Is the iPhone Camera Really a Threat?

The photo-sharing site Flickr, owned by Yahoo, is one of the top online photo-sharing sites. It hosts at least 3BN images, and has over 24MM unique visitors. One of the interesting elements about Flickr is that it tracks the cameras from which each image is uploaded. Thus, it has important insight into the camera market. It is important to note that this is a subset of the camera market – those that use Flickr. Nonetheless, the data is revealing. The key data are available here.

Note that the iPhone camera is growing steadily in usage, and, according to the graph, appears to be in usage by nearly 50% of Flickr members. Among cameraphones, the 3rd graph on the page, iPhones are taking off rapidly. Clearly, the iPhone is very popular, and becoming more so, among those using Flickr. This is unsurprising, as the target audience for Flickr – the “digiterati” – are also the primary audience of the iPhone. The two align very closely. Additionally, with its always-on connectedness, it is easier to take a picture with an iPhone camera and then immediately upload it, rather than taking one with a standalone camera, then get back to the home or office, sync with the laptop/desktop, and then upload it. As such, the growth in iPhone usage is to be expected.

Business Insider has a different take on it. On the basis of the same data, Business Insider believes that the iPhone poses a real threat (clear and present danger?) to the point and shoot cameras from major manufacturers like Nikon, Canon, Sony, etc. Although Business Insider writers often have good insight, in this case, their reading of the data is flawed. We will look at this from two angles: the data from Flickr itself, and the market as a whole.

Flickr Data

The Flickr data has several features that make their data presentation questionable, especially for the purpose of drawing any conclusions.

  • The charts have no scales. This is graphing and charting 101, and even my grade school children know it from watching the CyberChase show on PBS. Without scales, we do not know if the iPhone has climbed from 10% to just over 50%, of 42% to just over 44%. Similarly, the decline in usage of the Canon EOS Digital Rebel XTi may be from 95% to 75%, or 45% to 44%, a statistical blip.
  • The charts are not exclusive. Any member may be (and probably is) using more than one camera. The charts simply show the percentage of users who have, at one time or another during the period, uploaded a picture from that camera.
  • The charts separate high-end cameras – Canon EOS Digital Rebel and iPhone – from point-and-shoot – Nikon Coolpix and Canon PowerShot. As these are not on the same graph, we do not know what the impact of one on the other is. Yet, the Business Insider writers attempt to draw conclusions about the future of point-and-shoot cameras from a graph that includes only high-end cameras. The people who buy and use a Canon SureShot are not the same ones, at least not for the same purpose, as those who buy a Canon EOS Digital Rebel.
  • The charts reflect percentage of members, not percentage of photographs. A single iPhone camera shot would have the same impact on the charts as 100 Coolpix photographs, but someone who takes 100 Coolpix photos is likely to continue using one for his or her basic photography needs.
  • The charts are “normalized” by Flickr to reflect a change in users. While a good idea, and works similarly in, for example, seasonally adjusting sales, it is highly susceptible to errors and unintentional manipulations, and cannot be relied upon without knowing the method of normalization.
  • The charts rely on limited data. Flickr explicitly states that it can only determine the source camera type in about 2/3 of the photos and/or videos.
  • The charts reflect only Flickr users, who are highly advanced technology users, usually younger and more comfortable with online usage.

There may or may not be a story in the charts. Whatever it is, the charts do not provide anywhere near enough information for anyone to determine if the iPhone does indeed pose a threat to point-and-shoot manufacturers. There definitely is a story in how (not) to use statistics.

Market Information

According to Apple, in the two years since launch, it has sold about 21MM iPhones. Every single one of these sales either involved a very expensive unlocked iPhone, or a monthly commitment for 2 years to some carrier. The entire cost to any one purchaser will run at least $1,500 (2 years of $30/month data and $30/month voice = $1,420 plus $99 for the cheapest iPhone), or perhaps $1,000 if an unlocked phone is bought. According to Gartner, 36MM smartphones of some kind or another were sold in 3Q2008. Assuming four times that number for the entire year (which is not fair because of seasonal adjustments and certain model launches, like the iPhone), the annual market is, at most, 144MM phones. While that is a fairly sizable market, there are several factors that reduce the impact:

  • Included in this market are 15.4MM Nokia phones, many of which do not fully qualify as smartphones.
  • Many, if not most, of the smartphones do not include cameras, due to lack of market need, cost factors, or corporate preferences. Many companies do not want to purchase phones with cameras for employees for liability and/or security reasons. Corporations are the majority purchaser of smartphones for employees, although that may be shifting.

By contrast Canon alone sold $11BN in cameras in 2008 alone. Assuming an average price of $200 (some cameras are more expensive, some are less), that is 55MM cameras. Add in Nikon, Sony, Kodak and the others, and the total digital camera market, excluding smartphones, is at least 5 times that of the smartphone market.

Finally, even the new iPhone 3G S camera cannot approach the basic simplicity of usage and quality of a simple SureShot. Although the convenience of having the iPhone camera available will count for something with its users, an average of 10MM per year over the two years since launch, the lack of basic flash, zoom and other features that a compact smartphone simply cannot handle will limit its functionality.

Summary

Yes, the iPhone is a great smartphone, especially for Apple and its stock price. The camera is significantly improved in the new iPhone 3G S. Nonetheless, it is unlikely to threaten the point-and-shoot market – let alone the high-end camera market – for years to come.

About Avi Deitcher

Avi Deitcher is a technology business consultant who lives to dramatically improve fast-moving and fast-growing companies. He writes regularly on this blog, and can be reached via Facebook, Twitter and avi@atomicinc.com.
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