iPhone can’t send SMS to multiple recipients or forward SMS. To a European, that’s poor.

This is why I was wondering if Apple with fix the problems with the iPhone in the second version. If they take your attitude towards SMS then I doubt they will.

9 russtic { 11.23.07 at 4:25 am }

In fairness the tariffs are similar to o2′s other tariff particularly if you factor in £10 for cloud. The problem is paying for something you are unable to use – seeing as I have no cloud hot spots near where I work or live. As such I would much prefer £10 more calls/texts.

3G reception in my area of the UK is poor so I would prefer the battery life! As for the SMS issues I would be surprised if these niggles are not resolved. It is a v1 device and frankly I have found it to be the most enjoyable and usable phone I have ever had. Well worth the money.

For info I live in Hull, and have previous owned both win mobiles and Nokia smartphones including the N80i.

10 iPhone pakt 27% van Amerikaanse smartphone-markt » Nieuws » iPhoneclub.nl { 11.23.07 at 5:11 am }

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11 gus2000 { 11.24.07 at 12:31 am }

I queued up for the iPhone launch in front of an Apple store at a local mall. Almost directly below on the lower level was an AT&T store, and I checked in on them periodically during the day. While the Apple store had hundreds of people in line starting at 6AM, there was no one in line at the AT&T store until mid-afternoon. By 6PM, there were 30 or 40 people as opposed to the Apple store that had a line wrapping around the concourse. I think it was more about the experience than just getting Being The First On Your Block.

On SMS: while iPhone could have more features (like multiple recipients), I like it because it’s made SMS easy enough to use. I’ve sent more text messages with my iPhone than all other phones I’ve ever owned combined. If any of them supported multiple recipients, I never figured that out, nor used the feature enough to care.

12 thebob { 11.24.07 at 4:35 am }

I think they must be saving the iPhone V2.0 for Japan. Millions of young office ladies will buy this phone. I have seen people here record one half of a conversation on an iPod Touch, and play it, filling in their half, just to pretend it’s an iPhone.
I just wonder who they will partner with. DoCoMo are almost anti-Mac here, and Softbank have poor reception in many areas.
I’d love to see Apple buy a carrier and just go all out. Japan is a very Mac loving place. Once this hits Asia, I just hope they can build enough!

13 Misha3d { 11.24.07 at 7:07 am }

I live in Germany and I think you missed some of the obvious facts.
T-Mobile is the most expensive carrier in Germany. It is also the largest carrier, though one that ranks very low in customer satisfaction, hence lots of people leaving every month. For this reason lot’s of people are rather unhappy with Apples decision to go with T-Mobile. Personally I had hoped for O2 here.

I don’t know what you base your assumption about Vodafone not wanting to lower their service fees.
Comparing their service tariffs Vodafone offers at least twice the bang for the buck.

For 19.95 Euro per month with Vodafone you get unlimited data, unlimited minutes to VF (Vodafone) and into to wired phones. You pay 29 Cents for all other calls (39 Ct T-Mobile) and 19 Ct for SMS (39 Ct T-Mobile). Which is in my opinion a far better price. And there are even better offers from other carriers.
Personally I don’t need the unlimited data plan as I already have free data where I am mostly at (Café’s, University, work place, home). I’d need a phone to, well, call other people mostly, but these tariffs are just plain rip off for this type of customer.

Another point in your article relates to VF trying to stop T-Mobile from selling the IPhone. Wrong!

The complaint was made to force T-Mobile to sell the phone unlocked or Apple to sell the phone through other retailers.

Concerning the sms functionality – I don’t own an IPhone, but from what I’ve seen, the IChat interface is one big downside for me. It is just eye-washing and a big waste of precious small screen space. I don’t even use IChat on my Mac for exactly the same reason that it won’t let me change it’s look to something less playful.

The IPhone is a great device and I am thinking about getting one, but for the time being it just doesn’t offer enough advanced functionality. All it has is a very nice looking very usable interface, but other phones have better hardware features (exchangeable battery, exchangeable memory, better camera) and features (modem anyone?). So for now I’ll wait and see…

14 Rich { 11.24.07 at 9:35 am }

“I just wonder who they will partner with. DoCoMo are almost anti-Mac here, and Softbank have poor reception in many areas.”

DoCoMo doesn’t have a GSM network, but they would be the obvious partner for a WCDMA iPhone. Apple have gone with the biggest player in each market and NTT DoCoMo have by far the largest slice of the Japanese market.

15 vfbr2001 { 11.29.07 at 8:11 am }

The iPhone is brilliant – but it is not selling brilliantly in the UK. I live in the UK and own an iPhone but the tarrifs are so bad. As it is almost Christmas we are being bombarded with tv ads for phone companies and it makes me feel ill to watch all of the fantastic plans and rates O2 offers that I cannot use. I am going to Japan for New Year and will have to switch off most of the phone to avoid costs.

The SMS is a problem. Everyone I know texts like mad – O2 offers some fantastic deals to non-iPhone users. The ability not to send a multiple text or to be able to forward one is very annoying. I also cannot send a picture text which is also bad.

If everyone had an iPhone then this would not be a problem as I could simply email people on the move. Unfortunately when everyone else has a 3G phone and uses SMS and MMS, my shiny device is at a disadvantage! The other day at work a colleague asked me to bluetooth a picture to her. I couldn’t do it! The she asked me to MMS it and I couldn’t do that either. She couldn’t receive email on her phone.

So great phone, but the USA market is very different to the European market and I am guessing that this again will be very different to other markets. The Japanese have the most advanced markets in the world, even if they do not have the iPhone; and that’s the problem with most American companies if you are not an American living in the USA. The market is so huge in the USA that almost everyone else is not considered. Fair enough as Apple can concentrate on one territory and maximise its profits but it can also mean that other ideas and values can be over-looked. This phone is the first phone I have really loved but it has also made me question my devotion to Apple for the first time.

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26 harrywolf { 01.06.08 at 8:54 pm }

Complaining about the things the iPhone doesnt do because you want those things isnt good analysis.

However, as everyone here seems determined to insist that their subjective usage is somehow the objective representation of the majority, heres my totally subjective view:

I only ever text one person at a time – and because these are personal messages, I NEVER forward them. I use it (always have) for very personal stuff.

SMS on the iPhone, therefore, is perfect.

3G being faster seems a non-issue to me – everything I do on the iPhone feels great – and quick – and I cant DO things on other phones, no matter how ‘fast’ they are.

I guess thats the real point I wish to make:
You can pay less money – but you DONT get an iPhone.
You can get ’3G’ – but you DONT get an iPhone.
You can send a picture by bluetooth (why?) – but you DONT get an iPhone.
You might find better rates – but no iPhone.

As with most things, the list of ‘features’ and the cost has very little to do with the satisfaction level of the object.

If it was about money and a list of spurious ‘features’. presumably I would still be in constant danger of throwing my Razr at the nearest brick wall.

Thanks to the iPhone, the Razr I used to have has been sold to someone with less taste and more patience than me.

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33 aayush61 { 04.08.08 at 5:31 pm }

Daniel… O2 offers unlimited data for 7.5 pounds for other phones… Add that to a 20 pound sim-only plan, you get 400 minutes, 500 sms’s and unlimited browsing for 27.5 pounds only… What you now need is just a unlocked iPhone… which is not tough to get by, isn’t it??

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