Yes – Apple will sell a lot of iPhones – Here’s Why

iPhone 5

Image from: iPhone 5 / Apple.com

Yesterday Apple unveiled the iPhone 5 to predictably strong reviews and aggressive sales forecasts. With a bigger screen, faster processor, thinner profile, LTE connectivity and more, the iPhone 5 looks to be a better version of what is already the world’s most popular smartphone. What you already know is that most forecasters are predicting huge sales. We agree. But what you don’t know is why. Here’s our take:

First, we know that upgrade interest has declined 46% since October, which is indicative of existing subscribers waiting “on the sidelines” for new phones, plans or both. There are a number of reasons for this – the continued general softening of the economy, changes in upgrade availability and fees, seasonality – but the biggest, we believe, is simply extremely high consumer interest in the newest iPhone.

Big 4 Online Upgrade Interest

Second, we’ve seen that iPhone “S” releases drive dramatically less consumer interest than “number” releases. The launch of the iPhone 4S was a huge success, with interest and sales volumes exceeding all previous releases. But that success is a bit misleading, because it was achieved by dramatically expanding distribution, through the addition of Sprint, Virgin Mobile, C-Spire and others to the mix. If you look only at shopper interest at AT&T & VZW, however, you can see that the October 4S release – while still hugely successful – failed to generate as much interest as the iPhone 4 did at AT&T in June 2010 or at Verizon Wireless in February 2011.

iPhone Shopper Penetration

Finally, we know that Apple is better managing the technology adoption lifecycle curve than any other consumer electronics company today, and possibly ever. Demand for the iPhone 5 will likely be highest among the “innovator/early adopter” segments, many of whom will be looking to replace their 18-24 month old iPhone 4. (In fact in a survey fielded in July, Compete found that 60% of those consumers describing themselves as “innovators” were likely to buy the iPhone 5, when available.) However, demand for older generation iPhone models will surge among the mainstream/majority segments, especially as prices for the 4S and 4 (now just $.99) fall dramatically.

Why do we focus so much on online interest? Because it is a leading indicator (really, the best indicator) of future purchase intent. In fact, when we look at online visitation to the Apple.com iPhone product feature page and compare this to the last six full quarters of published iPhone sales, Compete’s online device interest data is very highly correlated with published global sales volumes. (Feature page visitation and sales are correlated at r = .775, for any statisticians out there reading this.)

Since this enables Compete to get an early view into device sales trends, we’ll be monitoring September online interest data very closely. Look for our predictions of initial iPhone sales volumes, as well as our thoughts on the holiday prospects of other recently announced smartphones from Nokia, Motorola, HTC and Samsung next month. Stay tuned!

About Christopher Collins:
Chris Collins leads the Technology & Entertainment Practice for Millward Brown Digital. In this role, Chris provides data-driven insights and strategic guidance to leading retailers, telecommunications carriers, consumer electronics manufacturers, and their marketing partners. Prior to Compete, Chris was a senior member of the Consumer Wireless team at Yankee Group Research and worked as a management consultant for Monitor Group and IBM Business Services. Connect with Chris on LinkedIn.