Well technically Google seems to be sharing revenue generated from services like Search, Gmail, Maps, etc. with their carrier and manufacturing partners to incentivize their "going Android". If rumors of Apple making a cool $100,000,000 a year from Google for iPhone search are any indicator, the money may be nothing to sneeze at either.

Apple by contrast also gets $400 from AT&T per iPhone customer (the part AT&T subsidizes off full list price so those who sign contracts can get the iPhone 3GS for $199 instead of $599). So Apple is making money, Google is paying money (offsetting manufacturer cost), but the revenue -- and the access to Android users' data -- is likely so valuable to Google that they consider it well worth the investment.

Given how many and how fast new uber-Android devices are hitting the market, the carriers likely don't mind one bit. (Android aficionados who just bought the Nexus One and now want the EVO 4G, on the other hand, might prefer a bit of a breather.)

Either way, both companies are so obscenely profitable that their respective business models must be doing something right. Still, it's interesting to see the differences in those business models. RIM tries to sell their small network footprint, Apple their brand cache, Google their free OS with revenue sharing services. Which one will prove most successful? We'll have to wait and see.

[MocoNews via Phone Scoop via Android Central. Photo credit.]

When iTunes Music went DRM-free and "hits" jumped from $0.99 to $1.29 stories soon followed that the higher price point was leading to slower sales... and now that iBooks and publishers aim to increase eBook sales from $9.99 to up to $14.99, MediaMemo is telling them to "beware!":

Warner Music Group (WMG) said this morning that it has seen unit sales growth at Apple’s (AAPL) iTunes decelerate since the price increase: Industrywide, year-over-year “digital track equivalent album unit growth” was at five percent in the December quarter, down sequentially from 10 percent in the September quarter and 11 percent in the June quarter.

If people have to spend more they'll buy less? And if they think the price is unreasonably high they'll buy less still? Shocked. Shocked are we!

The thing is this -- under the new 70/30 agency model, publishers can charge what they like. If nobody buys a new bestseller at $14.99 but they do at $12.99, publishers can set that price on iBooks and still get their 70%. They can go back to $9.99 if they want to. Same with music.

Way back when iTunes Store launched, Steve Jobs made it a point to say their competition wasn't physical media -- it was free pirated media. There's a price point where users will feel it's cheap enough they don't even want to bother with the steps involved in pirating eBooks or MP3s, they'll just click the Buy Now button and thank Apple for the convenience.

That's the real model.

If the internets are to be believed, Google is setting pricing on their HTC built new Nexus One Android flagship smartphone at $529.99 unlocked, or $179.99 if you take it alongside a 2-year, $80 a month T-Mobile contract. Here are the deets:

• Existing T-Mo customers can't keep their current plan if they want a subsidized phone.
• The subsidized price only works on accounts with single lines. Family plans, Flexpay, SmartAccess and KidConnect plans must buy the phone at the full $530 unlocked price.
• You can onliy buy five Nexus Ones per Google account.
• Looks like it can be shipped outside the U.S.
• It'll be sold at google.com/phone.
• And if you buy the Nexus One at the subsidized price and cancel before 120 days have passed, you have to pay the difference -- $350 -- or return the phone to Google.

Now the original iPhone 2G sold for $600, locked on a 2-year AT&T contract. The current iPhone 3GS 16GB sells for $199 + ~$450 in carrier subsidy = ~$649 (it's currently sold unlocked by store.apple.com/hk for about $695). Nexus One has higher, presumably pricier specs, so is Google eating their profit margins, or is their massive advertising-based revenue model more than going to make up the difference?

No doubt the unlocked, unsubsidized sales model appeals to us geeks (it tempts me! comments reminded me, no 3G for all other US carriers, so never mind!) but will mainstream consumers go for it? Nokia hasn't had luck with that in North America. Could Google do better? And would you like Apple to follow suit?

[Gizmodo via Android Central]

How important is the iPhone to Apple's business going forward? See the chart above, prepared by Fortune. Up from 5.7% in 2008 to 18.5% in 2009.

We're going to say "very" and "increasingly". Daring Fireball highlights how Apple goes about ensuring that "increasingly" part, riffing off The Loop's reminder of when Apple killed the iPod mini at the height of its popularity and replaced it with the iPod nano:

You know who thinks the iPhone 3GS stinks? Steve Jobs. No one is working harder on an “iPhone 3GS killer” than Apple.

Given that competition is ramping up (see Android Central's coverage of Droid Day, CrackBerry's BlackBerry Storm2 watch, and Nokia Experts' massive N900 guide), is that internal drive still enough?

Could Apple's iPhone be destined for 3rd place in smartphone marketshare by 2012, trailing Nokia/Symbian's 39% and Google Android's 14.5% with a paltry 13.7%? That's what some analysts at Gartner are telling ComputerWorld, with Nokia already in the global lead, and Google's wallet, cloud-services, rapid iteration of the OS, and variety of form-factors and UIs from multiple manufacturers. Rounding out the other players are Windows Mobile with 12.8%, RIM BlackBerry with 12.5%, various Linux mobiles with a collective 5.4%, and Palm webOS with 2.1%.

iPhone, projected at 71.5 million unites sold, doesn't have Nokia's existing footprint or Google's services, but here's the thing: a) it has Apple's still-unmatched 360 degrees of ecosystem integration, b) will likely continue to improve at the same rate it has since the original iPhone 2G running 1.x with no apps or services in 2007, and c) will remain wildly profitable, and that profit share will remain more important to Apple than raw marketshare.

TiPb has discussed this before, of course. Back in August we heard that while the iPhone currently only has 8% of the market, it gets 32% of the revenue. Further back in January, we heard Apple was making double the profits of Nokia.

So, okay, if the Mayans are wrong and we're all still here in 2012, maybe Apple will only be making 30% margin on a 13.7% share. But that might still be killer compared to very little on a 39% share.

Just compare Apple's current financial results to the rest of the industry for an indication of how that works...

In light of today's response by Apple to the FCC about the Google Voice rejection, and anticipating the likely, negative reaction it will engender, I'm again left thinking that Apple and their iPhone are closer akin to a restaurant, not a super market.

Steve Jobs is like one of those screaming, perfectionistic executive chefs concerned more with his haut cuisine than his customers, whose palettes he believes tempered by years of McRosoft (or whatever). He -- and they -- will serve you a beautiful, delicious, premium plate but will also decide every single ingredient that goes on it, if not tell you exactly how they want you to eat it. If you go to a restaurant, you know what you're in for. You don't go to Nobu and throw a fit because they refuse to serve you spaghetti, or let you run into the kitchen and whip up your own meal.

Other companies might be more like super markets, where you can indeed assemble your own meal from whatever they sell -- though they'll still stock the shelves with what they want, and not what they don't want. More freedom, more work for the customer, and some will gladly take control over ease of use.

Typically, most of us go to restaurants AND shop at super markets, depending on what we feel like at the time. Likewise, some of us want that Apple-polished experience, others want more ability to roll their own.

With Google Voice specifically, Apple's not letting that hot new sous-chef in the door, perhaps because they suspect he's going to alter the menu in a profound way, then open up down the street and take all their customers. IBM learned that very painfully when they licensed DOS from Microsoft for the PC -- sometimes you create your own killer.

Ultimately, the iPhone is Apple's restaurant and Steve Jobs is the executive chef, and whether the lease with the booze supplier (AT&T) prohibits certain other cocktails (Skype, SlingPlayer), or Apple refused to let certain food in the place, it's still their restaurant, and they control the menu.

Apple should just be honest about it and tell users and developers like it is -- an iPhone is an appliance, no different than a Nintendo Wii or any other closed box. Right now, they're feigning greater openness than they're actually providing, causing prolonged confusion and ill-will. Say it straight, it's our iPhone point finale, take the hit from users and developers who'll leave, and then everyone else knows what it is when they pick it up and sign the contract, and it's their responsibility.

More a cameo than a starring role, never the less the iPhone and MobileMe feature in Apple's latest marketing campaign "Get the most from your Mac: Our picks for getting your best pics":

Let friends download full-resolution images. Enjoy your own online gallery where you can share photos and videos. Let friends download your photos and upload their best shots. You can even publish and view photos directly from your iPhone. Visit a live sample gallery now.

While thin on iPhone overall, it does showcase the incredible ecosystem Apple has plugged the iPhone into, including Mac's for photo editing and organization, printing services for books, calendars, etc. sharing online and to devices from Apple TV in the living room to MobileMe online and iPhone and iPod on the go, and back up solutions like Time Capsule.

That 360 degrees of integration is one of Apple's -- and the iPhone's -- greatest strengths and one smartphone-only manufacturers have no short-term way of matching.

Venture Partners guestimated, based on a survey from O'Reilly, that Apple has made "only" $20-$45 million from their 30% cut of App Store revenue since the service launched in July 2008.

To quickly recap, App Store developers can charge whatever they'd like for apps -- including free as in $0 -- and Apple will take 30% off the top, from which they pay storage, bandwidth, infrastructure, transactional processing fees, etc. Obviously 30% of free is nothing, but for $9.99 apps, they'd gross almost $3, and net... well, that's anyone's guess. (see above).

Techcrunch (via Daring Fireball) provides some interesting analysis on that point, and the larger point on just what Apple may be netting in total:

I think Liew’s numbers are well below the actual revenue numbers, but no matter if its $50 million, $100 million or $200 million, that’s not a huge amount of money for a company that has nearly $30 billion in cash in the bank. But going forward, that number is only going to increase both as the platform expands and as in-app purchases come into play. That’s not bad for a company that just wanted to make enough money to keep the App Store running.

Parallels to the iTunes Music Store, and what it did for iPod sales, are thus as plentiful as they are well founded.

As many of us eagerly wait for Twitterrific 2.0 to hit the iTunes App Store, developer Craig Hockenberry has provided an interesting insight into the mind -- and strategy -- behind one of the most high-profile development houses in Apple-dom. Says Hockenberry on being Trendy:

As software developers we often fall into the “just one more feature” trap. We want a 1.0 release to be awesome, and that one more thing will only take a day or two, and people will love it, so why not?

Because that awesome feature could be a very good thing to generate buzz and sales for a 1.1 or a 1.2 release. And by not “doing it all” in the first release, you get your product to market faster. You’ll be making money while you implement that cool new feature.

And holding back can have another advantage: you might find that your users want something different than what you had planned. Their input can often change your idea, so don’t waste time doing something without feedback.

The rest of the article is a worthy read, as is his blog Furbo.org in general.

Take your $5+ apps and put them on sale for $0.99 for a week, and see if cheap really does make it up on volume, and what do you get? Aside from a lot of iPhone media attention, pretty much a wash according the AppCubby:

People seem to think that there is unlimited demand for iPhone apps, but that's just not true. The time, attention, and discretionary income of iPhone and iPod Touch users ARE finite. They can only download and use so many apps in a single day. The published download numbers for the App Store are off the charts, but as I've pointed out before, those numbers are spread quite disproportionately among free apps and the top 50 paid apps. The harsh reality is that very few apps can "make it up on volume."

The post goes on to describe some of those harsh realities in more detail, and shares the developers thoughts on whether or not he'll keep with his current apps, or ditch it for high-volume, low-brow novelty CrApps. Definitely worth a read, especially by anyone who wants to see really innovative, really polished iPhone apps. Extra-especially by Apple.

Or is this just a bunch of crazy talk, and real iPhone users are happy with free/cheap iFartz! fun, premium apps be damed?

(Via Gadeon from Icon Factory on Twitter)

Digital Daily brings BOOM!ing word that Apple's market cap has just exceeded Google's, at $159.37 vs. $157.56.

Good on Steve Jobs and Apple. And kudos to Valleywag for saying, way back in 2007 that this would happen because "Apple knows how to design not just gadgets, but the businesses that go around them."

We here at TiPb have been marveling at Apple's unique 360 degree spherical integration for a while now as well.

We, like pretty much everyone else in the blogosphere, probably can't help but wonder how Michael "I'd shut down Apple and give the money back to its shareholders" Dell is doing lately? But is all this market cap stuff really anything more than a seriously juicy headline? Any savvy investors reading, please enlighten me on how much more or faster this news, never mind the ever fickle and capricious dice-game that is the current market, will restore our childlike sense of wonder?

Microsoft's most recent 10K filing with the SEC gives every indication you-know-who may be bringing them some future pain:

A competing vertically-integrated model, in which a single firm controls both the software and hardware elements of a product, has been successful with certain consumer products such as personal computers, mobile phones and digital music players

Sure, Microsoft has their Xbox and Zune end-to-end business models, the former of which has enjoyed both success and red-ring framed troubles, and the latter of which is jettisoning even its... er... more eccentric fanbase, but they've yet to enjoy iPod-level triumph in the space.

To put this in some perspective, we know Microsoft's CEO, Steve Ballmer, has said Apple's tight integration is something they want to emulate going forward, but Microsoft basically invented software as the mega-business. They've made gatestillions of dollars on software and enjoy a monopoly level position in both PC OS and Office applications.

So, even as Apple sold a million iPhone 3Gs in a weekend, and Steve Jobs wants 1% of the global mobile market, and 10 million units shipped short term, Microsoft came close to moving 20 million software licenses for Windows Mobile in the last year, and even as Mac sales keep inching on up, Microsoft still sits so far atop that market share mountain, its basically everest.

Still, if we discount Microsoft's endemic -- and groundless -- Apple (and now Google) envy, could Ballmer and co. seriously still see Apple's 360 degree, spherically integrated business model as a threat? And if so, why?

Posted from my iPhone

Read that title again, and realize that the iPhone 3G will sell for LESS than the infamous price drop given the original iPhone before the holidays. (Recap: it's started at $599 and was dropped to $399 with early adapters getting an equally infamous $100 Apple Store gift certificate Jobs-a-culpa).

And while the price drop was big news then, the retail price of $199 should be HUGE news today.

At $199, that's HALF the price of the original iPhone at its lowest. It's the SAME price as an 8GB iPod Nano. It's LESS than an iPod Classic, and MUCH LESS than an iPod Touch!

When we consider the possibility of carrier subsidies on top of that (Europe has been heavily rumored, with Orange at the extreme gossipy end of giving them away free to current iPhone owners), the iPhone may just be cheaper than "competing" Blackberries, Windows Mobile, and Treo smart phones.

Profit margins (averaging 30%) on hardware have historically been Apple's bread and butter, but this isn't the personal computer market (where they're a founding name) or the MP3 player market (where they have a dominant market share already), this is a much bigger, much less saturated market for Apple. Consumers will buy for a variety of reasons. Features often tops the list. Fashion certainly plays its part. But price can be the difference between dream and reality for a lot of shoppers.

Apple knows this, and they've developed an unparalleled 360 degree, spherically integrated business model to support it. A share of App Store sales and MobileMe subscriptions are just two examples surfaced today. Apple Retail Store profits, accessories, Mac hardware, licensing fees, iTunes sales, and a host of other factors let them maintain profitability while minimizing sticker shot for their users.

Steve Jobs once said that the mistake made by the management prior to his return was to go for money rather than market share. By keeping high prices in the present, they all but killed the platform's future.

Judging by today's WWDC 2008 Keynote, Jobs learned that lesson well.

8GB iPhone 3G for $199. Perfect price-point storm?

What do you think?

[Updated following Phone Different Podcast #19, see below!]

Way back in February, Apple's Chief Operating Officer, Tim Cook said:

"We're not married to any business model."

At the time -- and it's scary how long ago it seems already -- the iPhone was only available in the US, UK, Germany, and France, with rumors of Ireland and Austria waiting in the wings. What's more, these were all exclusive deals, with Apple doing their best to lock the iPhone down to single carriers in each territory in exchange for lucrative -- and unprecedented -- revenue-sharing deals that some have estimated could be netting Apple up to $15 per month, per subscriber.

So, with a potential billion dollars on the table, while they weren't married to it, they no doubt felt more than a little lusty.

But in true Apple fashion, invoking perhaps the pirate mantra of old, and embracing the same mindset that has them run iTunes as a near-loss leader, price-cut the iPhone a scant few months in, and offer cheap family upgrade options on their OS and iApps, it looks like Tim Cook was serious.

Read on to find out just how serious he was...

Late April brought rumblings of carrier "discounts" in Europe. Apple claimed carriers could charge what they wanted. Pundits on various sides pointed to clearing stock in the face impending 3G, or desperation to nudge thus-far-disappointing sales.

Then the floodgates opened. Literally. What had been a scant 5 countries with official first generation iPhone deals, became a torrent of announcements, week after week, of dozens upon dozens more. Canada. Australasia. Africa. Latin America. The Middle East. Scandinavia and the Baltics. And more. Double, triple, quadruple, the numbers became near-exponential.

The strange part? Multiple carriers began announcing iPhone deals in the same countries or territories. Vodafone and Telecom Italia both claimed Italy in early May.

Carrier exclusivity was gone.

No doubt at Apple's behest, press releases were short to the point of single sentences at times, all with the promise of more details to follow, but Orange did let slip that there would now be non-exclusive deals (where no carrier had the sole rights to the iPhone and any GSM provider could theoretically support it), and co-exclusivity (where two or more carriers had sole rights and only they could officially support it).

Orange didn't stop there either. Rumor has it they are now calling up existing iPhone customers and offering them €50 upgrade paths to the next generation iPhone 3G. Talk about a subsidy!

So why, with so much money at stake -- and let's face it, cachet -- are Tim Cook's words suddenly ringing so loudly?

Steve Jobs has said that one of Apple's greatest failings during his absence was that other leadership chose to grab for money rather than grow market share. And Steve Jobs is known to think about products and positioning years into the future.

Our own Dieter Bohn has teased some of his thoughts on this, and promises to follow up on the next Phone Different Podcast. Don't miss it.

UPDATE: Dieter, having brainstormed with another one of our writers, Chad Garrett, is offering the following: Given the massive amount of carriers now announced for the iPhone 3G, managing activation via iTunes may get a lot tricker... unless Apple offers the iPhone unlocked, and iTunes simply provides a way to connect to one of the established carriers in exchange for a subsidy, or -- dream of all dreams -- lets you keep running unlocked if you're willing to forgo said subsidy. How's that for a new business model?

For my part, I'll mention this again:

Apple is alone among modern technology companies in enjoying near spherical integration. They make the iPhone hardware. They develop its software. They provide .Mac services. They market pro-level content creation tools. They own the high-end computer market that runs those -- and the developer -- tools. They sell content via the #1 music retailer in the US, iTunes. They have a toe in the accessory business with a headset, docks, cables, etc. They license 3rd party accessories. They get revenue sharing on subscriptions from current carriers. They are about to launch an App Store, getting a cut of commercial sales in exchange for putting product in front of every single iPhone user on the planet. They have an international online store, and their growing chain of retail Apple Stores make more per square foot than Tiffany's.

So, unlike many others who have to survive on platform licenses, hardware margins, service contracts, or any other single or small number of profit streams, Apple can choose to take hits in multiple streams (like revenue sharing) and still earn money hand over fist in many, many others.

In short, Apple isn't married to any specific business model because they can afford not to be. And come WWDC in June, and the long expected iPhone 3G announcement with it, Apple's plans may just result in a windfall for consumers as well...