My 1st Million At 33 - yes, you can do it too

I guess by now everyone has seen the iPhone from Apple. Steve Job has done it again with his visionary leadership. Apple has been a terrific innovator. In fact, the opposite is probably more true, the competitors are too timid and stupid not to come up with more innovation.

So what did you see in iPhone besides the cool user interfaces and features? Do you see what Steve Job is seeing? In fact, Apple has leveraged its success in iPod in a tremendous way, changing the music distribution industry in a big way. iTune has been a great way for Apple to leverage its music platform. Music distribution companies like Sony have the inferior end of negotiation when it comes to iTune. What may be coming for iPhone will be bigger than iPod.

What I see in iPhone is PORTAL. Let me define what I mean by portal. Portal is essentially a gateway through which traffics need to go through. The people who recognize the concept of Portal in internet has made it big: Yahoo, and the search engines. Google certainly has proved that you don’t need to be the first in market, but the best will do. Internet traffics go through internet portals, such as search engines. The person who controls the gateway controls EVERYTHING.

Now, look at iPhone. If it is as successful as iPod, as a platform for communication and multimedia, it will control things like a portal. Who gets the cell phone business? Cingular for now. Who gets to be the internet search engines? Yahoo & Google for now. If the number of units of iPhone reaches a certain threshold, the power of Apple will be tremendous. Let’s say one day Apple wants to drop Google and use AOL search exclusively, it will definitely bring BIG impacts. In fact, iPhone controls the front door to the search engine portal. Whoever has the exclusive keys to the front door has more power. And the same goes for music/video downloads via cell phones. Or geographic maps for that matter. Distribution of map with vital information such as restaurant locations, etc. is another gateway of information. It’s like a yellow page with map, AND controlled by whoever built your phone.

Note that another keyword here is exclusivity. Many things on iPhone have been protected by 200+ patents. I assume that competitors won’t be able to make another phone that is anywhere close to Apple’s, unless they innovate beyond Apple. The exclusivity is always a problem in every competitive landscape. If you look at what has transpired in Apple’s computers, the key to Apple’s failure (in my opinion) was that a computer has too many components and technologies to be handled by a single computer in a cost effective way. Various public standards have helped bringing more competitors for different PC components to bring better and faster technologies to the end-users. A monopolistic market without serious competitions almost always fail. CPUs in Apple computers simply cannot catch up with vehement competition in PC. Same for every other components. The speed of commoditization and innovation of PC components is incredible, and overcomes a few leading advantages that Apple would have.

If we compare the phone and PC market, phone will be always simpler than PC (since it is smaller than PC). There can only be so many IC chips in a phone that will fit. Furthermore, most of the difficult challenges have been solved by the IC design companies. Once you put together all the needed functions, it’s up to the phone maker in how to present the entire phone experience to the users. Therefore, Apple is relieved from having developed all if not most of the ICs, while it is left with the task that Apple does best: user interface.

I believe that Apple will succeed and maintain its competitive edges for quite some time. By lowering the price in the future for further market adoption/penetration, Apple can further leverage its platform as the central MOBILE gateway to many many things. If Apple plays its business cards right, it can emerge as the important player on many negotiation tables.

No doubt that there will be a big fight for the cellphone market, but it’s the votes from the end users that count. Whoever pleases the users with their simplicity, beauty, and wallet, will win this game. If Apple can manage its price curve to keep ahead in market share, competitors will be forced to form wide alliances across different domain to have any chance of breaking Apple’s stronghold.

Repeat after me, PORTAL!

P.S. A monopoly is never good for consumers. Monopoly is always pricey, if not lack in features (or full of bugs like MS). And I guess a more likely scenario for Apple is that their arrogance (& unwillingness to lower price) prevents them from becoming a widely adopted platform, and they will again remain as a niche player like in Apple’s computers. After all, a cell phone is not like a iPod music player. Cell phone needs to be cheap, while iPod can remain expensive.