They were expensive, ugly, and not very popular.
They used styluses!
These smartphones had limited penetration of the overall mobile phone market.
In February 2006, ABI Research predicted that by the end of the year, sales of smartphones would double year-over-year, and that their share of the overall mobile phone market would reach 15% by 2007.
The point is: When Apple came out with the iPhone, normal people had not yet embraced smartphones, and this gave Apple the opportunity to:
1) introduce the gadget category to them, winning their long-term loyalty (through product quality and iTunes lock-in) before another company could
2) ride the natural growth of the category until it reached full market penetration.
Apple seized the opportunity, and as smartphone penetration reached 50% this year, Apple became the world's most valuable company.
In 2010, Apple came into another very similar opportunity when it launched a gadget into another nascent category — the iPad into tablets.
The iPad made Apple three-for-three in the new millennium, following the success of the iPad and before it, the iPod.
In the three years since the iPad's launch, Apple watchers (and shareholders) have waited for the company to do it again.
When would Apple launch another gadget at an early stage of its category's penetration, collecting most of a rapidly growing market for itself through the quality of the product and clever lock-in strategies like iTunes or the App Store?
Because Apple has done this three times in the past 15 years, it seemed like a sure thing that it would again and that it was only a matter of time.
You can almost see this pent up expectation in an Apple stock chart:
Apple stock price from iPad launch to peak
Over the past three years, many analysts and reporters had a good answer to the question of what would Apple do next: iTV.
Apple has seemed to encourage this.
Before he died, Steve Jobs said that Apple had finally figured out how to make TV work.
Over the past couple of years, CEO Tim Cook told several interviews that TV was an "area of interest" for Apple.
And, a couple years ago, an Apple TV seems like the perfect follow-up to the iPod, iPhone, and iPad.
The "smart TV" category had limited adoption, and if Apple could get there early, it could once again secure long-term consumer lock-in with apps and content purchases.
Now you have to worry if Apple has missed the boat on smart TV.
According to a new report from the Diffusion Group, smart TV adoption amongst broadband-connected households doubled in the last year to reach 25%.
And that's just "smart TVs" where an Internet-connected apps interface is built-in.
Will Wei/Business Insider
Smart TVs are already here
If you include Internet-connected set-top boxes like the Roku (or Apple's box), which effectively turn TVs into "smart TVs," the category's penetration is up to 39%.
If Apple were to launch an iTV right now, it would be entering into a competition that would look very different than the one it entered with the iPad and iPhone.
This is the category adoption at Apple product launch:
iPads came out when tablets had ~0% of the PC market
iPhones came out when smartphones had ~9% of the mobile market
iTV, if it came out now, would arrive when smart TVs have ~39% of the market
So is Apple doomed to fail at TVs?
Obviously, Apple could still launch an iTV and dominate the smart TV market the way it's dominated the smartphone and tablet markets.
But if that happens, it will have happened without the advantage Apple had with digital music players, smartphones, and tablets.
In each of those categories there were existing competitors (we'll count PDAs in tablets), but the vast, overwhelming majority of consumers had never used those competitors.
Apple was able to teach new consumers how to use smartphones, how to use tablets, how to listen to music digitally. That's a certain kind of lock-in, itself. But Apple was able to do even better, locking consumers in with side services like iTunes, apps, and iCloud.
If Apple launched a TV right now, it would not have the same a huge majority of people to train and lock-in. It would have a slim majority available.
It would be entering a market as mature as smartphones were in 2011.
If it launched a TV a year from now or later, it might be entering a market where a majority of consumers are already using the competitor's products.
Then, Apple would have to win in a crowded market on pure ease-of-use and product innovation alone.
That may be something it can do, but it's not something we've seen it do.
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