Lower income consumers drive iPhone growth

Thu, Oct 30, 2008

Analysis, Finance, News

ComScore has recently come out with a report detailing the demographics of iPhone users, and the results are surprising. While the iPhone might stereotypically be thought of as the province of tech geeks with money to burn, ComScore’s findings indicate that the real driver behind the iPhones tremendous growth has come from users who earn less than the median household income.

From June to August 2008, the growth rate of the iPhone for individuals who earn over $100,000 was 16%. Meanwhile, the growth rate of the iPhone for individuals earning between $25,000 and $50,000 was 48%, and for individuals earning betweein $50,000 and $75,000, the growth rate was 46%.

Chart courtesy of comScore

The release of the iPhone 3G in July clearly has a lot to do with these statistics. When Apple lowered the base cost of the iPhone to $199, it instantly became a viable, affordable, and more attractive option for consumers who wouldn’t ordinarily pay upwards of $400 for a cellphone. Jen Wu, a senior analyst at Comscore noted:

As an additional household budget item, a $200 device plus at least $70 per month for phone service seems a bit extravagant for those with lower disposable income. However, one actually realizes cost savings when the device is used in lieu of multiple digital devices and services, transforming the iPhone from a luxury item to a practical communication and entertainment tool.”

Another explanation behind the data could be that individuals earning over $100,000 most likely already had an iPhone if they wanted one, and decided not to upgrade to the 3G model. Lower income users, however, were not as likely to spend $499 for an iPhone when it first came out.

In light of Apple’s recent earnings report, lowering the base price of the iPhone to $199 seems to have been a great move, and as the data suggests, has opened up the iPhone to the masses. Steve Jobs even noted that Apple sold more iPhones during its last quarter than it did in all previous quarters combined.

Mark Donovan, another analyst at ComScore noted:

“These data indicate that lower-income mobile subscribers are increasingly turning to their mobile devices to access the Internet, e-mail and their music collections. Smartphones, and the iPhone in particular, are appealing to a new demographic and satisfying demand for a single device for communication and entertainment, even as consumers weather the economy by cutting back on gadgets.”

Will competing phones such as the BlackBerry Storm and T-Mobile’s G1 have any impact on consumers who are seeking an all-in-one device? Not necessarily. People tend to forget that the iPhone is also a full-fledged iPod, and offers storage capabilities that other competing smartphones can’t match straight out of the box. An entry level iPhone comes with 8gb of storage, while T-Mobile’s G1 and the BlackBerry Storm both come with only 1GB of storage, which lets you put on around 240 or so MP3′s. Customers can, of course, put in a MicroSD card for more memory, but that will most likely cancel out any initial savings in cost. Also, consumers looking for a phone and media device in one might be disappointed to find out that the G1 doesn’t come with a built in video player, though one can be downloaded from the Android Market.

Read the press release here and the full report is available for purchase here.

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16 Comments For This Post

  1. Melver Says:

    Well it seems the reason Apple has been doing good with their products. It’s mostly douchebaggery idiots who buy their crap.

    That explains it all now.

  2. gleep Says:

    Why do you care so much? No one’s forcing you to buy one, princess.

  3. Maria Says:

    Apparently, business people (or rich people) is more towards business oriented phone like HTC, Samsung Omnia and etc. Looks like iPhone need to improve to suit their demands.

  4. al Says:

    hmmmm…

    Looks like the dumps don´t see the real priced. It´s like the house crisis. Real people with real work pay for the sore looser. If they evict all low level looser, we loose money. The looser is used to live in the ghetto and chear the owner out of their money. You are not the guy who drives the flashy car or the woman who forces the man to buy the house. We in the USA need to grow up and give loosers what they deserve: nuuthing ( speeled so they can read it ).

    Maybe we should stand up and kick these so called people of the bus. I see loosers day after day whith their ipods and iphones riding, while they obviously can´t afford them. Kick them cause we the tax payers “help” them buy shit like that. What will happen if a low level hero like obama “give it to the poor” will win? We need to create a new class of real poor people who don´t have to eat instead of wasting their money on apple dump!

    The guy on the bus who will kick the apple but …

  5. duhster Says:

    Maybe the iPhone has appeal with younger people, who tend to also have jobs that pay less money. People who are older and would need an iPhone-like device may have a Blackberry, paid for by their work.

  6. chao Says:

    Given that these are growth numbers, maybe more than 80 % of actual sales were in the high income bracket, the remainder in the low income. Then the big increase in the low income still makes the thing mostly bought by high income persons.

  7. Rodney Says:

    I have to be honest if I wasn’t already in live with my T-Mobile service and price, I’d consider getting an iPhone now that it’s only $199. But I’ll hold off for now.

  8. Netmark Says:

    Most business people get their blackberry for free from their business. IPhone is regarded as a toy.

  9. Sean Says:

    Another, factor to consider may be the rich kids of those making over 100k. Some boomerang parents today are still finacially helping there children well beyod the age of 18. While technically, for statiscal purposes my household income is under 25k right now. I have the strong desire, as many youth(s) to use the latest and greatest. I am centro power user and proud of it.

  10. David Sweeney Says:

    I would be interested to see how many of these “lower income consumers” are still living with Mommy and Daddy. Sure, they can afford a $70 per month plan and a car payment because they have zero housing costs.

  11. supergeek Says:

    some said that the iPhone is the first device ever for the cool kids and the geeks to both want at the same time. thats a pretty big market.]

  12. Free xbox 360 System Says:

    Wow that’s interesting. But it’s also a sign that we live in a consumerist world.

  13. jamie Says:

    Your readers might be interested…

    I just posted a brief “think piece” on the new comScore iPhone numbers, looking at the prospects of low income US households substituting iPhone for their landline broadband lines…

    If this were true, it would place the US Middle Class on par with that of many emerging nations, B.R.I.C. and the like – where most people, even the “rising middle classes” simply cannot afford both a mobile and PC internet connection (or fixed line internet simply isn’t widely available, again ultimately due to price)

    Check it out and take the poll @ http://mobilestance.com/2008/11/01/iphone-as-leading-indicator-of-eroding-us-middle-class/

  14. suresh Says:

    In my view, iPhone is the single most mobile phone capable of winning an Oscar if something like that exists…

    Hatsoff to Apple for making even low income consumers to take cash out of their pockets

  15. adebuche Says:

    I’am thinking like Jamie that the issue is : an iPhone at $199 is way cheaper than any computer with internet connection … and way cooler :-) For people that have basic computer needs (email, surfing, …) and do everything online (which you can do) or rely on some of the iPhone apps … that’s a good deal :-)
    Would be good to see if those people already had a computer with an internet connection, or if it is replacing it.

  16. Jim Spence Says:

    I am not sure that I can completely understand your comments. Would you be so kind as to expand on your reasoning a little more before I comment.

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