With Apple’s next launch event coming up on September 12, now is a good time to look at several years’ worth of exclusive iPhone historical data in Mixpanel that shows how quickly users have been adopting these devices and operating systems, watch a decade’s worth of Apple keynote addresses and product launches to chart their journey from zero phones sold before September 2007 to where they are today—the world’s only trillion dollar company.
Apple is the the most valuable company in the history of humankind. And it is has that otherworldly valuation primarily because of its phones.
Every quarter, Apple releases its quarterly earnings data, and every quarter, a majority of the revenue comes from the sale of iPhones. In the third quarter of 2018, that meant 41.3 million iPhones sold for a total revenue of $29.9 billion, which comprised 56.1% of their total revenue of $53.3 billion.
(Once again, that’s $29.9 billion in revenue in a single quarter. On phones alone).
Our data bears this dominance out. According to Mixpanel Trends data, over 60% of American mobile phones are on iOS.
(I hate to keep doing this parentheticals for emphasis thing, but let’s state this plainly: over 60% of American phones are Apple products).
In order to tell the full story how this happened, I watched all of Apple’s release events since the 2007 release of the iPhone, and looked at Mixpanel’s trends data (access it for yourself here!) to see how the product grew over time and how the public reacted to it.
Apple didn’t just decide to become a phone company and then become the world’s preeminent phone purveyor–well, actually that is kind of what happened. But hindsight has the unfortunate flattening tendency to make what happened seem inevitable. Apple’s rise hasn’t happened in a vacuum. It’s taken time and effort, and for the first time anywhere, we’re presenting the data that tells that story in full. This is the story of why Apple came to dominate the mobile phone market, and with it the world.
Because the iPhone is the single greatest invention of the 21st century
Let’s dispense with the attempt to be clever and counter-intuitive and think up too many theories about why Apple has done so well and start with the most obvious one: the iPhone has dominated the market because it truly was a groundbreaking innovation.
The buzz at the time was incalculable, but it’s not like tech hadn’t seen buzzy products before. After all, it was Steve Jobs who said that the Segway would be “As big a deal as the PC.” But when his so-called Jesus Phone actually graced us with its presence, the reaction was rightfully reverential.
To understand why, it’s worth taking a short trip back to 2007, the era of “Hey There Delilah” and Gossip Girl.
The first thing to understand about the iPhone is that it is cool as hell and everything prior to it was literal trash. This is a point Steve Jobs made when presenting his new product to the world.
“Every once in a while a revolutionary product comes along that changes everything,” said Steve Jobs at Macworld 2007.
And he was absolutely right to put the iPhone in that category. There are a million different ways the hyperconnectivity enabled by these computer-phones has changed everything: think of the way you physically navigate the world, how often you text with friends, apps like Twitter, Instagram, and the rest.
Full-on industries have emerged from the ubiquity of the smartphone. You know what didn’t exist in 2007? Podcasts. Thanks to Steve Jobs and co., Marc Maron, Sarah Koenig, and various ex-Obama staffers named Jon get to participate in an industry that wouldn’t otherwise exist.
We can go on and on, but the iPhone was the first mass-market smartphone that legitimately made accessing the internet and audio and video possible. And that was a quantum leap forward.
The promise of the iPhone was real: what mattered was that they delivered.
“‘The entire fucking Western world hopes that it’s a case of imperial overstretch,” said the CEO of one of the planet’s largest communications companies in 2007. “But everybody is quietly saying, er, what if people want to buy a $500 phone? What if, er, people have been waiting for a device that does all these things? What if this thing works as advertised? I mean, my God, what then?”
What then, indeed.
Because Apple had a good product to start with, and kept making it better, or: I watched every Apple launch event since 2007, and these people know what they’re doing
So long as there has been a mobile web in the United States, Apple has commanded a majority of it.
Let’s look at the above charts for a second. The first two show that despite controlling only 28% of the “smartphone” market in 2008, Apple users were doing 71% of mobile browsing. The early evidence was supporting Apple’s hypothesis that they’d built a machine that was more suited to mobile browsing than the competition.
The next graph, with data from May 2010 shows iPhone’s share of U.S. mobile browser usage: a robust 58.2%. Admittedly, down from two years earlier with the emergence of Android devices. Was this something to worry about? Not at all. The graph on the right is Mixpanel’s browser data, from the first six months of 2018, showing Safari’s share of U.S. mobile browser usage: holding at a remarkably steady 58.4% 8 years later.
Nope! Today, with Android as a viable competitor, Mixpanel data show’s that Apple’s share of U.S. mobile browser usage has held remarkably steady in the ensuing eight years, and currently, Safari sits at an eerily close 58.4%.
Even if we take the iPhone to be a giant leap forward, Apple didn’t exactly start from a dominant position in the phone game. A pre-launch profile of Steve Jobs in New York includes gems such as a prediction that Apple will sell to Google, a taunting quotation from the CEO of Last.fm (“Apple served their purpose already. They validated the space. Thank you very much, Steve, for that, but now we don’t really need you anymore.”), and a critique of the iPhone for having “No removable battery. No removable memory…It has a bigger screen, so watching a movie on it will be better—but with no removable battery, you’re not really going to want to do that and make phone calls. So you’ve got the houseboat problem: It’s neither a house nor a boat, it’s both, and it’s not particularly great at either.”
Well, that ended up being the case, only if it were more like a houseboat that was a combination of a 90-foot yacht and Downton Abbey that also had the internet on it.
Though, admittedly, there were some legitimate concerns with the original iPhone. No device is perfect when it’s rolled out. Apple has consistently rolled out new models that have improved on previous iterations, refusing to let the competition catch them.
I watched all of the Apple launch events since the introduction of the iPhone in 2007, and certain themes emerge. There are improvements every year. Truthfully, nothing groundbreaking. There’s an update to the phone functionality. Most years there’s some hardware/software combination of changes that claims to be make things considerably faster. The battery gets a little better (or stays the same, but with improved performance, which is like having a better battery if you think about it!). Touch ID legitimately does make for an easier user experience. The App Store gets improved, gaming gets better. However you use your phone, it’s a better product each year.
Look, for example at this braggy slide from the 3G introduction in 2008:
The claim is that the competition takes 50% longer to load a webpage, but it’s worth noticing that in 2008, 21 seconds to load a webpage was something to brag about, while today such a figure would be considered atrocious. Apple was delivering a better internet, faster.
There is an improvement to the camera pretty much every year. There’s other stuff: flush headphone jacks, it’s always getting thinner (then it gets bigger), better microphones, copy and paste (even the littlest improvements count!), FaceTime, the inclusion of Canadian English, and other things that blend seamlessly into the Apple ecosystem.
Apple has consistently had an edge over competitors as a place for developers. Every year, they announce out some enormous sum of money that has been paid to developers, most recently a Dr. Evil-worthy 100 billion dollars. That figure implies tens of billions of extremely high-margin revenues of their own, even having reduced their 30% cut to 15% in 2016.
And one little-mentioned thing that has made the App Store such a viable playground for developers is that Apple gets its users on the same page. Those little alerts pestering users to update work, it turns out.
While north of 90% of Apple users are on iOS 11 as of this writing, just above a quarter of Android users are on Android’s most recent operating systems, Oreo and Pie. Knowing which operating system users are going to be on encourages the development of new cutting-edge apps that make use of the full range of features as they’re developed.
Because their competitors are fools
What’s worth noticing in the famous clip where then-Microsoft CEO Steve Ballmer laughs at the iPhone ($500 for a phone?!?!?!) he makes the very correct point that, at the time, Apple had sold exactly zero phones. Who was selling phones at the time? Well, a plurality of phones were being sold by those Finnish innovators (Finnovators?) at Nokia, who in the fourth quarter of 2007 had a staggering 40 percent share of the mobile phone market.
To the extent that “smartphones” were the thing to watch, Nokia was even stronger, controlling a majority of that market in the fourth quarter of 2007. Research in Motion, the makers of the BlackBerry, held around ten percent of the market.
They have summarily been wiped out. Research in Motion (now BlackBerry) and Nokia’s stock have each fallen well over 80% since the 2007-08 range.
The overly simplistic explanation for why Apple beat Microsoft, BlackBerry, Nokia and the rest is that it had the ability to integrate the holistic view of the product: to understand that it was hardware and software while its competitors leaned heavily in one direction or the other.
On some level for the incumbents, Research in Motion and Nokia, it was a classic Innovator’s Dilemma situation. They had very profitable products that they would have to undercut at great expense to try and enter the phone-as-computer era.
For Microsoft, which was more of a challenger at this point, their problem was different. They were a software-first business and were unwilling to give up those glorious, glorious margins in order to enter the hardware game.
That’s more or less Steve Ballmer’s explanation many years later (plus, interestingly, some praise for Apple’s pricing plan, which rather than requiring the customer to pay the $500 that so flabbergasted him upfront, folded the costs into users’ phone bills.)
In his post-mortem of the Finnish giant, the New Yorker’s James Surowiecki stresses that Nokia had not historically been afraid of change. After all, this was a conglomerate founded in 1865 that decided to reorient and pour all its resources into phones. He points to three problems that led to Nokia’s downfall at the hands of Apple and Android: their underestimation of the value of software, their failure to see the yet-to-develop post-keyboard smartphone market as anything more than a high-end luxury option, and faith that their brand would be strong enough to carry them through even if they were late to the market.
It’s easy, with the benefit of hindsight to be harsh on these companies who didn’t see that people might want a literal pocket-sized computer that can make phone calls, but as one analyst put it, it’s easy to understand. Nokia, perhaps as much as any single company, bore the responsibility of a nation. Research in Motion was founded in Waterloo, Canada in 1984, and had spent the ensuing decades on little other than building toward and perfecting the BlackBerry.
As one analyst put it: “People who get hit by ‘innovator’s dilemma’ are not stupid … I think when you create something from scratch and turn it into a multi-billion dollar business you’re very reluctant to say ‘I’m now going to throw away everything I’ve learned and do something different.’“
A popular thing to do in this sort of tech history is point to the “superior” technology that was, in the long run, beaten: the Betamax to VHS, the steam engine to the gasoline engine, the DC-10 to the L-1011. In this case, there is nothing resembling a superior competitor. For a while Android partisans could point to a superior camera, but at no point has any of Apple’s competition surpassed their biggest offering by a significant margin.
Because he’s Steve Jobs and you’re not
Despite everything in the previous section, the company whose products were most directly threatened by the iPhone was Apple itself. Steve Jobs’ Apple had reestablished itself with the iMac, and then iPod. It then decided to do everything it could to destroy those products in the ensuing years. Operating with the confidence of a company that knows it’ll have another earth-shaking idea in a few years’ time, Apple was willing and able to build products that killed their own products, basically finding a way around the innovator’s dilemma by building a cult that gleefully anticipated the impending obsolescence of the products they’d just purchased.
The success of the iPhone necessarily meant the end of the iPod, which at that point was the product that had, after the iMac rescued the company from the point of insolvency, put it on firm ground. And they were delighted to kill it.
Apple under Steve Jobs was consistently innovative; not merely a “design innovator” as some critics put it. More than any other company, Apple moved technology from nerdy to cool. They built sleeker products that emphasized the user experience rather seeming to resent non-technical users for their shortcomings. They made product releases into a spectacle. They set up an ordering system that gets the fanboys and fangirls to wait in line to win publicity. Steve Jobs was the only major business executive with even a scintilla of charisma. All this adds up to a company who has a brand orders of magnitude beyond that of the competition.
Jobs’ closest confidant, Apple Chief Design Officer, Jony Ive, put the cult of Steve Jobs into words better than anyone else at Jobs’ memorial service: “Steve used to say to me—and he used to say this a lot—‘Hey, Jony, here’s a dopey idea.’ And sometimes they were: really dopey. Sometimes they were truly dreadful. But sometimes they took the air from the room, and they left us both completely silent. Bold, crazy, magnificent ideas. Or quiet, simple ones which, in their subtlety, their detail, they were utterly profound.”
That hope—that the next thing was going to be magical—as much as anything else, separated Steve Jobs’ Apple from the competition.
Because they made a good product, then caught some breaks
Even the biggest Apple haters have to acknowledge that the iPhone was an improvement over what was available at the time, but there’s a case to be made that the biggest reasons for Apple’s success was that other companies’ technology got better. Let’s think back for a moment on the first iPhone.
First of all, It’s clear that some of their hypotheses about how users would interact with early iPhones phones were plain wrong. They emphasized widgets over apps, satellite imagery over functional maps, and producing heavily edited videos and watching feature-length movies over the minimalist video content that has won out over time. Only a little attention is paid to “SMS texting,” which is a crucial way that users on iPhones communicate with one another today.
But even the things they got right were not nearly as useful then as they are now. Check out Steve Jobs the initial demo of the internet on the iPhone. To show off his glorious new internet browser’s ability to access an exceedingly not-optimized-for-web New York Times homepage, Steve Jobs has to preface the demo with “It’s kind of a slow site because it’s got a lot of images.” That was the state of wifi in 2007: really, really, slow. As late as 2010, Steve Jobs was taking time to berate people in the audience for ruining his demo by clogging the WiFi.
It’s not just the Internet that was slow: mobile speeds were not nearly what they are now. When FaceTime was introduced in 2010, it was a wifi-only feature, limited by slow and unreliable cellular speeds.
iPhone and its Android competitors were enormous beneficiaries of mobile data speed improvements. For mobile phones to fulfill their potential, they need to operate at the speed of streaming, not the speed of downloading. So as performance improved, the iPhone turned from an email machine that could play songs a user downloaded and kind of handle email into into what it was initially billed as: a pocket computer.
It’s difficult to say how much to ascribe this to luck or design, but the best thing Apple did for the iPhone was build the App Store ecosystem that allowed third-party developers to build products that users could access either at a price or for free. Rather than building games and apps themselves (with a particularly notable exception) and risking their own brand’s reputation, they set up an ecosystem and let everyone else fill it in with their great ideas.
So what is it?
The boring thing to do when presented with a bunch of theories about something is to hand-wavingly say “it’s some combination of them all,” and then stroke one’s chin knowingly. Of course that’s the case! But when it comes to the iPhone’s overwhelming success, the one thing that seems worth coming back to is the original iPhone was orders of magnitude better than anything else on the market at the time, and building a good smartphone at a (somewhat) reasonable price is a great deal harder than Apple’s competition anticipated.
For Apple’s competition, there was no “last mover advantage.” There was no period where Apple’s competition took advantage of extended missteps. There were no extended missteps. There was not even a “your margin is my opportunity” moment where the competition effectively commoditized the space.
There has been an undramatic, ruthlessly competent and dominant hold by Apple on the top spot in the mobile market that it shows no sign of relinquishing, relying at this point more on the more resilient combination of brand and network effects than the technical advantage that put it in this lead in the first place. Apple looks unstoppable, but in the end every empire ends up like Ozymandias, a forgotten ruin of something that was once powerful.
But then, Ozymandias didn’t make a phone that also has the internet and a camera, so maybe Apple will last forever.
The 2018 Apple launch event is on September 12.