The design for the device that would revolutionize mobile phones and, eventually, the culture at large, arose from hatred. When considering whether to create the iPhone, Apple CEO Steve Jobs found that people largely despised the phones that they had.
“Everybody has a cell phone, but I don’t know one person who likes their cell phone,” he once told John Lasseter, Pixar’s chief creative officer.
To create a phone people would actually love, Jobs latched onto an important innovation: the touch screen. The display was the key to creating a computing chameleon: a device that could be a phone one minute, a camera the next, and a gaming pad the next.
The master showman unveiled his smartphone in January 2007 with one of the most brilliant sales pitches ever. “Today, we’re introducing three revolutionary products,” Jobs said with a bit of misdirection, as the iPhone would be all three: phone, iPod, and Internet device. Steve Ballmer, then Microsoft’s CEO, laughed. Clayton Christensen, the Harvard business professor who turned the world on to the notion of “creative destruction,” scratched his head. But the public’s reaction after the iPhone’s release on June 29 was anything but skeptical. Ten years later, it’s clear that the critics were wrong. Consumers were right. Again.
Sales started briskly and then went into overdrive after Apple cut the starting price of its second model, the iPhone 3G, to $199 with a wireless contract.
More important, one year in, Apple introduced a critical new feature that Jobs had initially resisted: the App Store. It enabled iPhone users to buy and install mobile programs from third-party developers directly to their phones, unleashing a wave of creativity and new business models.
The magic of the iPhone was putting “the power of a computer in one’s pocket” and then making it easy to use, says longtime analyst Toni Sacconaghi at Bernstein Research.
With help from the iPhone, mobile messaging grew from a nerdy niche to a cultural phenomenon with WhatsApp and Snapchat. Social networks Twitter and Facebook gained big new markets. Games like Angry Birds minted money while ride-sharing app Uber burst onto the scene.
During the iPhone’s early years, Apple ate the cell phone industry’s lunch. By the end of 2009, iPhones accounted for one of every seven smartphones sold worldwide, according to IDC. But as Apple lapped BlackBerry, Nokia, and Microsoft, Google started its own push into mobile phones that was inspired by the iPhone and introduced mobile operating system Android.
The gamble paid off.
Unlike Apple, Google courted multiple phone carriers with promises of greater influence and more money. Google also worked with multiple hardware makers including Samsung, leading to better Android phones and a greater variety of designs.
By 2010, more Android-based phones were being sold than those running the iPhone’s iOS system. Spurring further gains for Android, Apple didn’t quickly recognize the appeal of Samsung’s large-screen phones. By last year, the Google—supplied software powered more than five out of six smartphones.
There were other hiccups for Apple, like “Antennagate” in 2010, when Jobs dismissed customer complaints about reception problems with the iPhone. But even with Android’s success, iPhone sales kept climbing. Apple sold almost twice as many iPhones in 2010 than in the year prior, doubled sales again in 2011, and kept growing an average of 25% annually to a peak of nearly 232 million in 2015.
Still, more recently, the iPhone’s growth has stalled. Apple sold 215 million phones in 2016, its first annual decline, after making only minor tweaks over the previous two years. Sales have also been held back by Apple’s decision not to chase a crop of cheaper Chinese upstarts.
The rumor mill is already churning about the next possible iPhone, a 10th-anniversary edition with a bigger, brighter edge-to-edge screen; glass casing; and wireless charging. Maybe it will be enough to put Jobs’ beloved phone back on top.
Graphics Sources: Bloomberg; Strategy Analytics; Apple Filings
A version of this article appears in the June 1, 2017 issue of Fortune.
