iPhone Generates $400 Million in Free Publicity

By James Alan Miller

March 22, 2007

Apple's Wi-Fi/cellular phone for Cingular won't be out for months, but it's already the handset to beat in 2007.

Although it is still several months away, the iPhone is the smartphone to beat in 2007.

While the combo iPod/Internet/phone gadget's Teflon-like coat of armor isn't as strong as it was when Steve Jobs first introduced the iPhone at Macworld more than two months ago—upstaging every device shown off and company at the Consumer Electronics Show in the process—the Apple CEO's reality-distortion field and the company’s expertise at creating a buzz for an upcoming product has had the effect of generating an unprecedented amount of free publicity for the device.

Sure, an Apple product launch producing a huge amount of pre- and post-announcement buzz isn't a surprise, but according to Harvard Business School professor David Yoffie, the company exceeded its own impressive track record with the iPhone announcement. He said to USA Today,"No other company has ever received that kind of attention for a product launch."

How much attention has the iPhone received? $400 million worth, according to Yoffie.

He explained that with the iPhone Apple used all the weapons in its buzz-generating arsenal. These include: make an innovative product with an emphasis on design; keep product selection simple; create truly memorable ads; find an enemy; work the taste-makers; offer surprises (so while the iPhone was expected for years, no one knew exactly what it would be like when Apple finally got around to introducing it); and, last but not least, put on a show.

Yoffie expects all the free publicity the iPhone announcement has received will "drive people into the stores to test the products. It will help sell a lot more iPods and iPhones. Think of all that publicity as a substitute for marketing costs and an opportunity for Apple to dramatically increase its market share."

Apple's goal is to capture 1 percent of the cell phone market in 2008, which would translate into about 10 million units sold. And while the initial cost to buy an iPhone, which will be sold exclusively by Cingular (the new AT&T) in the U.S., is high for your average smartphone today - at $499 for the 4 GB model and $599 for the 8 GB version with a 2-year contract - Apple's high profit margins on the device leave plenty of room for prices to be lowered over time.

According to market research firm iSuppli, there's a gross profit margin of nearly 50 percent with each iPhone. This means for every 4 GB iPhone sold, Apple could earn approximately $253, and with the 8 GB model $318.

While iSuppli's numbers don't include advertising and marketing costs, as you can see from what professor Yoffie reports, these outlays probably won’t be as high as you might think. After all, the iPhone has already received $400 million dollars worth of attention without Apple shelling out a dime.

Story courtesy of SmartPhoneToday.

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