Why the iPhone Won't Be a Big Hit

The big news of the day is that Apple is releasing the iPhone (finally!). If you somehow missed that, check Engadget for a recap of Job's keynote, overview of the phone, pictures, and video. Or you might want to read TechCrunch's take, watch Job's speech, or maybe most obviously check out the iPhone webpage.

Of course before viewing any of those, make sure you have a paper towel with you, because you are going to be drooling. The touch interface is amazing and the software they put on it looks really cool. And no one can do a demo like his Steveness.

It has so many features, it makes you wonder why they named it the iPhone especially since Cisco already owns the trademark.

That being said, as cool as it is, I don't think it is going to be a big hit. If I were you, I would pick up some Research in Motion stock because it got hammered today as the market over estimated the impact of the iPhone.

There are a couple of features that are missing. First, it is not 3G compatible. Second, it has no GPS. That would make it so much more valuable, especially with the Google maps. Geotagging pictures would also be sweet. Third, you can't wirelessly sync with iTunes. While these are disappointing, I don't think they will be deal breakers.

There are five potential deal breakers.

1) Cingular only. Like Verizon's ads correctly suggest, phones are really about the network. If Cingular service isn't great in your area, you aren't going to buy the phone regardless of how cool it is.

2) No keyboard. While it makes for a cool demo, many people who have tried them have commented that they hate virtual keyboards. The lack of tactile feedback makes them difficult to use. If you like to type up messages with your phone under a table during a meeting or under a desk in class, or hitting buttons like doing something else (like driving, not that anyone does that) good luck with this one. I expect someone will come up with a bluetooth mini-keyboard for use with it, but that it still kind of a pain.

3) Doesn't work with Microsoft Outlook and Exchange. Most of the smart phone users use them with their work accounts, which are usually Microsoft. If you can't sync your email and contacts with the iPhone, lots of the value is lost.

4) Size and durability of phone. While the iPhone is about the same size as other smart phones, it is still big for a cellphone. It is not a clamshell like everybody likes. I wonder about the durability of the screen. Will it scratch easily? And what about fingerprints from touching the screen all the time?

5) It is a $500 cellphone. How many people buy $500 cellphones? The iPod became a hit when it was under $300 and a huge hit when it got under $200. $500 for a phone is a lot regardless of what it does and severely limits the potential market.

Because of these drawbacks, no matter how cool the technology is, it isn't going to be a huge hit that adds up to lots of sales and additional profits for Apple.