Bringing the iPhone to the masses

Yesterday’s New York Times had an article about the underground market the iPhone in China. It illustrates two unique challenges of marketing a popular technology product.

 

The first is that if your product is a hit, if you don’t have a distribution channel to sell your product in other countries, a channel will be created for you and often at your expense. Of the 3.7 million phones Apple sold in 2007, only 2.3 million have been activated. The remainder phones are ending up abroad where they are being unlocked and used on local cell phone networks, against Apple’s wishes. The article interviewed one 22 year old internet professional who is using one such phone.

 

“He and other people here often pay $450 to $600 to get a phone that sells for $400 in the United States. But they are happy.

 

“This is even better than I thought it would be,” he said, toying with his iPhone at an upscale coffee shop. “This is definitely one of the great inventions of this century.””

 

Even though the sale of these iPhones contributes to Apple’s revenue, this is bad for Apple because it forfeits receiving the monthly royalty payments from the cell phone company over the life of the phones.

 

The second challenge is dealing with knockoffs.

 

“The copycat models are another possible threat to Apple. Not long after the iPhone was released, research and development teams in China were taking it apart, trying to copy or steal the design and software for use in knockoffs.

 

Some people who have used the clones saythey are sophisticated and have many functions that mimic the iPhone.

 

In Shanghai, television advertisements market the Ai Feng, a phone with a name that sounds like iPhone but in Chinese translates roughly as the Crazy Love. That phone sells for about $125.”

 

When I was in Hong Kong last year, I went to Temple Street and saw that some of the street vendors had what looked from far away like iPods. Except when you get up close you realized they lacked the signature iPod click wheel.

 

Speaking of my trip last year, if I had known there was such a market for the iPhone in China, I would have bought a couple with me and then stood on a street corner in Shanghai's Xiantiandi tourist district and tried to sell as many as I could. With my profit, I could have loaded up my actual iPod with songs purchased from the iTunes store.