iPhones and the 10 Million Prediction

Steve Jobs hopes to sell 10 million iPhones between July 2007 and 2008. Many people have questioned the feasibility of this number. The people over at Arstechnica say that 10 million is actually a lot harder than Apple made it out to be due to the size of the smartphone market. One claim Arstechnica makes is true: Jobs definitely over-reported the size of the market he was entering.

Last year, 80 million smartphones were sold. If apple wants to sell 10 million, they have to grab a lot more than 1% of that market (more like 12%). Up to this point, it looks as if Apple has a pretty tough up hill battle.

But I believe this prediction is short-sighted and ignores a few crucial facts.

The Market

First, the smartphone market is growing at a mind numbing rate. Last year, it went from 46 million to 80 million: a 175% change. It’s always hard to know if you’ve hit the top of a curve, but last year, the world bought one billion cell phones, in line with what Steve said. So with less than 10% of all phones being smartphones, it’s clear that the smartphone market has plenty of room to grow.

Convergence

To be honest, I think most people aren’t thinking about the Internet features of the iPhone. Most people simply haven’t been exposed to mobile Internet to understand why people refer to the Blackberry as the “crackberry.” Thus, what people see when they look at the iPhone is:

1. Music
2. Videos
3. Cell phone

People have been demanding that these devices converge for years, as evident by the recent media phones by companies like Verizon. This alone should be a reason why the phone will sell. Can you name any other product that had people demand it be made half a decade in advance? Any?

The News Media

The last and most important reason why the iPhone is likely to kick butt has to do with the media. Ever wonder why there is such a media circus around the iPhone? Ever wonder how articles full of nothing but iPhone speculation made it into respectable newspapers? Why is it that even though there are many other more capable phones out there, the iPhone continues to get all the press?

Because the iPhone appeals to average Joe and the media recognizes this. Apple carved out a new market for smartphones. The iPhone has a camera and media features that place it in a separate bucket from the “productivity” smartphones. Apple’s phone is for casual use.

Market Growth

So right now, the smartphone market, aimed only at business people, is 8% of the global market. This is after sales grew over 70% two years in a row.

Arstechnica was making its prediction based on the idea that the market doesn’t grow. But what happens to that share when smartphones suddenly open up and are actively marketed to regular consumers? What happens when Apple’s marketing team starts marketing the phone as the next “in” thing to have? What happens when you start seeing celebrities using them and showing them off at movie premiers?

Just like Nintendo stole the PS3 thunder, Apple will turn the market upside down by flooding it with a ton of new, previously uninterested consumers. It’s not a done deal, but the metrics used by Arstechnica hardly speak for themselves.