It's not all about the iPhone -- or is it?

Saw this on the NYTimes blog section today. 

V.C. Advice to Entrepreneurs: It’s Not All About the iPhone
By CLAIRE CAIN MILLER
Though almost every discussion at the MobileBeat conference in Sunnyvale, Calif., on Thursday centered around the iPhone, venture capitalists told mobile entrepreneurs to broaden their focus and build applications for all phones. Still, all anyone wanted to talk about was the Apple App Store, from which users have downloaded 30 million applications for the iPhone this month.

Startups should “intelligently hedge their bets across multiple platforms,” advised Richard Wong of Accel Partners. His firm has invested in mobile games and application site GetJar, “the store for the other 3 billion phones that aren’t iPhones,” as Mr. Wong put it.

Rick Segal of Blackberry Partners Fund and JLA Ventures reminded developers that the iPhone only accounts for a tiny share of the worldwide market. In India, for example, Nokia has 70 percent market share. “You must think multi-platform,” he said.

Some investors insisted that multiple mobile platforms–whether Apple’s, Google’s, Research in Motion’s or others–will thrive. Matt Murphy, head of Kleiner Perkins Caufield & Byers’ $100 million iFund, said most entrepreneurs who pitch him have iPhone applications, but that the platform war “is not a winner-take-all game.”

David Sokolic of Battery Ventures disagrees. He predicts a shakeout akin to the PC market and Microsoft’s Windows, with a clear leader emerging...

Two learning points here, I think.

1. It IS all about the iPhone for mobile entrepreneurs, whose main goal is to take invested capital and gain quick cash flows. The iPhone is not the product: the real product is the Apple platform, which is about as direct-to-consumer as you can get, with the added bonus of being a trusted channel. Apple's true insight with the iPod and the iPhone is that the PLATFORM is the offer, and the benefit of that offer is a simple, trusted source for digital content. By giving that platform so easily to entrepreneurs, Apple theoretically can build robust product ecosystem very quickly, while giving software developers the ability to leverage what they presumably do well: build and sell software. Software entrepreneurs are usually terrible at marketing. 

Contrast the Apple "platform" with what you have to go through to get Nokia's attention in India. I think the VC's are looking at this wrong. The risk is in getting to early cash flow, not in diversifying the customer base at a huge up-front cost for HR, multi-platform technical support, and high cost of marketing. 

2. Will a clear leader emerge? One thing that strategists almost uniformly ignore is the power of the retail channel to keep a leader from emerging. So long as both hardware and software are sold through retail, you'll have multiple players. Retailers just have too much incentive to keep suppliers vying for the value of their in-person sales channel to give it over to one provider. It gives the retailer buying power, and it gives the OEM a channel they can rely on -- even if there's price pressure. 

So, to answer the question, will a clear leader emerge, we have to look at the question, will people start buying phones and mobile software primarily through retail, or will they start buying the phones and software primarily via the Internet? Because on the Internet, clear leaders do emerge.

Want to lay bets on the future of mobile phone retail? I know how I'm placing my own bet.

UPDATE: Very interesting and intelligent forum/blog discussion on the topic of the iPhone app ecosystem vs the Facebook ecosystem. I have my own views, but the interesting thing here is that you can see the POV of investors, developers and customers. 

Comments

[Rick Segal - JLA]

Paul,
While I appreciate your views, it really isn't all about the iPhone when it comes to starting up a business and attempting to make a go of it be it a living or serious hobby.

The iPhone is not the fastest way to get something up. The RIM/Windows/Noikia devices all have better/easier platform systems to plug into combined with millions and millions of users. If you are solving a specific problem or offering a very focused service to a targeted number of users, there are lots of choices.

The iPhone is a great device and Apple is a great company. Getting caught up in hype of any kind can be a fatal mistake for a start-up.

best,

>R<

[Paul Ward]

Rick,

Thanks for your comment!

I think going after an existing installed base, such as RIM, can make sense, but the ecosystem of applications, adoption rates, challenges in identifying and reaching your niche to market your product, all pose daunting challenges when making a business case. I'll take your point that the combined user community for RIM/Windows/Nokia is huge. I'll poke around to see just how effectively app developers tap that market.

I also take your point that getting caught up in hype can be a fatal mistake for a start-up. But that hype applies across the board. The business case for building ANY mobile app needs to be based on a consideration of quality, market relevance, competition, channel control, and pricing.

All that business mumbo-jumbo aside, I don't think anyone three years ago would have believed that RIM's position would be threatened in such a disruptive way by Apple. And anyone banking on Microsoft's Zune might have had a business case that looked good on paper given Microsoft's available resources. Brands matter, because they affect market adoption, and so hype -- in a way -- can be a leading indicator ... :)

Great to have you here, and you are welcome anytime to be your own disruptive innovation on my blog ...