Platform Based Economy and Business Model

Origins of Great Success of iPhones

The mobile phone in their old form had many limitations. IT was capable of sending voice and text messages; however, it could not receive (download) and install the programs. However, with the emergence of smart phones, such limitations have disappeared. Users can download as many applications as possible and can use smart phones for multiple purposes via applications.

However, in mobile data communications, it is clear that the MNOs (mobile network carriers or mobile service carriers) have failed. They failed to deliver the value to consumers who had viewed the mobile data service too expensive for the value.

When Apple first launched AppStore in July 2008, no one foresaw how AppStore and apps will radically change the structure and business model of mobile business. By 2010, after a little more than 2 years, it has revolutionized the business model of the entire IT industry.

In traditional mobile phone business, the hardware design and the product line-up were keys. In smart phone, that is not important.

1. Device is still regarded important.

2. Telecom infrastructure is also important.

3. The quality and availability of multiple applications have become critical

4. The data use tariffs should be reasonable.

Smart phones are always “on” unlike notebooks or netbooks. That makes smart phones all the more useful.

What are root causes of the wild popularity of iPhones? How does a smart phone enjoy such high product margin? How does it enjoy such pricing power over the conventional mobile phones?

First, the availability of a wide range of applications from news and information gathering to emails, business-use and leisure services through a single smart phone has contributed to the success. Such SNS as Tweeter and Facebook represent these apps and these social media has contributed to the success of smart phones. . There are currently over 500,000 mobile apps that have been developed and introduced via App Store. About 80% of these apps are free; that has made App Store all the more popular. Apple generates a very % (less than 5%) of its operating profit from the sale of apps at App Store. It makes a bulk of profits from the sale of its iPhones.

Second, the emergence of App Store as a new online market place has allowed consumers to freely buy (explore and experience a new kind of user experience) and developers to sell apps (i.e. generate new business opportunities). Any developer can develop and upload the apps and any user can freely download the apps. The more good apps become available, the more people will become users of these apps and that has led to an exponential growth of iPhone sale.

The more developers supply

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