So the Verizon iPhone arrives, iOS is finally multicarrier, and consumer first-day reaction is “meh…not interested”. Honestly, I wasn’t expecting this.
Yes, I predicted, based on looking at AT&T’s 4Q2010 numbers, that Verizon iPhone sales would be “anemic”. There are statistical clues that AT&T has already largely saturated the market of people who really want an iPhone. But the way I was expecting things to play out was for a strong initial burst of sales to true believers to be followed with an unusually rapid fall-off. This is not the result we got.
All day, reports were of short or no lines at Apple stores; several news stories reported that Apple employees, reporters, and cops laid on for crowd control consistently outnumbered the actual customers.
It is just as interesting that Apple and Verizon seem to have been caught completely flatfooted by the slackness of demand. They overstaffed, overprepared, and in all ways behaved as though they were braced for a buyer feeding frenzy. This, of course, had the effect of emphasizing that slackness.
I have no doubt that Apple and Verizon’s publicists will be engaging in some frenetic spin control over the next week. You’ll hear a lot of talk about record pre-order levels for the iPhone V, but watch for what you probably won’t hear – actual sales numbers, either for pre-orders or first-week in-store volume. What we’re likely to get is evasiveness on a par with Microsoft’s refusal to speak figures about WP7 sales. And what that will mean is that all three companies are running scared of what market analysts will say when they learn that a much-touted product has bombed.
I’m confident in these predictions because we know what success looks like; we’ve seen it often enough with the first-day frenzies surrounding previous iPhones. But that dog has failed to bark this time. Stage ignition not achieved, Houston we have a problem.
What happened here? How did a product that had been the focus of almost worshipful intensity fizzle like this? And what conspired to fool Apple and Verizon about the demand level?
Several hypotheses suggest themselves. One, which I’ve discussed here before, is simply that iPhone V is a weak product. It’s a serious problem for Apple that its phones only handle 3G when the transition to HSDPA and 4G/LTE is well underway; there were signs that this was impacting demand as early as the iPhone 4 launch last summer.
Ever since, it’s been clear that Apple must be bleeding potential customers to faster Android phones like the Sprint EVO and T-Mobile G-2. Nobody knew in what volume, but a craving for faster data rates was differentially more likely in the elite professionals, creatives, and youth market that Apple targets especially heavily. Now I think we’re getting a clue that this was not minor lossage – that, in fact, Android has siphoned off essentially all the growth there.
Another hypothesis is that the mass of iPhone customers were never as brand-loyal as the company believed. It may be they only looked that way because for the first couple of years after the 2007 launch there was nothing to match the product in features and perceived quality. Support for this one comes from the fact that iPhone market share has been much larger than Apple computer market share. The question we should perhaps thought to ask was this: if the iPhone was creating Apple loyalists in volume, why did their PC market share remain stable at a much lower level?
Now it’s 2011, the iPhone V is surrounded by cheap Android handsets with faster networking, and it begins to look as they have sucked away almost all the demand that we might otherwise have seen as block-long lines at Apple stores today.
As for how Apple and Verizon got fooled…well, one of the dangers of being really good at marketing is that you can start believing your own hype. Apple, if not Verizon, is a company composed almost entirely of people from the same demographic niches it has focused on in the past. I think they may be beginning to have trouble seeing outside that bubble.
The reality check is: how many of the phones did they actually sell, in preorders and today? How many will they sell over the next few weeks and the quarter? This is a question that we should not stop asking, and the importance of asking it rises directly with Apple’s reluctance to answer.