Bottom Line On iPhone 3.0: Mostly For Developers, Not Consumers

This story was written by Tricia Duryee.
This morning at Apple's headquarters, just off Infinite Loop in Cupertino, Calif., reporters, analysts and developers arrived early to snack on bagels and sip coffee, eagerly awaiting juicy details on the iPhone's latest software update. At similar events in the past, we heard industry-shattering news, like the advent of the Apple (NSDQ: AAPL) App store and the iPhone 3G. For consumers, today's presentation was something of a letdown. The user features are nothing new and, in fact, amount to Apple playing catch-up with other smartphones. Far more significant were the announcements aimed at developers, who will now be able to create an array of cool new applications for the iPhone.

Among the standard consumer features announced today are: copy and paste, the ability to search emails and other content on the phone, and the capacity to send a photo via text message. Let's contrast that with the tools that Apple unveiled for developers: Starting this summer, it will allow developers to sell subscriptions in the App store. So, for example, magazines can charge a monthly recurring fee, and game companies can sell more levels once a player has completed a certain stage. Although carriers have supported subscriptions for some time, this is new to the iPhone and other open-application markets, like Nokia (NYSE: NOK), Google (NSDQ: GOOG) or RIM (NSDQ: RIMM).

The company also announced peer-to-peer connectivity, meaning that multiple people can link their phones together to play a game, or swap business information (See the Smule example here.). Developers will also now have the ability to integrate their applications into third-party accessories, ranging from a pair of speakers to a heart monitor.

More after the jump on where Apple is going with its announcement today

Electronic Arts (NSDQ: ERTS) demonstrated how it might use some of the new features in the virtual-world game called TheSims. The company showed how a character could pay real money for something in the virtual world, like a home stereo to add to a virtual house. It wasn't possible to sell things within apps before. In addition, the virtual character would be able to connect that stereo to an iPod and listen to music on the device. You can see how an app could easily make incremental revenues.

Clearly, Apple has prioritized making tools for thousands of developers, rather than using the limited resources it has in house to make applications themselves. In general, Apple's internal development of applications has been very limitedand frankly, unimpressive. Leveraging developers is a not a unique strategy. In fact, Microsoft (NSDQ: MSFT) is famous for it on the the PC. One can argue that this may be the first mobile ecosystem successfully built and operated with the developer and consumer in mind. But there are companies close on Apple's trail, so there's no saying whether it will be the last.


By Tricia Duryee
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