Buying a Kindle DX ten months ago and now an iPad (delivered in the first batch on April 3rd), it really struck me recently how messy (or exciting!) everything is getting.  Mash-ups of business models are happening everywhere, and at an accelerating pace.  Here are a dozen big trends that I'm watching for this year, some relevant to Bazaarvoice and others not so much:

1. After Amazon.com launched the Kindle, it quickly became their number-one seller.  The free wifi to download a book from anywhere was just too compelling to pass up, along with the very easy to read screen.  Amazon projected that it would increase compulsive buying of books to the point where the wifi was subsidized by Amazon.com.  And it is working (for now).
2. And while we're talking about compulsive buying, consider Amazon.com Prime for "consolidated" buying vs. other retailers.  Other retailers have tried to emulate Prime and failed to do so.  It is difficult to do – you have to be very quick to ship (i.e., many distribution centers), with the availability (i.e., tons of inventory), to really trigger the compulsive buying effect.  There are profound implications on the long-tail as Amazon.com expands.  And, in their most recent quarterly report, Amazon's same-store U.S. sales were up a staggering 75%.  It seems that both the Kindle and Prime are triggering the compulsive buying effect, coupled with Amazon's long-tail inventory.  Many retailers same-store sales are flat to down as we come out of the Great Recession, and Amazon.com's stellar performance has to be noticed by them.  Our Chief Marketing Officer, Sam, blogged about this in November of 2008 and it is even more true today.
3. Enter the iPad.  The week Apple launched the iPad it sold 450,000 units with 600,000 books (via iBooks) shortly after.  Now that I have had the iPad for awhile, I don't just think of it as competitive with the Kindle or other eReaders or "tablets" – it is also competitive with netbooks (another mash-up), as Steve Jobs eagerly stressed.  Just project out a few years when the iPad has 256gb capacity, instead of the 64gb my model has today, combined with the new iPhone 4.0 OS (coming out at the end of this year) that enables multitasking, a micro-USB port or two, and wireless streaming everywhere allowing for seamless connectivity no matter where you are.  The iPad already has a keyboard docking station, which I also bought, and, of course, bluetooth for connecting to wireless keyboards.  And new TVs and DVDs are coming out with built-in home network and wireless capabilities, allowing you to stream TV to laptops, netbooks, desktops, iPads, iPhones, or whatever you choose to use around the house (or while you are on the road if you have a Slingbox or something similar).  The bottom line is that the genius author, Kevin Kelly, got it right in this Wired magazine article (comparing tablets to a portable window into the world).
4. Will the iPad hurt Kindle sales?  Many Wall Street analysts and journalists think so.  My personal take?  Well, I was skeptical about whether or not I would enjoy reading books on it as much as I do the Kindle.  Initially we were just buying the iPad as a family device for watching movies, playing games, and keeping up with blogs, Facebook, and Twitter.  But now with the Kindle app loaded on my iPad, adjusted to a sepia "paper" color and 60% brightness, I can read for hours just fine.  But to really see how the iPad transforms books, just check out the book it comes pre-loaded with (a Winnie the Pooh children's book, which is, of course, in beautiful color).  No color on the Kindle.  Every try to read a no-color book to a child?  And then check out the app, The Elements, which has gorgeous color, 3D illustrations, and full-on video.  Or look at what Wired magazine may be planning to do with tablets.  I was watching Alice in Wonderland with our daughter recently, and Alice said (shortly before falling down the rabbit hole), "What is the use of a book, without pictures or conversations?".  Just look back in history at the adoption rates once color television came out vs. black-and-white television.  It is just a matter of time before our children are carrying interactive tablets in their backpacks instead of heavy textbooks.  Yes, I think it is going to impact Kindle sales.
5. Ok, let's talk about mobile.  Google's Android (open platform) continues to gain traction vs. Apple's iPhone OS (closed platform).  It wasn't surprising to me when Eric Schmidt resigned from Apple's Board of Directors.  I moderated a panel of amazing venture capitalists at NRF and Shop.org's Innovate conference back in March, where my good friend Peter Fenton of Benchmark Capital predicted that Android would overtake the iPhone OS over time.  Of course, Android will power tablets too.  We've seen this movie before as Apple stayed closed vs. the PC world being open.  Will the movie be the same this time?
6. Mobile is now at a tipping point, with GPS built in, good camera phones, and great web browsers (e.g., Safari and Chrome).  We'll see a lot of mash-ups in this area as mobile is increasingly used by consumers while in stores, which will one-up the mobile use we've seen in social commerce so far.  Interestingly, the VCs on my NRF and Shop.org panel in March thought it would take several years, so our prediction about "the year of mobile" in 2009 may have been a bit early, although I would argue that the iPhone's rapid adoption that year did change the game.  And it certainly hasn't slowed down Mary Meeker at Morgan Stanley to produce the most comprehensive report (at 424 pages) I've ever seen on the state of the mobile industry, nor did it prevent NRF and Shop.org from having a Mobile Boot Camp at the March conference.
7. How about blogging?  My guess is that blog-post length has decreased (this post aside!) as Facebook has increased to a longer status format and people have become more and more used to Twitter's 140-character length updates.  Perhaps blog views have also decreased.  This leads to more "lightweight", or surface-level, conversations than the deeper-thinking conversations on blogs.  But we'll survive just fine.  I simply don't buy Nick Carr's arguments but I'll debate that later if you wish.
8. Although this would be the obvious place to discuss this trend, I'll purposely stay away from Facebook Like vs. Google Buzz vs. Google AdSense as my co-founder and our Chief Innovation Officer, Brant, is addressing that in a future post.  But needless to say, social is permeating the Web and that trend is accelerating, so we will continue to innovate quickly in this area.
9. Let's talk about transparency.  At the Liberty Interactive NetLeaders Forum in 2008, I remember Rich Barton, founder of Expedia and Zillow, presenting, "everything that can be reviewed will be reviewed [on the Web]".  He showed us examples of CEOs being reviewed on Glassdoor.com.  My opinion?  This will lead to a company culture revolution, which is part of the reason I feel so compelled to write my forthcoming book, How to Make Your Company Suck Less.  And Chris Fralic of First Round Capital as well as Kamal Kirpalani of Bazaarvoice recently asked me to review them on Unvarnished.  I wrote about transparency awhile back, based on a leadership talk I gave at The Wharton School.  In short, I think this is a very profound trend that will not only cause a renaissance in commerce but also in politics, government, and all types of human activities and relationships.
10. At Bazaarvoice, we're leading a revolution of marketing and merchandising with social commerce and user-generated content – or (my preference) digital word of mouth.  Digital word of mouth is quickly becoming the central point of insight for marketers and merchants.  We are writing the marketing and merchandising textbook of the future in our work with our clients (read my previous thoughts on this, from when we reached out 100-billion-impression milestone in February).  Digital word of mouth is getting mashed-up versus the aging focus group, NetPromoter, customer survey, and other methods that get "close" but aren't nearly as pure as how customers speak to each other with no bias vs. how they communicate while in the context of talking to the company.  Things for you to consider here: a) the market has always been based on conversations (read this chapter that was the namesake of our company), b) reviews are the new advertising as we are already beginning to commonly see, c) consumers write reviews to help each other (i.e., altruism, or with no bias), and d) this trend is why Google and Nielsen partnered with us.
11. Channel marketing is becoming more wired.  We see a major trend in this area with the adoption of our BrandVoice and BrandAnswers solutions.  We are at the beginning of this shift, and it is logical to think that, just as offline to advertising shift has fueled online advertising, we will see a similar accelerating trend as suppliers of retailers become more savvy at online channel marketing in a world where 80% of consumers read reviews while they are shopping (Nielsen's most recent stat).  And, of course, mobile is a major accelerant of this trend.
12. Finally, the digital executive will continue to rise in prominence as companies work hard to make sense of the rapid shift to a more digital, hyper-connected world.  For some early indicators of this, look at Raul Vazquez's promotion from CEO of Walmart.com to EVP and President of Walmart West.  Or Toby Lenk's, the founder of the original eToys, rise to President of Direct at Gap.  (I should mention that both are among the best speakers we have ever had at Shop.org events, where I proudly serve on the Board of Directors.)  These are very exciting times for those who really "get it" in digital.

For the long-term potential of the Web, I recommend you check out Kevin Kelly's speech at TED in Dec 2007 or his similarly brilliant article in Wired magazine.  And if you have time to get really far out in thinking about technology's impact on the world, just read chapter 1 (trust me, it's enough) of Ray Kurzweil's The Singularity Is Near: When Humans Transcend Biology (thanks to my good friend, Ethan Holland at American Eagle, for suggesting it to me).

While all of the findings are of interest (mobile, widgets, personalization, etc.), this year I was most struck by three big trends:

•  The global traffic share gains of YouTube, Facebook, Hi5, Wikipedia, and Orkut – all making the global top-10 for the first time.  I remember when Time selected "You" as the "Person of the Year" for their Dec. 2006 cover.  They may have called it too early.  Social connection online has truly arrived.  The growth of these sites are staggering, highlighting the power of community, user-generated content, and word of mouth online.
• The share gain of Amazon.com relative to large, multichannel retailers.  They led the way with customer reviews over 10 years ago, and have become a Wikipedia of sorts for broad, product-focused reviews.  And they continue to innovate at a staggering pace, spending over $3 billion per year on R&D.
• The uncharted territory we are in with the recession, truly making this our most important presidential election in history.  Although Bazaarvoice is growing at a very fast pace, beating our financial projections repeatedly, we are also cautious and watching the economy closely.  And I know that most, if not all, of our clients and partners are doing the same.

In case you missed the link above, you can read the full report here.

And if you have some more time this weekend, you may also want to check out Steve Jobs' recent keynote on the iPhone 2.  While I carry a BlackBerry myself (my wife carries an iPhone), the power of the iPhone's new programming language (and SDK) to deploy corporate applications as well as the new AppStore (reminds me of Salesforce.com's AppExchange) signal a new type of Apple.  With these moves, they are embracing being an "open" platform and focusing on B2B at the same time.  This should lead to an accelerated adoption of Macs in corporations, as the iPhone uses the same OS and user behavior historically shuns change (or seeks familiarity; heck this is human behavior not just 'user' behavior).  In any case, his keynote may lead you to believe that the iPhone 2 will be the dominant mobile computing platform for corporations in our near-term future.

1. As the author of "The Influentials", former CEO of Roper, President of WOMMA, Board Director at Bazaarvoice, and CEO of your new business, why do you think the word of mouth movement is buzzing like never before?

Why now and not five years ago?

Word of mouth has always been an important factor in consumer decision making about products and services.  Over the course of many decades, consumer research has shown it to be among the most important factors to consumers.  However, over the past several years two major forces have aligned to make word of mouth considerably more important to consumers than it has ever been in the past, and considerably more important than other forms of consumer contact with brands.  The first force is declining trust – over the past 5 or 10 years consumer trust in official sources of information has plummeted, replaced instead with rising trust in friends, family, and "people like me."  The second force is the rise in technology, which enables consumers to see out peer-to-peer advice and recommendations more easily than ever before.  And the more they "try it," the more they "like it."  So the trend is accelerating. 

2. Do you think the reason trust in official sources is plummeting is the rise of the Web?  Or is some other factor, maybe sociological, at work here?

The decline in trust started with the corporate scandals of the 1990s (e.g., ENRON and others).  I think the transparency that the Web facilitates provides an additional means for people learn the facts and seek out the truth about matters more quickly and thoroughly than the could in the past.

So it is an enabler and an accelerator, in my view, but not the initial impetus.  History then shows that trends in trust (up or down) come in cycles, so once the trust decline starts declining it will generally take a while before it turns around the starts climbing again.  The trust must be re-earned.  And for some businesses, they are beginning to re-earn the trust through their word of mouth initiatives, showing they are sincerely interested in being enablers of open, honest, and beneficial consumer conversation.

3. Do you view what we do as an effective way for companies to improve trust?

The short answer is, yes.  And the reason is that when companies open up and let customers express themselves in their own voice — talking both about what they like and what they don't like in order to help other customers make smart and informed decisions — it sends a message that the company values openness, transparency, and (most importantly) that it respects the consumer.  All of those attributes help to build trust.

4. What are other ways that companies can earn trust via word of mouth initiatives?  What are some of the best examples you have seen?
There are many ways for companies to engage in word of mouth — some of which take place through online channels while others taking place offline.

Dell's IdeaStorm is proving to be a powerful way for Dell to listen to customers, and act on their suggestions.  Companies like Harley and eBay and others are creating customer communities that are very powerful way to cement customer loyalty and create advocacy.  Apple earns trust and customer respect through a wide variety of initiatives, including a very powerful experience that takes place in their retail stores which generates a considerable volume of positive word of mouth for Apple (in addition to a considerable sales volume). 

5. Let's talk about your new company.  What are the some of the exciting word of mouth insights that you have discovered for your current clients?

My company's research involves ongoing survey research with consumers about their word of mouth conversations regarding products, services, and brands.

We monitor this on a continuous basis to help companies understand the dynamics of consumer word of mouth about their category, their brands versus the competition, and among their target consumers.  Some important findings:

1. By a 7 to 1 margin, consumer word of mouth about brands is positive, rather than negative.  As Bazaarvoice has noted in its research about the J-curve, consumers are more interested in sharing advice and recommendations with consumers about "what works" and what they should be doing, rather than knocking down brands.  This debunks a major myth about word of mouth, and should encourage companies to be more comfortable with "letting go" and inviting consumers to talk about them and their services. 
2. Media and marketing play a big role in stimulating consumer word of mouth.  About half of all consumer word of mouth conversations about brands include a reference to some type of media or marketing.  By channel, TV is the number one medium, but the Internet is very close behind reinforcing the important role that the Internet plays as a channel to drive word of mouth.
3. Finally, our study proves just how ubiquitous word of mouth is. The typical American consumer engages in about 125 conversations each week about products and services, and talks about brands over 90 times per week.

That's a lot of word of mouth.  In fact, our projections are that there are 3.4 billion word of mouth conversations each day in America about products/services, and 2.3 billion brand-specific conversations.

There are just a few of the many insights we have learned.  But the real power of our research is to dig into the data at the category and brand level to help companies understand their strengths, and opportunities for improvement, in a word of mouth era.

6. What do you think about Wal-Mart's decision to launch customer ratings and reviews?

I think Wal-Mart's decision to offer ratings on reviews is a very significant development in the growth and development of word of mouth.

Anytime the industry leader in a category gets actively involved in something new and innovative it sends a very loud signal. And, in this case, the signal is to multiple parties: 

(a) to Wal-Mart's consumers: the message is that their voice is important and that Wal-Mart wishes to listen and let them be heard;
(b) to the many manufacturers whose products will be reviewed, letting them know that Wal-Mart is serious about opening up this new and important channel of conversation; and
(c) to other retailers who have been sitting on sideline, wondering if they should engage in word of mouth or not.  So this is both an important development for Wal-Mart and it's customer base, as well as for the word of mouth movement.

We had the pleasure of hosting Andy Sernovitz, the founder of WOMMA and a Bazaarvoice Advisory Board member, at our office a few weeks ago. Andy gave a lunch presentation to our team, and something he said really struck me: “Advertising is the tax companies pay to sell poor products”. Google, Starbucks, and many other brave companies decided to buck the formula and invest in the product instead of “brand imagery” (i.e., advertising). Andy has countless examples, and wrote a fantastic book on the subject that has been endorsed by the likes of Seth Godin and Guy Kawasaki, two of my favorite authors.

And then I met with a large apparel company a week later that is afraid of reviews. Prospect: “We tell the consumer how they should think about our products”. Prospect: “A hip woman in NYC may be turned off by a woman in Topeka, Kansas writing a review on a trendy fashion”. I’ll save you my lengthy and impassioned response.

As I write this, I'm on my flight back from London after spending a week in our UK office, speaking at the e-consultancy conference and meeting with prospects, partners, and press. And tomorrow is the 4th, so I'm feeling kind of revolutionary. So, here is my take on how advertising will evolve.

First, I would modify Andy’s quote: “At its best, advertising is a reinforcement for positive word of mouth, and it reminds a customer to buy”. Think about it for a moment. Do you remember most ads? Of course not. We all selectively filter information based on relevance to us at that point in time. But if you are shopping for a new phone-PDA, like I was recently when my phone broke, you are likely to call an expert. In this case, I called Michael Osborne, who is a gadget nut (check out his Bazaarblog post on the iPhone). He recommended the BlackBerry 8800 for a number of reasons: 1. call quality, 2. ease of use, 3. sexiness, and 4. built-in GPS. The last one really mattered to me, as I have always wanted a GPS when walking around a large city like NYC or driving a rental car. I bought one four hours later, after doing a bit more research (like talking to the sales rep in the store). Michael’s recommendation meant more to me than any amount of advertising ever could. And I can already say that the BlackBerry 8800 is the best phone-PDA I have ever owned. Built-in GPS navigation is a break-through in mobile phone technology (it will leave you thinking “how did I live without this?”, just like when you bought your first mobile phone).

Now let’s introduce advertising into this. Let’s say I wanted a new digital camera, and I had a longer lead time to look for one. I speak with the experts in my network. I read reviews online (both expert and consumer). I receive a range of different opinions. For my price range, I center on a Canon ABC or Nikon XYZ for different reasons. The Nikon has a slightly faster shutter speed and a better construction, but the Canon has slightly better software and is easier to use with more accessories. If I have multiple weeks to make this decision, advertising can now play an important role:

1. It can introduce me to retailers that carry these products (although I am already aware of the better ones since I read reviews online).

2. It can reinforce the positives that I already learned about via word of mouth and remind me to buy.

The best advertising is that which does a great job of highlighting real benefits in a concise and entertaining way. How many advertisements have you watched for cars driving fast on twisty roads? [Yawn!] We all know that very few cars are actually known for that. A Porsche, yes. That is real. But the majority of this advertising is almost completely useless. At its worst, it’s fraudulent. In this age of overabundance of media, it insults our intelligence and makes us want to tune out. We don’t like being lied to and the truth is more accessible than it has ever been before, due to the Internet. The best advertising is that which listens to real word of mouth and highlights real benefits.

This is easier than it sounds, again due to the Internet. Here’s the three-step formula:

1. Find a product that has a high velocity of positive word of mouth. No need to advertise a product that no one cares about. You are fooling yourself if you think you can get consumers to start talking about a boring, or poor, product. Better to put that money into better product development or invest it in your stores than waste it. But a product that a lot of people are talking about – that’s the sweet-spot. Wii ads everywhere – and highlight the revolutionary controller, please.

2. Research what people are saying in reviews, blogs, forums, and social networks. Word of mouth is now digitally archived, globally accessible, and available at the speed of your fingertips. Learn what the real benefits are. There are probably only three key benefits that everyone is passionately agreeing on. Don’t waste your money on a focus group; that isn’t a real conversation. That’s old school – it honors the days when marketers had to guess at word of mouth (i.e., when it wasn’t digitally captured for analysis). Today, nothing is more real than tapping into a C2C conversation – where there is no reason to share anything but the truth. No agenda – just social connection, good karma, and a little ego. If you haven’t searched your brand on Technorati, try it now – it’s a start and it's free.

3. Highlight these three authentic benefits in your advertising in an entertaining and concise way. Have you seen the recent Apple vs. PC ads (see above)? Pure brilliance. Entertaining, real, clever, memorable, and emotional.

Now, assuming you do a good job of placing the ad where potential buyers will see it, you will remind them of the positives they have already learned about and therefore increase the chance that they will buy it from you. That ad will drive the behavior that you are ultimately accountable for (i.e., sales).

Although this form of advertising is currently rare (i.e., most ads rarely highlight authentic benefits), I am convinced that this is how advertising will evolve. The Internet has made it mandatory. Everyone online now has near-immediate access to the real positives and negatives. It is becoming increasingly difficult to advertise to consumers in an inauthentic way because they are now hyper-educated. And as advertising evolves, advertisers and merchandisers will work more closely together (they have to) and we will tune back in.

Products will get better, too, but that is a subject for another time.

Steve Jobs set the blogs ablaze in January by announcing the iPhone and continued causing a word of mouth stir all the way through the interview with the Wall Street Journal. Looking back to my post in January, from day one the iPhone was a hit. The expectations were overwhelming and the dissenters numerous, but Apple adhered to one key rule in marketing – live up to the hype. Apple called their shot and told consumers EXACTLY what to expect, with demos and details metered out carefully, then simply released exactly that. Creating the buzz is easy, but nailing it on launch day is where some products have missed the mark. Not the iPhone.

The experience of getting one was great. The Apple store I went to in the Domain here in Austin had over 1000 in stock the first day, according to rumors in the line. Apple wouldn’t say exactly. The line was visited by Apple employees handing out free Starbucks' certificates and water. They told everyone that you could buy two at a time and they had more than enough in stock. This easily prevented the mayhem seen with the PS3 launch AND boosted the image of Apple to the crowd. People around me were talking about how great Apple was for two hours. Can’t get better than that. Also, they had about 30 employees in the store, they were processing the sale of the iPhone quickly and efficiently, then you bought your accessories in a separate purchase. All with handheld checkout devices to keep things moving and avoid lines. It worked perfectly.

Activating it worked through iTunes, making the purchase process faster and the activation process easy. This is certainly the new model for activating mobile hardware. I did it all from my house and had to call into their hotline only when my current plan didn’t allow for adding a second line on the same bill. Once that was fixed, I was talking on my iPhone in minutes.

The iPhone itself is exactly what you’ve seen on TV, blogs, Apple.com, and everywhere else for the past six months. The interface is fast and slick. The multi-touch input mechanism works really well. You won’t set speed records for text entry but it works – and for anyone but the fastest of BlackBerry typists it will be fine. The audio quality is great and notably better to the people I’ve spoken to on it so far. Text messages look great (resembles iChat). Videos look fantastic and the touch-screen iPod is fantastic. As others are already saying, this will change the way MP3 players and phones are designed. And everything is exactly as Steve Jobs said it would be back in his keynote in January.

If you want one, go get one, you won’t be disappointed. Last time I checked their website, stock levels were good. And enjoy being a part of the best product launch in a long time.

In any case, I view the Mozilla news as very significant.  Just like del.icio.us and StumbleUpon have Web browser plug-ins that drive high adoption of their services, so will "The Coop".  Instead of visiting Facebook as a Web destination, The Coop integrates it directly into your Web browser.  Kelly Mooney of Resource Interactive showed a great demo of "social shopping" at the Shop.org Annual Summit last year.  Resource Interactive had created the demo for Victoria's Secret Pink.  Via mobile and the Web, they made it appear easy for an in-store shopper to share an outfit that she was thinking of buying with her friends online.  Everyone benefited from the resulting feedback and shopping list it created for all.  Millennials have been shown to follow each other more than the more "independent" generations of the past, so the Resource demo seemed like a natural evolution.  And it is no mistake that The Coop chose Facebook as their embedded partner, as Facebook is most heavily used by Millennials.

The Coop will accelerate the hyper-education of consumers that is underway.  It is just a matter of time when consumers have nearly instant access to global peer ratings and reviews on any product, service, place, person, or thing.  Access no matter if they are shopping online or offline.  While that may sound scary, it will actually be a beautiful thing.  Markets will become democratized, the voice of the marketplace will be "rediscovered", smart companies will react quickly, and as a result "consuming" will be driven to higher levels as shoppers gain more confidence to buy when leveraging the wisdom of the crowd.  Manufacturers will build better products, service providers will respond with better services, and companies will become more customer-centric.  Everyone will benefit, but the short-term disruption will make the old guard question the revolution underway.  Change is often difficult.

Expect Microsoft to quickly follow Mozilla, as they did with tabbed browsing and other Mozilla-led innovations.  It is just a matter of time before social networking becomes intimately interwoven in all Web browsers.  And then we will all wonder why it took so long as adoption skyrockets.

And speaking of revolutions, have you seen the short film, "Web 2.0 – The Machine Is Us/ing Us"?  The Kevin Kelly article it references is brilliant, and the film itself is pretty cool.  It's a powerfully brief summary of Web history. 

This past week saw the public announcement of what will be THE device of the year in consumer electronics – the Apple iPhone.  Regardless of your views on Apple, the Mac, or the now legally-embroiled Cisco iPhone issue, you will admit that this thing is cool.  The blogs that cover this space exploded on Tuesday with the announcement at Macworld by Steve Jobs.  The blogs that DON’T cover this space exploded just the same.  It seemed that everyone was talking about this 4.5” x 2.4” x 0.46” phone – that doesn’t really exist yet.   I found it interesting that no matter how hard people tried, you couldn’t really talk about it for the past 2.5 years – including Apple employees that were working on it.

Apple did something that they’ve had difficulties doing in the past – they kept the entire project secret.  Many blogs and interviews have covered the “how Apple did it” of this achievement, but what’s amazing is that they really pulled it off.  Even up to the day of the presentation by Steve Jobs the rumored specs, capabilities, and even photos of the iPhone were vague or flat-out wrong.  Do a quick search for iPhone on Google’s image search and you get seven wrong images before you get to the right one.  The first page of results is all wrong except for two.  Clearly the word of mouth about the idea of an Apple phone was extreme leading up to the announcement – and this allowed Mr. Jobs to announce only one other major innovation and still have a very successful keynote.  No update on the rumored Macbook + Macbook Pro form factor, nothing about Leopard or Time Machine, nothing about iLife ’07.  The Apple TV got some early spotlight time in the presentation but that was it.  This announcement was too big to let anything else get in the way.

So the world wanted to hear about it – and the markets were waiting to react.  This image is a snapshot of Apple (AAPL), Research in Motion (RIMM), and Palm, inc (PALM) showing their relative performance on the day of the announcement.
 

While the activity corrected a bit by weeks end, the results were Apple gained 7.83% with Palm and RIM losing 3.43% and 5.23% respectively.  Legitimately, the Apple iPhone is not a competitor of the Blackberry as it has no business-level email support nor any integration with Outlook planned (yet).  That didn’t matter – as the perception by the market and the word of mouth on how great this new device will be was enough to add BILLIONS to Apple’s market capitalization and erode hundreds of millions to billions for Palm and RIM respectively.  All because the word on the street about a device that exists in prototype only and won’t be available for six months was so very cool.  (Full disclosure, I will gladly be one of the first to try and buy an iPhone)

Even Mr. Jobs is being conservative with their estimates of how many they can sell – by saying that their stretch goal is 1% of the overall market.  That means ten million units, or a minimum of almost $5 billion in sales.  And to think that at one point the experts said that the iPod was a failure in the making.  Anyone predicting the same of the iPhone may have some fun looking back on their quotes in five years. 

What has generated such strong word of mouth for Apple, particularly in recent years, are the strong products they’ve released and revolutionary experiences they’ve provided for their customers.  Referencing some of the word-of-mouth training on WOMMA’s website, Apple doesn’t have “me too” products.  Their operating system OS X is very different than Windows and if anything Vista could be the “me too” product here.  Their design for the recent flat-screen, single-unit iMacs is completely different than anything else offered in the PC world and has remained that way for years.  The iPod was different in its controls, its link to a music store, and its constant innovation (the iPod nano, shuffle, video iPod, etc).  Their basic premise of creating great products, over and over again, has created the foundation of great word-of-mouth potential – which was realized completely this past week.  This has worked for a number of companies like Google and Starbucks, referenced back in September by Brett in his posting here.  But keep in mind that it can fail even for companies with great previous wins – if they don’t continue to innovate and deliver great products.  Anyone remember the Apple Lisa? Or the Newton?  The lesson is that companies which invest in greatness in their products and services instead of tons of additional marketing will win in the long run.

The buzz about this new phone from Apple shifted billions of dollars of wealth, scared a number of multi-billion dollar companies, and generated outstanding traffic and interest on the net.  All in a day.  I’m off to read more about what Apple will do next