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The Next Billion Users

Five weeks ago Apple forecast 100 million iPhone OS devices will be sold by summer. This was fairly easy to predict but the question comes up: when will the next 100 million be sold? And what about after that?

The iPhone OS three-legged platform is now the fastest growing platform ever and enjoying network effects which naturally accrue to platforms under solid custodianship. However, I am observing signals from Apple that they intend this platform to become the global standard for mobile computing, which, in today’s world, means targeting 1 billion users. Here are the signals that I’m noting:

  1. Geographic and cultural universality. What plays in Peoria should play in Beijing.  As it has shown by being big in Japan, the iPhone crosses over cultural idiosyncrasies. Not long ago it was taken for granted that “mobile tastes” differ and “one size does not fit all” in mobile phones hence the need for hundreds of phone models in every portfolio. Apple has completely destroyed this myth. (One could ask why should mobile computers be polymorphous when their slightly larger cousins the laptops are rigidly monotonic?) By broadening the platform with multiple screens and connectivity options, Apple is cleverly spanning the jobs that he platform can be hired for.
  2. Avoidance of a pricing umbrella.  Note that this does not mean being low prices, but rather, the protection of their franchise through pricing. Apple has developed a way to stretch a single product across multiple price bands, and carefully builds product to price and margin targets that have strategic placement.
  3. Product cycles and product ramps. Apple has imposed upon itself a yearly product cycle for the iPhone and the iPod.  This is a brilliant move because it keeps the product fresh without having it seem disposable.  It also keeps competitors within its turning radius. However, the challenge is that the distribution network has to be filled rapidly and drained rapidly to maximize availability. This gets harder and harder as the volume grows. Imagine having to manufacture and ship into the channel a billion devices in less than a quarter.

I would point out that all these are marketing, not technical challenges. They are thinly disguised questions about product placement, portfolio, pricing, production and distribution–classic Marketing 101. (Promotion, which is what most people equate with marketing is not particularly challenging, especially for Apple who mostly does it through PR).

It is comforting perhaps to know that Apple is the best marketing organization in the industry today. So to answer the question, 100 million is in the rear-view mirror, 200 million will come up in no more than 2 years and 1 billion will take 5 to 8 years.