Ten Years In- Part II: Where Are We Now and Where Are We Headed?

IPhone Lineup

In Part I of Ten Year In, we talked about Steve Jobs’ iconic original iPhone announcement in January of 2007, and how it looks in the light of history. Ten years is a perfect time to look back at where it all started. Now let’s go from there up to the present. Where are we now, and how did we get here? Let’s take a look.

Humble Beginnings

IPhone 3G

While the original iPhone achieved more status as a technolgical and design wonder than sales success, that quickly changed with the release of the iPhone 3G. Apple and AT&T making the decision to offer the iPhone on a two year contract with subsidy was significant, because it brought the price down to a level that far more people could afford. I think a lot of people outside the tech community have either forgotten or never knew that the original iPhone had to be purchased outright, and was contract-free. That was far outside the norm in 2007.

The other big shift at the release of the iPhone 3G was obviously the addition of the capability to run native 3rd Party Apps an the beginning of the App Store. THIS was the real game-changer, as the exponential early growth of the App Store became the engine that quickly drove the iPhone to heights most didn’t expect. Add in 3G Internet capability in place of the outdated Edge connectivity of the original iPhone, and the 3G was a giant leap forward.

Off to the Races

The iPhone 3G and 3GS established Apple as a force in the smartphone world, and the devices became cultural and design icons. They established cusomer satisfaction standards that no previous smartphone had ever approached, and were easy enough to use that everyday peolple were drawn to them. Feature-wise, Android quickly caught and surpassed early versions of what was then called iPhone OS, but the usability and build quality of the iPhone, both of which remained far superior to the competition for a few years, helped to keep it in the forefront with US consumers.

IPhone 4 and 4S

However, it was the release of the iPhone 4 where Apple threw down the design gauntlet and absolutely lapped the field. As sucessful as the 3G and 3GS were, the stylized glass and metal industrial design of the 4 just stood out. It wasn’t just in comparison to other phones, either. The iPhone 4 was unique in comparison with most consumer products. It was the embodiment of afforable luxury, which is exactly the kind of image that Apple had been actively cultivating since Steve Jobs returned to the company. It almost seems like a footnote now, but Apple was also the first manufacturer to get serious about screen technology with the original Retina Display. It stood out among all devices for almost a year after its release, and touched off a wave of screen thechnology innovation and improvements that swept through the smartphone industry.

Top of the Mountain

Siri

The iPhone 4S was another leap forward, as Apple introuduced Siri, the first phone-based voice phone assistant, and also rolled out iCloud in its first serious attempt to match mobile offerings from Google. Unfortunately, the 4 and 4S seemed to represent a bit of a high water mark for Apple’s iPhone in terms of device design. The 5 and 5S were amazing devices in their own right, but not quite the bold leap forward that previous versions were. Of greater concern, however, was the fact that iOS 6 was too modest of an update to keep pace with what Google was doing feature-wise with Android. The primary reason it was so modest was because of the time and resources spent on Apple Maps, which had a disaster of a launch. It was enough of a disaster that it eventually cost Scott Forstall his job, marking the first major shift away from the original iPhone design team. This was really the first sign that Apple was mortal, after all.

After this major shakeup put Jony Ive in charge of the design of iOS, Apple regained its footing in software design and took iOS in radically new directions with iOS 7 and 8. Also, Apple proved they could still be first with interesting new features with the TouchID fingerprint sensor. A year later, the iPhone 6 and 6 Plus embraced the industry trend of larger screen devices, which Apple has stayed with for the 6S, 6S Plus, 7 and 7 Plus. They also introduced the first widely adopted mobile payments system in ApplePay However, after Apple pulled back the reigns in iOS 9, which was more of a bug fix os update, they folowed that up with another somewhat modest update in iOS 10. Add to this the fact that Apple has used the same phone basic phone design for three straight years for the first time, and its easy to get the feeling that Apple is in another “innovation lull.” Of course, this may very well be due to resources being focused on a radical re-design of the iPhone for its tenth anniversary next year.

Money Matters

Money

With the success of the iPhone came money. LOTS and LOTS of money. Apple went from an outsider in the smartphone market, to the most profitable producer of mobile devices, to the most profitable company in the world. At one time not long ago, they were more profitable than purveyors of scarce natural resources. This seems a little more crazy now in hindsight, but at the time, the endlessly growing profits, margins, and sales just became predictable and commonplace. Even through the lull in innovation and Apple Maps disaster with iOS 6, the sales just kept coming and numbers kept growing.

However, nothing lasts forever. For every boom there is a bust, or in the case of Apple, just a gradual slowing of growth while still remaining very profitable. Several things play into this situation that go beyond the iPhone. First of all, the iPad, which was at one time a big profit center for Apple, has seen its sales fall of a cliff from their high water mark. They have been canabalized by larger and more powerful smartphones, while the upgrade cycle for those who do love and use the iPad has grown longer. Also, secondary devices like the new Apple TV and Apple Watch, while not failures by any stretch, are not the huge sales successes that we are used to with the iPod, iPhone, and iPad. That “next big thing” hasn’t come yet, and the markets that Apple makes most of its money in are fairly saturated. Even the iPhone sales, while still very strong overall, have fluctuated more over the last two years than Apple is used to. Still, if the last earnings call is any indication, the reports of Apple’s imminent demise have been greatly exaggerated. The iPhone is still a force to be reckoned with.

A Victim of Incredible Success

Market_chart

You might get the impression that I hold a negative view of Apple and their current prospects reading up to this point. However, that is actually not the case. I think Apple has faced some unrealistic expectations based on their incredible run of success. Everyone just assumed they would unlock the mythical “next big thing” consumer product category because they were 3 for 3 leading up to now with the iPod, iPhone and iPad. However, if you look across the rest of the industry, EVERYONE is facing the same kinds of challenges. Google is still struggling to sell their own phones and make Apple-like profits off of Android. Samsung has slowed the pace of adding new features and makinf sweeping design changes to their Galaxy phones, and then had the massive PR disaster with the Note 7 battery and device recalls. Every other Android manufacturer outside of China is struggling just to stay above water. Blackberry and Nokia are just cheap shells of their former selves, at this point. Apple isn’t alone is struggling to find the next hit that no one can live without.

As with every other electronic device category, there is eventually a plateau in both innovation, and then popularity an profitability. The easy features and improvements get covered and copied by all, and the problems left to solve are the difficult ones that take more time and investment. For example, making smartphones thinner and lighter, but also more powerful and with as good or better battery life. Again, ask Samsung what they think about pushing the limits of batteries after the Note 7 debacle. We’ve seen it with desktop and laptop computers for years, and it feels like mobile devices are reaching the beginning of a leveling off right now.

There are some interesting categories that are showing promise, such as Artificial Intellegence, Virtual Reality, and an area that Apple has expressed direct interest in, Augmented Reality. Still, these are all areas that will take time to mature, so there aren’t a lot of new features to sell new phones with right now. Everyone has amazing cameras, fast processors, plenty of memory, and beautiful screens. Manufacturers are resorting to gimicks like wearing a phone on your face for half-assed VR, at this point. All I can say about that is meh.

Applying Yourself

App Store

Apple founded the App Economy, and touched off a Gold Rush in the early days of the App Store. Everyone wanted to be in the App Store and raced as fast as they could to get there. If you were there early on, you may remember that we actually had to PAY for apps early on. It took a while for pricing to sort itself out, but eventually some early rules were established, and developers were actually able to make good money in return. Quality apps were still far less expensive than there desktop counterparts, but unlike Android’s Market where most apps were free, we still expected to pay something for software on iOS. Developers assumed they would be able to make up the money difference in quantity, as users rushed to download everything they could fit into the then limited space on their iPhones.

The problem with the App Store is that I don’t think anyone, Apple included, thought it would take off anywhere close to as fast as it did. And what a problem to have, right? Money flowing in like crazy and all the buzz in the world. If you think back, Apple used to run commercial after commercial highlighting the hottest and most creative apps in the Store, because that’s where the action on iOS was, and it was an unmatched strength. For all its device sales numbers, Android has never been able to usurp Apple as the primary platform for mobile development. As for everyone else, the lack of vibrant app ecosystems were the primary reason for the failures of both Windows Phone and Blackberry 10.

The App Store became a legitimate paradeim shift, and I don’t think anyone truly ever understood the dynamics of it, or how to gain control over its direction. A good example would be the devastating ripple effect of in-app purchases. At the time they were implemented by Apple, it seemed like the perfect solution to many problems. It would help developers get paid for new features and additional content. It would help them to release ad-supported or demo oriented free versions of software that users could pay for to remove ads or unlock primary features. Best of all for Apple, they got to keep a nice 30% cut of every sale. What could go wrong?

Now we can look back and see how, over the course of a few years, skilled marketers have been able to take control of the App Store using “freemium” apps and games that require in-app purchases to keep playing. Many are literally built by psychologists to trigger reward centers in the brain, the same way a Vegas casino game does. These apps have sucked up a disproportionate amount of the money in the market, and driven out other apps, especially other games, that used to be able to sell at a one-time flat fee. There was a race to the bottom in App Store pricing that Apple not only didn’t oppose, they seemed to actively encourage at times. Too many people expect something for nothing when it comes to apps, and that midset won’t support a healthy marketplace. Combine this with the overgrowth of the App Store, and you had a market that quickly became difficult to search, and then eventually impossible to stand out in. Apple’s search tools were never really up to the challenge, even after they purchased companies and made improvements to try and catch up.

Without a market with people willing to pay for quality apps, we now have an App Store that is dominated by a handful of free and fremium apps from a handful of companies, and unfortunately, a lot less innovation and creativity than we saw in the store’s first four to six years. The worst part about this is, Apple now has the memory and processing power in its iOS devices, especially the iPad Pro line, to really do serious work. Unfortunately, there are fewer developers taking advantage of these new features and capabilities because there just isn’t enough money in it.

Message wise, the worst part about the deflation of the App Economy is that Apple used the App Store to define the capabilities of some of its devices. This is especially true with the iPad, which was always seen as a vehicle for tablet-specific App interfaces. Sure, there is no shortage of iPad apps in the store, and a growing number that support the Pencil and the multitasking features of iOS 9 and 10. However, developers are usually slower to adopt these features now than in the past. This more deliberate pace has allowed Microsoft and its Surface line to close the gap in many ways. Developers don’t have to rebuild power and busiiness-oriented apps to run on a Windows tablet, and the Surface line has great stylus support, as well, so they have been able to flip the script in a way that didn’t seem possible four to five years ago.

I’m not going to say that the App Store has become a weakness for Apple, or that it is some kind of failure. However, I think we can look back now and say it isn’t the success that it really SHOULD be at this point, after the way things started. Apple is trying to be more pro-active now, cutting different profit split deals with different categories of app developers, and really trying to foster new creative apps and ideas, and encourage brand-name software companies to embrace the unique features of their devices. They also came out of left field and released Swift as the programming language of the future for all their platforms. The release of Swift Playgrounds, a free tool that helps to teach programing skills using the iPad, was also an interesting long-term move toward solidifying the iPad as a device for serious work and learning. However, we are still a LONG, LONG way from the early gold rush days of the App Store. Apple still has a lot of work to do to make it as vibrant a community and as much of a driver of sales that it once was.

Unfinished Business

ICloud

In my humble opinion, unfinished apps, services and abandonware are some of the biggest weaknesses of Apple today, and also the biggest changes from the days of Steve Jobs. I have listed off numerous huge successes and that Apple has had over the last decade since the release of the original iPhone, but there is a growing string of software that is released half-baked or feature-incomplete and projects that are abandoned that are putting Apple in a more and more negative light with many users and consumers. Here are just a few that come to mind:

  • iCloud- While the service has always worked fine for me, Apple never was able to get database sync to work, even after two years of attempts, and according to many users, document sync is still unreliable to this day. The feature set also pales in comparison to what Google offers.
  • Siri- Apple got out to a BIG lead in the AI wars with Siri, which they purchased in 2010, and rolled into iOS 5 in 2011. However, while they have made incremental improvements over the years, it has not been developed at the pace of Google’s Assistant or newer entrants to the market like Microsoft’s Cortana and Amazon’s Alexa. Siri can do some things the others can’t, such as working with multiple foreign languages, and allowing users to mix languages in a single query. However, make no mistake. This is a market where Apple had a lead, and is now playing catch-up to the competition.
  • Apple TV- While the current Apple has an expanded feature set and access to an App Store and 3rd party game controllers, it was very late to the game and didn’t come with the TV service that everyone expected Apple to use its weight to pull together. After two years, we are still waiting. Still, the real disappointment is the fact that Apple had a MASSIVE lead on the field in set top boxes, and just sat on their hands as Roku and Amazon caught up, and in some ways, passed them. The current Apple TV is a fine product. It just came too late to keep Apple the market leader in this segment.
  • Apple Maps- The launch of this product was an absolute fiasco considering that Apple had the gall to pump up how amazing it was beforehand. This is one negative that Apple has managed to turn into a positive, however. It took a long time, but Maps is fairly reliable now, and while it lacks the Street View of Google Maps, it has developed a much more competitve feature set over time.
  • iWork- Apple occasionally adds features and updates to these long-running products, and even added colabrative web-based versions a few years ago. However, they have grown far out of date in comparison with Microsoft’s Office 365, and has even lost pace with Google Docs, at least when it comes to basic word processing and colaboration. If Apple is going to offer iWork as a viable alternative to these services when they are both also available via apps in the App Store, they can’t continue to let them wither on the vine. We are nearing the point where it would be better to not have them at all, then to have them looking bad in direct comparison to the competition.
  • Apple Music and iCloud Match- When iCloud Match was realeased, it worked almost flawlwssly, and was very popular among Apple users. Unfortunately, the Apple Music rollout did not go nearly as smoothly initially. Power users had issues with tracks getting mismatched, and those who cancelled iCloud Match had problems with tracks getting matched with DRM versions of the same songs. These kinds of details weren’t thought out ahead of time, and Apple didn’t have their messaging and instructions ready when the problems came. I will go ahead and say that I switched from Google Play All-Access to Apple Music after its release, and I’ve been happy with it. The app was clunky in year one, but the improvements they rolled out in 2016 really made a big difference. In this case, while the start was rocky, Apple moved quickly, and completely overhauled the Music app just a year after release.
  • Apple Watch- The rollout of the Apple Watch was disappointing to some in that, it really wasn’t the next great device category for Apple. It is a great secondary device to the iPhone, but really isn’t ready to stand on its own. Apple’s marketing DEFINITELY didn’t help with this. However, for those like myself who stuck with the device, we found that it was very good at filling several niches, like keeping up with notifications and basic and health and fitness. Despite this, there were complaints with the scatershot design of the original OS interface and how poorly version one apps performed. To their credit, Apple went back to the drawing board, completely revamped the OS, created a framework for native apps that stay up-to-date, and garnered a lot of priase for listening to cusomers and responding quickly.

The negative side of this is how long this list has become over the last six years. However, if there is a positive side, it is that Apple seems to be more flexible and faster to change in response to problems today than in the past. The changes to Apple Music and Apple Watch last year show that Apple has already changed for the better to some degree. The fact that they have also instituted public betas for OSs and their increasing openness about their AI research are also signs that Apple is becoming more pro-active. The next step- get these products in better shape BEFORE release.

A LOT has happened to Apple over the last decade, and their impact and the impact of the iPhone and App Store on technology and our culture is hard to eve measure. There has been success beyond anyone’s wildest dreams, but there have also been plenty of setbacks along the way. Enough has happened over this time to fill a multitude of books and research papers, and I am sure those will come in time. All I am doing here is scratching the surface, but it is essential to take stock of the past before looking forward.

In the next couple of months, as we get closer to WWDC, more and more rumors will appear with information about where Apple and the iPhone are headed next. In a future Part III, we will take a look at some of these rumors and start to put some puzzle pieces together and read the tea leaves to see if we can get an idea of where we go from here.

Do you have some thoughts on Apple’s iPhone over the course of the last decade? Feel free to leave them in the Comments section below, or reach out to me on Twitter @jhrogersii. I would love to hear from you!

 

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