iPhone Apps Could Outshine the Phone

By Amy Gilroy -- TWICE, 7/10/2008

Cupertino, Calif. Calif. — With Apple’s announcement today that it will offer more than 500 applications for the iPhone 3G in time for its launch tomorrow, analysts say the software may become a game changer for the smartphone market.

Apple said the applications, a quarter of which will be free, will be available through over-the-air downloads directly from the iPhone 3G, potentially converting the device into a broader, mini-computer platform. The applications will access through an Apple Apps store that appears as an icon on the iPhone or through iTunes and they will also run on the iPod Touch.

The applications may be “the most interesting part of the 3G launch,” said Jupiter VP and research director Michael Gartenberg, noting that availability of hundreds of applications at the launch of a smartphone is unprecedented.

Until now, smartphone applications were often difficult to download, requiring users to go to a PC first and to access various third-party Web sites. “There wasn’t a simple, easy, method. That’s why developers love this and consumers love it because every application adds to the functionality of their device, making it that much more valuable,” said Gartenberg.

It is conceivable that a trove of 500 new applications could produce a “killer app” that would “transform the iPhone as Lotus 123 did for the PC and PageMaker did for the Mac,” he said.

Ross Rubin, The NPD Group director of industry analysis director, echoed this, saying that until now, “There really hasn’t been widespread adoption of native smartphone programs by consumers. It could potentially give Apple more of a lead in the smartphone market and it could transform the mobile applications business.”

The new iPhone 3G, to be available in more than 20 countries tomorrow, is expected to win a 35 percent share of the mobile touchscreen market in the United States by the end of the year, according to Strategy Analytics, which predicts the iPhone 3G will account for 6.3 million of the 18.1 million touchscreen phones sold in the United States from January through December 2008. iPhone rivals include the Instinct and Voyager from Samsung and LG. BlackbBerry and Nokia are also expected to launch new touchscreens in the near term.

Among the 500 new applications will be titles from eBay, Facebook, MySpace, Sega and Travelocity, said Apple. Applications will include games and productivity tools and include news, sports, health, reference and travel software.

The iPhone 3G launches tomorrow at

$199

, half the price of the original model, offering download speeds that are twice as fast, according to Apple. The product, however, requires a two-year contract with AT&T that is $10 more expensive than the service fee for the original iPhone, which effectively renders the new model more expensive in the long run. Apple sold 6 million of its original iPhone models and is expected to well exceed its original goal to sell 10 million iPhones by the end of the year.