Five Ideas That Matter

Continuing our occasional coverage of the evolution of the web as an information market, Joe Wilcox had a great article recently that picked apart the story around the iPhone.

We’ve been reviewing iPhone coverage here and here oh and here as well. Here is the tail end of Joe Wilcox’s article. the whole is well worth a read as are the comments.

“Many of my journalist peers are themselves obsessed about iPhone and App Store. The number of blogs in any given week just dedicated to new App Store applications is evidence enough. There is informational obsession with the device that defies reality.

IDC’s Ryan Reith agrees. “The view about American journalist obsession with the iPhone couldn’t be more true,” he said.

It’s that misguided obsession as expressed in two separate blog entries posted yesterday that prompted my writing about iPhone. At the Apple 2.0 blog, reporter Philip Elmer-DeWitt asserts that “iPhone’s share of the smartphone market hits a record 40 percent.” Really? In what alternate universe? He writes:

Apple now has a substantial — if not the largest — share of the smartphone market in every region of the world except Asia and Africa, according to a report issued Wednesday by AdMob. Overall, the iPhone’s worldwide share grew to 40 percent from 33 perent over the last six months. In North America, its share of the smartphone market is 52 percent, as measured by hits on AdMob’s ads.

This data — based on advertising measurements — doesn’t even remotely jive with Gartner or IDC smartphone unit shipments, nor even Apple’s figures. According to Gartner, Nokia has 45 percent smartphone marketshare in the United States. But the data makes sense perhaps looking at AdMob’s share on different handsets. This kind of persistent reporting makes iPhone appear larger than what it really is. It’s wonderful for Apple’s Stock price.”

We’ve said a couple of times below that the success of the iPhone is an important case study in how the Web’s information dynamics work. In light of that I was fascinated to see this piece by Javier Marti. It was written in autumn 2007 as the initial hype around the iPhone was dying down.

The Obama election campaign and its aftermath has parallels – which we will come to below albeit only briefly.Why is it important to Five Ideas? The Western ethos of progress through criticism is important; changing information dynamics seems to threaten the principle that criticism is good, and needs to be effective. If information dynamics are changing then we need to understand what it means for what is “true” and what the “truth-to-reality” cycle is becoming.

First iPhone.

Marti being close to the action points out all the negative reactions to iPhone at the time and as importantly points out that the iPhone’s biggest early success was to turn the US into a more mobile using population.

This graph from Nielsen suggests that during the initial launch period the iPhone secured close to 0.75% of all blog posts everywhere, which is a pretty amazing feat.

Still, many of those early reviews were negatives:

3. The camera is a simple application that has one button: The shutter. Picture quality is no where near exceptional.
4. SIM card is near impossible to open, if at all.
5. Web browser is slow, even over WLAN. Even the simple OneList web app that was created takes around 20 seconds to load over WLAN. You can not highlight, cut, copy, or paste and text from a website, and you can not save any images you find from a website either. The only nice thing about it is the tabbed browsing, which crashed when visiting Engadget and YouTube on two tabs. This is the only application that allows you to use the keyboard in landscape mode.
6. The keyboard sucks. It gets slightly better after the iphone “learns” you, as the employees said, but even then, it’s not a device you can use with one hand comfortably, much less without looking.

And so on. Interesting that some of these are usability and interface issues. Experienced mobile users are accustomed to working with one hand and to tactile devices whereas the iPhone is very visual.

Anyway, the point is Apple managed to overcome rational critique and the “how” of that I think should be on every marketers mindd, and every sociologist’s too. So to Obama.

This is from the New York Daily News back in April 2008: “It seems like ancient history now, but not long ago Hillary Clinton argued that Barack Obama was getting a free pass from the media.”

It’s interesting because it comes well before the election. However, 8 months in and Obama’s style, rhetoric and capacity to change Washington are all pretty much subject to wider doubt than at any time when he was being hailed for his ability to connect to the voter.

This is from Newsweek in January 2009:  “Luckily for Obama, the public still likes and trusts him, at least judging by the latest polls, including NEWSWEEK‘s.But, in ways both large and small, what’s left of the American establishment is taking his measure and, with surprising swiftness, they are finding him lacking.”

And this from the yesterday’s London Times: “President Obama is ready to retreat from a central part of his domestic agenda in order to achieve some sort of healthcare reform this year, two of his senior aides indicated yesterday.”

All politicians get an easy ride at some stage but I wonder is Obama another case study in the uncritical nature of open communications on the Web. If so what can we do to fix the problem. The great part of conventional information dynamics is its responsiveness, in principle, to the dialectic of criticism.

Behavioural economics is the dismal science with people brought back in. I think it tells us that the more perfect a market, the easier it is to see human irrationality at work. The web is a perfect information market, full of glitches of course, but one that REALLY shows human irrationality and its consequences.

The definition of a perfect market would be something along the lines of information being freely and equally available in the same timely manner to all participants. Sounds like the web.

This is one of the reasons why we think the web acts in a bull and bear kind of way that stock markets also do. And why we think marketing has to think less rationally and change its expectations.

My vote for the most irrational market behaviour of people is the Apple iPhone. Apple dominates the market in information about mobile handsets, and specifically that of smart phones.

First a piece of external data from Hitwise: iPhone almost immediately outstripped interest in the iPod just about from the minute it was launched.

Then there was consolidation of that interest until by late 2008 the iPhone was unassailable in the market for smart phone information. We studied the iPhone and Android, the Google-led open source operating system for mobile phones, from December 2008 to March 2009 to compare the two, to understand the web as an information market for handsets.

If you want to get on top of the very latest in the iPhone bull market turning bear take a look at this post of yesterday from Michael Arrington at Techcrunch. Om Malik is also an iPhone sell advocate. Interesting point is both have lived with serious iPhone negatives for two years and chose not to write or mention this. And the sell recommendation is not based in performance negatives. It is based on new contract conditions that Apple and AT+T want to impose.

So let’s turn the clock back. During our study period there was no major iPhone initiative or announcement. There was however the announcement of the first Android handset, the HTC G1.

Under normal circumstances Android, with the infinite reach of Google, and HTC should have dominated the information market for mobile handsets during this period.

What happened? During that time iPhone garnered 12 times more information flow than the G1 and Android combined.

The normal way to look at this is to say the iPhone gets stronger information flow because it is more popular. But we don’t believe the web works that way.

Take Facebook as a parallel. There is little in the way of competition to Facebook. It has define a service that is similar on concept to many other social networks but no-one else tops 200 million users. There is a bull market in Facebook information. Its numerical success bears only an ill defined relationship to its inherent qualities.

In our view there is a tipping point in cases like iPhone and Facebook where the fact of information becomes more critical than their features, price or quality.

The iPhone is a poorly constructed product, with a long lock-in contract, arguably with poor performance characteristics compared to competitors.

If the only answer to its success is the user interface or usability then we’d have to conclude that all products should focus primarily in usability regardless of performance. In the case of the iPhone consumers choose to pay a higher than normal price to ignore poor performance.

Instead we believe iPhone addiction is the phenomenon we are looking at. As with Facebook. And other online bull markets. The kind of factors that are at work are confirmation bias – a tendency to take on only information that works as confirmation of our views; and availability bias – a tendency to use the latest information available rather than the balance of information.

Neither of these explains the peculiar web characteristic that we see with the iPhone, that people are generating information about it, all the time and that this information is crowding out other information about smart phones. To get at that we need to look at the sources of influence in web information markets. We’ll be digging out our Android study to do that in our next post.