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.

I also wrote about how Netflix would eventually launch digital streaming of movies, which would change the game yet again.  That would take away the only serious deficiency Netflix has versus Blockbuster – again, the immediacy of movie delivery.  What I didn't imagine is that it would happen so quickly.  The Associated Press had a great story on Netflix's new "Watch Now" feature yesterday.  One thousand movies and TV shows are available to 250,000 subscribers (for free) and they will be rolling this out to an additional 250,000 each week through June.  And Netflix is spending big money on this – $40 million to cover the licensing and overhead costs, which will cost them greatly at their current operating profit of $17 million per quarter (compared to Blockbuster's $1.9 million).  There is a lot of speculation by individual investors about the two giants battling it out, and a great deal of trading volume. 

I have to wonder if Netflix made this move not just because of Blockbuster but based on Apple's recent announcement of the Apple TV.  Apple has been a huge catalyst for digital music downloads due to the viral success of the iPod.  If Apple TV is executed well, it will become a similar catalyst for digital movie downloads, and Netflix will be well positioned versus Blockbuster.  Netflix's recent move is a difficult one for Blockbuster for copy, but Apple's iTunes may be the real competitor.

There are many word-of-mouth lessons to be learned in watching these two battle it out:

• Netflix capitalized on the negative word-of-mouth that Blockbuster had generated due to its "bad profits" – the late fees that we all grew to hate; Netflix's campaign launch was "the end of late fees" (all they really needed to say due to the bad profits doing most of the talking for them); Netflix pioneers many "sticky" social networking and community features along the way, including ratings and reviews and great collaborative filtering.
• It takes Blockbuster no less than four and a half years (during which Netflix's value grows eight-fold) to battle back due to the inertia caused by them being a franchise and not wanting to kill their most lucrative profit source (late fees); Blockbuster's campaign slogan for "Total Access" is "never be without a movie".
• It takes Netflix only four months to launch "Watch Now" and aggressively start rolling it out to (presumably) its best customers first to stop them from leaving to go to Blockbuster (or, alternatively, movie download sites like Amazon.com's Unbox, CinemaNow, Movielink, or iTunes once Apple TV is launched).

I look forward to seeing how the rest of this movie plays out.

And speaking of online video streaming, we are proud to launch online video upload for customer reviews.  Many of our clients will be launching video-enabled reviews over the coming months.

Update 1/25:
Netflix reports a very solid quarter with a record-low churn rate and 654,000 new subscribers (for a total of 6.32 million).  However, Blockbuster is projecting that it will be at 4 million subscribers by the end of 2007 (Netflix is projecting between 8-8.4 million by the end of 2007).  The battle rages on.