The moment of truth, a portrait of the iPhone from 2009 – Using the past to understand today’s digital economy
Smartphones are ubiquitous. Through combining a number of different technologies, smartphones provide users with access to a range of services – you can consult a map and be given directions when lost, pay for your coffee in a café, watch YouTube while you commute, listen to podcasts when exercising and perhaps make the occasional phone call.
For many, imaging a time before the widespread availability of smartphones, with the access to a wide range of services that they enable, is difficult. And a strong association has emerged between the phones manufactured by a handful of vendors like Apple and Samsung and what is commonly understood to be a smartphone. This is arguably unsurprising given the market share of the smartphones manufactured by these two companies, and the rivalry between them that has emerged in recent years. This rivalry, as well as the subsequent transformational impact of the iPhone after its launch in 2007, can overshadow some of the more critical assessments that were made at the time.
One such assessment is ‘The moment of truth – a portrait of the iPhone’ from 2009 by Strand Consult. The report begins with, and sets the tone for the report, by listing 10 of the most significant ‘myths’ surrounding the iPhone – these are broad in scope, ranging from its positive impact on network traffic, operator finances and its ability to attract customers to the revolutionary impact that app stores have had. These myths are then explored in the report, providing a detailed critique of the impact that the iPhone on mobile operators in particular and the mobile economy more generally.
But why look at a report that is almost two decades old? There is considerably value in understanding how technologies that are today considered successes were evaluated and understood when they first launched. This is especially true when the assessment offers a detailed critique, as this report does, or when it addresses an issue that was once central to Apple’s strategy but no longer is. While today iPhones are widely available for purchase, this was not always the case – when iPhones were first launched, they were tied to a specific mobile operator in each country. The report shows how the distribution of iPhones changed over the course of three generations of the device and discusses the sales of these early smartphones, suggesting among other things that early adopters of the first iPhones may retain their devices longer than is average for the industry.
With hindsight, the notion of iPhone exclusivity sits uncomfortably with how smartphones are sold today, namely, through as many distribution channels as possible so that they are widely available. For those unfamiliar with how the distribution of devices has changed over time, such as my students, the report raises two related questions for discussion: why did Apple initially opt for exclusivity and why did it subsequently change this approach?
Another area that the report highlights is that of app stores. The report draws attention to the ‘halo effect’ enjoyed by Apple, where various parts of its ecosystem such as the iPhone, iPod and iTunes support one another, before critically and negatively assessing the potential of the company’s App Store. In essence, the report argues that while the App Store will generate some revenue, other means of distributing services will be more lucrative. The ‘halo effect’ is still present, albeit expressed somewhat differently as the products and services offered by Apple have changed over the years. The negative assessment of the App Store is, with hindsight, arguably more interesting given how significant it has become as a distribution channel – according to Apple’s own figures, in 2024 there were over 1.9 million different apps available via the App Store, which facilitated almost $1.3 trillion in (digital and physical) sales.
The report highlights the difficulties experienced by other device vendors and app store operators, and as it is not unreasonable to extrapolate from these examples that developing the App Store into a viable and lucrative distribution channel would be challenging for Apple, the inevitable question that arises is how did it succeed when so many others have failed before it? The subsequent growth and success of the App Store is another fruitful area to discuss with students – did Apple learn from the mistakes of others, did it develop a unique business model or was Apple simply lucky? And what theoretical perspectives can be used to understand the growth of the App Store?
Returning to the question outlined above, the value of this report is twofold. Firstly, it casts a detailed and often critical eye on the emergence of the iPhone, a device which subsequently dominated the smartphone market for many years. The position adopted in the report allows students to explore whether they agree with it and assess the basis on which it was made. Secondly, the report highlights the need to place today’s developments in the digital economy within a longer timeframe. There is a temptation to focus on the ‘here and now’, especially as new revolutionary technologies such as Artificial Intelligence emerge, but doing so overlooks the impact of path dependencies and how decisions taken in the past, which may be technical, commercial and regulatory, shape today’s digital economy.
Request the free report: “The moment of truth, a portrait of the iPhone” from 2009.
