Is Apple's iPhone-without-a-phone the McDonald's Happy Meal of mobile communications?

Click to enlarge. Source: Flurry Analytics

Peter Farago of the mobile analytics firm Flurry uses data from its November report to make the case that Apple (AAPL) is quietly — and successfully — using the iPod touch to lock in a loyal base of under-age users who will eventually become the next generation of iPhone buyers.

"While it is clear that the iPhone has significant short-term revenue value for Apple," he writes in a report issued Sunday, "Flurry believes that the iPod Touch holds more long-term strategic value for Steve Jobs and team."

"In terms of Life Stage Marketing," Farago writes, "the practice of appealing to different age-based segments, Apple is using the iPod Touch to build loyalty with pre-teens and teens, even before they have their own phones (think: McDonalds' Happy Meal marketing strategy). When today's young iPod Touch users age by five years, they will already have iTunes accounts, saved personal contacts to their iPod Touch devices, purchased hundreds of apps and songs, and mastered the iPhone OS user interface." (link)

The evidence that Apple's strategy is working, Farago says, can be seen in a graph of end-user sessions recorded over the past six months.

Flurry, according to Farago, tracks 15 million end-user sessions every day from its "analytics solution" code embedded in 3,000 applications on 4 platforms: Apple's iPhone OS ( both iPhone and iPod Touch), Research in Motion's (RIMM) Blackberry, JavaME and Google (GOOG) Android.

The graph above shows that the iPod touch's share of those user sessions has grown 4 points over the past six months — the same as Android despite starting from a much larger user base. While the iPhone continues to grow in user sessions, its share in Flurry's data has dropped from 57% to 50%.

Even more significant, according to Farago, is that kind of things the kids are doing with their iPod touches.

"Anecdotally," he writes, "we know the 'iPod Touch Generation' is made up of heavy MySpace, Facebook and SMS users, who voraciously share their lives with, and influence their ever-expanding social graph. Importantly, this also includes promoting products they like. Empirically, Flurry compared how iPod Touch session usage has changed over the last six months across key application categories important to this demographic; namely, Social Networking and Games."

Farago's empirical evidence is displayed in the two charts below, which show the iPod Touch growing faster than both the iPhone and the Android devices in Flurry's Social Networking and Games categories.

Via GigaOm.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Games dominate with nearly 17% of titles. Entertainment, books and travel are close behind.

Click to enlarge. Source: 148Apps.biz

Less than 16 months after it opened for business, the App Store now offers more than 100,000 applications for the iPhone and iPod touch, according to an Apple (AAPL) press release issued early Wednesday.

Two independent sites, AppShopper.com and 148Apps.biz, which track listings in the U.S. App Store, count 97,026 and 96,161, respectively. [UPDATE: A third, apptism.com, lists 100,699.]

Apple's total includes 3,000 or 4,000 apps available only in its 76 overseas stores. Another nearly 9,000 apps have been approved by Apple but for one reason or another are no longer available for download.

The distribution of applications remains roughly the same as it was a year ago. According to 148Apps' count, the U.S. App Store carries, among other offerings, more than 16,000 games, 13,000 books, 2,700 navigation programs, 1,200 medical applications and 442 weather apps.

Below the fold: A bar chart comparing the App Store's 100,000 with the numbers available at the official application markets for Google's (GOOG) Android platform, Research in Motion's (RIMM) BlackBerry, Nokia's (NOK) Symbian, Palm's (PALM) Pre and Microsoft's (MSFT) Windows Mobile phones.

Sources: Apple, AndroLib.com, Computerworld, PCMag, Palm

Note, in some cases a lot more apps have been written for the platform than are available on its online store. For example, Microsoft's Robbie Bach told PCMag last month that there were 20,000 Windows Mobile apps on the market; fewer than 250, however, are listed on Microsoft's Mobile Windows Marketplace.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Phil Schiller. Photo: Apple Inc.

The day after Apple's (AAPL) "It's only rock and roll" event, Erik Sherman asked on CBS's BNET why the media missed the strategic importance of the gaming announcements that were made that day.

He has a point. Apple spent nearly a third of the hour-plus long presentation talking about the iPod touch — the "funnest iPod ever" — and how it stacks up against handheld game machines made by the likes of Sony (SNE) and Nintendo.

Yet the attention of the press seemed to be on everything else: the return of Steve Jobs, the video camera on the iPod nano, the camera missing from the iPod touch.

I went back and reviewed the podcast video of the event and I think I've found the reason: Phil Schiller.

Schiller, for those who don't recognize anyone on Apple's executive team beyond its famous CEO, is the company's senior vice president for worldwide marketing and Steve Jobs' regular stand-in at events like this. He gave the Macworld keynote in January, when Jobs was too sick to attend, and emceed last June's World Wide Developers Conference. He ran the show for nearly 20 minutes Wednesday — longer than anyone else, including Jobs.

Listening to Schiller the second time, I realize that he actually made a strong case that Apple, with the iPod touch, is finally getting serious about competing in the multi-billion dollar videogame market. He had the numbers — and the demos — to prove it.

But by that point, I had mostly tuned Schiller out — and I was not alone. As Sherman notes, it was roughly 40 minutes into the event — while Schiller was on stage — that Chris Nuttall from the Financial Times blogged, “I’m sorry, but can we get to some news.”

I can't speak for the rest of the media, but after reviewing Wednesday's video I think I can finally put my finger on what it is about Schiller's presentation style that loses me: his tireless, repetitive use of the same handful of adjectives.

In Schiller's world, everything Apple does is great, cool, remarkable, unbelievable and, more than anything else, amazing and incredible.

In the space of his 20 minutes — much of which was ceded to game developers — Schiller repeated the words "amazing" and "incredible" an incredible 15 times each. I would go back and count the times he said "really great," but I don't think I can take it one more time.

Enthusiasm for one's products is a must for a marketing man. But so too is being able to communicate that enthusiasm in a way that doesn't lose the audience.

If Steve Jobs really wants to drive home the message that Apple has, in the iPod touch, its first world-class game machine, maybe he should do it himself.

UPDATE: Some enterprising soul has posted a 2-minute YouTube video of the special event cut down to just the adjectives. See here. I wish I'd had it when I made my word count.

Thanks reader to Urs in Zurich for the pointer.

Jobs. Photo: Apple Inc.

When David Pogue, the New York Times' chief technology columnist, sat down with Steve Jobs after his "It's only rock and roll" keynote Wednesday, Pogue's first question was the one, as he put it, the "blogosphere’s been buzzing about": Why did Apple (AAPL) put a video camera on the iPod nano but not — as widely expected — on the iPod touch?

Jobs reiterated what Phil Schiller, his marketing vice president, had said earlier on stage: that Apple was pitching the iPod touch as a game machine — the "funnest iPod ever." Adding a camera would have made that game machine less affordable.

In Jobs' words:

“Originally, we weren’t exactly sure how to market the Touch. Was it an iPhone without the phone? Was it a pocket computer? What happened was, what customers told us was, they started to see it as a game machine. We started to market it that way, and it just took off. And now what we really see is it’s the lowest-cost way to the App Store, and that’s the big draw. So what we were focused on is just reducing the price to $199. We don’t need to add new stuff. We need to get the price down where everyone can afford it.” (link)

But according to AppleInsider's Kasper Jade, citing unnamed sources familiar with Apple's decision making process, that's simple not true.  "While AppleInsider appreciates the company co-founder's play at damage control," writes Jade, "it's a tough sell."

"Like the nano," writes Jade, "people familiar with the matter maintain that initial plans for the new iPod touch called for a camera akin to the iPhone's. Manufacturing tooling was prepped and specifications issued some time ago."

Jade notes that an extensive analysis of the cost of adding a camera to the touch would have been done months — if not years — in advance and submitted for approval to roughly two dozen members of Apple's top brass.

"According to those familiar with situation," Jade reports, "management gave the green light to equip the latest-gen touches with cams last year. But problems, as AppleInsider reported earlier in the week, began to crop up with the third party camera sensors Apple took receipt of earlier this year.

"After several passes through quality assurance were met with less than stellar results in the time leading up to Wednesday's event, an executive decision was made a month ago to pull the cameras from the touches altogether, others familiar with the situation say." (link)

In other words, it was a bad part, not cost or marketing considerations, that kept the camera off the iPod touches introduced this week.

According to Jade, Apple is still committed to equipping the funnest iPod with a camera, and new devices with the added capability could arrive unexpectedly at any time.

The view from inside the Yerba Buena Center for the Arts. Photo: Jon Fortt.

Will we get new iPods with video recording? Will Steve Jobs show or won't he? Refresh this page during the event for live updates. It all begins at 10 a.m. PT, 1 p.m. ET. The presentation is about to begin.

Steve Jobs walks out on stage to a standing ovation. He clearly appreciates the reception. He still looks quite gaunt — much like he did before he took his leave. Applause lasts a good 45 seconds.

He says he has the liver of a person in his or her mid-20s who died in a car crash and donated organs. He asks everyone to consider organ donation. He thanks the Apple community, and Tim Cook and the rest of the Apple executive team.

Steve Jobs announces sales of 30 million iPhones.

Users have downloaded more than 1.8 billion apps, not including updates.

Today there’s something new for iPhoen and iPod Touch owners: OS 3.1. The new stuff includes:

Genius technology. The same recommendation technology that works on songs in iTunes now works for apps in the App Store. He’s showing it in slides. There’s a Genius button there with recommendations.

Ring tones: Adding ring tones to the iTunes store for $1.29. (These are pre-made ringtones, unlike the ones you can make yourself in iTunes now.)

3.1 is free for both iPhone and iPod Touch owners.

He says iTunes is now the #1 music retailer in the world. More than 8.5 billion songs have been sold, and there are more than 100 million accounts on iTunes, all with credit cards.

Today: iTunes 9.

He's quoting my "iTunes Genius is pure genius" review. Cool.

Now there are new genius features. Now there are Genius mixes.

There's also improved syncing. You can be more specific about what you want to sync – photos, but specifically events and faces.  You can also be more specific in movies.

The best thing, though: A new way to manage apps on the iPod Touch and iPhone. You can arrange them how you want, and then automatically change them around. (There was a jailbroken app that did this already, but it's nice to have it official.)

He's also announcing Home Sharing, a feature that allows you to more easily move files from one computer to another, or to stream it from one to another.

Now, the iTunes Store. There's better navigation with cleaner layout, bigger image display.

Now, iTunes LP. Jobs says he misses LPs, which came with essays, liner notes, pictures. He's showing iTunes LP for American Beauty, the Dead album. Dylan, Doors, Norah Jones, Pearl Jam, DMB.

Someone's up on stage to demo iTunes 9.

He's showing app organization. It shows all the pages, and you can rearrange the apps by drag and drop. You can even select more than one app at a time. In a list to the left, it shows all the apps. You can even rearrange pages. When you're done, click apply and the changes are made.

Now he's demoing Home Sharing. He enters an iTunes account and password. it loads his wife Laura's library. He can see everything, including apps. And he can stream things from there. He can also select items and drag them to his own playlist. (The confusing thing — I can't tell if he has his wife's computer here, or if he's doing it remotely. Big difference.)

Now, the iTunes Store. There's a new navigation bar at the top that makes it easier to jump from one category to another. There's now a quick view within iTunes that pulls up album information and lets you browse songs. You can also post information about songs and albums directly to Facebook. Clearly an attempt to use social media to spark viral buying. It will be interesting to see if it works out that way.

iTunes LP: Showing The Doors. The lyrics are in there, too. Awesome photos. Very interesting. It would be really great if this stuff synced over to iPods and iPhones; not clear yet whether that works. Now he's showing Dave Matthews Band LP, with art Matthews drew himself. Looks pretty cool on the screen, but I wonder whether seeing it on the screen is as cool as having something tangible.

There are also iTunes extras for movies, like the special features in DVDs. He's showing the extras for WALL-E. Cool – probably going to give some in Hollywood migraines, but cool.

Phil Schiller is up to talk about the iPod.

Apple has sold 220 million iPods to date and has 73.8% market share. Apparently more than half of iPod buyers are new to the iPod. The iPod touch is the fastest growing. Apple has sold more than 20 million of them so far, in addition to 30 million iPhones. He's reviewing features of the iPod touch. WiFi, now Genius, Genius Playlists, Genius Mixes.

It's also a great pocket computer. He's talking about apps, e-mail, Twitter, Facebook. "It really fits in your pocket. Not everybody can say that." He shows a picture of someone trying to shove a Dell netbook into their back pocket and ripping it.

It's a great game machine. He's comparing the touch to the PSP and DS, saying it's better. (Some gamers would call this a stretch; the DS is one of the best-selling gaming titles of all time.) Now he's showing how many game and entertainment titles are available for each platform, with the DS showing just under 4,000 and the iPod more than 21,000. (While that may be true, it doesn't account for quality; there are a lot of free games on the iPod, and a lot that are just junk. So, not a very fair or relevant comparison.)

Some developers are coming onstage to talk about games. First, Ubisoft's Ben Mattes, producer of Assassin's Creed. He's talking about Assassin's Creed II, Discovery. Very interesting graphics – not so great by console standards, but great for mobile. You can put your own face on the wanted faces around town, which is a nice use of the platform. Arrives November 11.

Next, Bart Decrem from Tapulous. He says they wanted a million users in the first year, and got them in three weeks. Now, Riddim Ribbon. You race down a ribbon and try to stay on it. If you slip off, your mix gets stripped down to basics and you have to build it back up. Very cool – exciting to watch, and it must be really engrossing to play. Reminds me of a mobile version of Dance Dance Revolution. The crowd is really excited about this one.

Next, Mark Hickey from Gameloft. He's showing a first-person shooter called Nova. You're a space marine defending the world from an alien attack. (The graphics are VERY nice.) You can listen to your iPod within the game, which is a nice touch. There's the option to switch guns, zoom in with a sniper rifle. It ships later this year.

Last, Travis Boatman from Electronic Arts. Madden 10 is coming to the iPod. All 32 teams. He's showing 49ers vs. Steelers. Defense has a deep playbook. You can tap on defenders to switch, and he picks one and intercepts. Wow — a feature called hot routes lets you re-draw routes right on the screen. He uses the feature and throws a touchdown pass. Hot.

Schiller's back onstage. He calls the iPod touch the most affordable gateway to the App Store. (Side note: I think I might see Google CEO Eric Schmidt in the audience. That would be especially interesting since he's no longer on Apple's board.)

The iPod touch's price is coming down today to $199 for the 8GB version. The $299 and $399 versions get upgraded to 32GB and 64GB. The higher-end versions will be 50% faster, and will have OpenGLs. He's showing an ad now. It's a quick showcase of some of the most popular games, a few of which I recognize.

Now, iPod classic. They're keeping it. They're bumping up the capacity to 160GB from 120GB. But that's all.

iPod shuffle: now there will be more headphones that work with it, and there will be an adapter that lets you use any headphones. Also, colors: black, silver, pink, green and blue. $59 for 2GB, 4GB at $79. Also, a special edition make of polished stainless steel for $99. (Interesting for a penny-pinching holiday season.)

Jobs is back onstage to announce one more thing: a video camera. YouTube serves up 1 billion streams a day. He shows the Flip, which has 4GB at $149. Apple will have 8GB for … free, he says. There will be a video camera built into every iPod nano. (So, not exactly free, but, you know.) It's a fifth as thick, and a tech the volume of competitors, he says. He's showing video from it. Looks pretty good – but I wonder what the specs are. You have to sync video to your computer to upload it to YouTube, of course, because there's no connectivity in the iPod nano.

There is also an FM radio built into the nano, and a voice recorder app and a pedometer. (With the pedometer you can sync up to Nike+, which is a nice touch.) It also comes in polished anodized aluminum with nine colors. Two models, available today. He shows a commercial that basically (and effectively) shows that the nano shoots video.

He's now showing the now-obligatory environmental checklist that establishes the Green Cred of the lineup.

Now he’s bringing Nora Jones onstage to perform. She says she thinks it's the earliest she's ever performed. She's on a red electric guitar with another guitarist, a bassist and a drummer. Next, a song called Young Blood from her album that's out in November.

Steve Jobs comes out and kisses and shakes Nora's hand, gives her a kiss on the cheek. That's a wrap.

Image: Apple Inc.

In an early-morning teaser, Apple (AAPL) has chopped $20 to $120 off the prices of most of its iPod line.

The new prices were posted only hours before a special music event at which Apple is expected to replace most if not all of its existing iPods with new models loaded with more memory and added functions, such as a camera.

Among the cuts:

• 8 GB iPod touch reduced to $189 from $229 ($40 off)
• 32 GB iPod touch reduced to $279 from $399 ($120 off)
• 16 GB iPod nano reduced to $149 from $199 ($50 off)
• 120 GB iPod classic reduced to $229 from $249 ($20 off)

The new prices are posted, without comparisons to the old, on Apple's online store. Only the iPod shuffle appears to be unaffected. It still $79 for 4 GB.

Today's event is scheduled to start at 10 a.m. Pacific (1 p.m. Eastern) at San Francisco's Yerba Buena Center for the Arts.

UPDATE below with price changes announced at the event:

Some iPod prices changed between this morning's post and the Yerba Buena event.

• Apple introduced a 2 GB iPod shuffle for $49 (the 4 GB model is still $79).
• The entry level 8GB iPod touch now costs $199 ($30 off), the 32 GB model costs $299 ($100 off) and there's a new 64 GB model for $399.
• The 8 GB nano (now with video) goes for $149 (no change) and the 16 GB model for $179 ($20 off).

This morning's listings may have been clearance prices for the older models; as of midafternon Wednesday they had not yet turned up in the clearance section of Apple's online store.

See also:

• Apple event roulette: Place your bets
• Apple's Sept. 9 music event: What's Steve Jobs got up his sleeve?

Apple (AAPL), for reasons known only to itself, does not report the number of iPod touches it has sold.

But it lets you do the math, and on Tuesday COO Tim Cook casually mentioned, in response to a question about the App Store, that the total installed base of iPhones (26.4 million) plus iPod touches (X) is now 45 million.

So where are those 18.6 million iPod touches?

Nearly 12 million are in the United States, according to a report on the geographical distribution of Apple mobile devices issued Thursday morning by AdMob, the leading mobile ad platform. That makes sense, given that Americans buy the lion's share of all Apple handsets, and the company has been particularly aggressive about marketing the iPod touch to U.S. students in its back-to-school computer sales.

But if you look at AdMob's region-by-region breakdown, the iPod touch is surprisingly popular overseas.

In Latin America, for example, the ratio of iPhones to iPod touches is virtually identical to North America's. Apple has sold more than 327,000 in Mexico alone, according to AdMob's estimates, which apparently is more than the total number of iPhones sold in that country.

iPod touches are even more popular in Canada. According to AdMob, Canadians have purchased more than 1.36 million iPod touches but only 805,594 iPhones.

iPod touch sales are also strong, relative to iPhone sales, in Oceania, Asia and Western Europe. The device is less popular in Africa and least popular in Eastern Europe.

Wordwide, according to AdMob, the ratio of iPhones to iPod touches on its network in June was roughly 2 to 1. In other words, iPhones represented 68% of Apple handsets and the iPod touch made up the other 32%. This ratio has remained constant over the last several months, according to AdMob, implying a similar growth rate for both devices worldwide.

Below: AdMob's country-by-country iPod touch sales estimates, obtained by multiplying AdMob user shares in each country by the total number of iPod touches sold.

Here's the comparable chart for iPhones.

AdMob describes itself as the world's largest mobile advertising platform, serving banner and text link ads on mobile web pages for more than 7,000 publishers. It collects handset and operator data on each of the nearly 95 billion ads it has served since 2006, which enables it to produce charts like these.

For a pdf of the full report, click here.

With the launch of the Flip video camera in May 2007, the camcorder market has never been the same. Flip brought video creation and sharing to the masses, which meant even more footage of cats riding skateboards. (We can't thank them enough for that.)

Consumers embraced the convenience, simplicity, portability, and affordability of Flip's "point and shoot" video camera. It has few buttons, records video on an internal chip, and uploads footage to a computer through a USB key that "flips" out of the camera. Software loaded on the device transfers clips seamlessly to the Web. Models start at $150.

Soon the device was grabbing market share from Sony (SNE) and JVC — more than two million of the cameras have been sold — and earlier this year networking giant Cisco (CSCO) snapped up Flip maker Pure Digital for $590 million.

But there's a new rival on the scene: Apple iPhone 3GS, introduced in early June, boasts a video capture function. And some technophiles are asking if Flip's days as the No. 1 pocket video recorder are numbered.

There's no question the iPhone's video function is one of the coolest new features on the phone. It absolutely competes with the Flip, and in some ways is actually superior.

Unlike Flip, you can edit clips right on the iPhone by moving the start and stop points. You can also share video immediately via wireless email on the iPhone 3GS. Flip can't do that. And while Flip does have a leg up with its high definition models, the standard definition iPhone is wired for HD. All it needs is a software upgrade (Apple (AAPL) had to leave something for the next version of the iPhone).

The iPhone also has a sleeker design and a larger screen than Flip, and performs a wide range of functions. The price tag reflects that, ranging from $199 to $299 for the phone plus a two-year contract with AT&T (T) easily coming in at $70 a month.  At $230, the MinoHD is the Flip's most expensive model.

The iPhone can do almost everything the Flip can, and in some cases, even more. In spite of this, tech and camcorder industry analysts don't believe it's a threat. Ironically, they say that many consumers are attracted to the Flip precisely because it lacks the iPhone's panoply of functions and add-ons.

"Much of the strength of the Flip comes from its simplicity and dedicated purpose," explains Ross Rubin of market researcher NPD group. While Rubin acknowledges the advantages the iPhone's video capture has over Flip, he argues that "these may not be as important or could be confusing to many Flip users that eschew sophistication in their devices."

Despite the seeming trend of convergence toward a single multipurpose device, analysts claim many consumers still prefer electronics dedicated to one task. "The notion of the hybrid cannibal device always pops up," says Chris Chute of research firm IDC. "The consumer doesn't say to themselves, 'I'm going to buy one device that does everything okay.'"

Indeed, the entrance of camera phones into the market five years ago sparked speculation that digital cameras would disappear because everyone would be printing photos from their phones. That didn't happen. And the Flip has held up in a market where digital cameras and other devices capture video, Rubin notes. "The iPhone is simply among the latest devices to offer video recording among its features."

The iPhone doesn't have all the edge either. To start, Flip is accessible through many more channels than the iPhone 3GS. Flip's MinoHD currently holds the No. 10 spot on Amazon's list of electronics bestsellers. You can't even buy the iPhone 3GS on Amazon.

As for the design, while the Flip might not be as sleek as the iPhone, it's nearly the same size and the Mino model is lighter in weight. The Flip is also more affordable and doesn't require a contract commitment, making it an easier sell to those outside the "early adopter" set.

To those for whom the ability to share video immediately is a real sticking point, the analysts recommend patience. IDC's Chute predicts that Flip will introduce wireless sharing by the Consumer Electronics Show next January. In the meantime, sharing on Flip is still relatively convenient, especially with its user-friendly software.

The analysts seem certain that the new iPhone won't challenge Flip's market position for the time being, but that doesn't mean the horizon is clear. Creative Strategies analyst Ben Bajarin thinks that video capture in phones could become a problem down the line. "How do they compete if this trend of higher resolution video capture and more shows up in more and more smartphones?"

Meanwhile both Rubin and Chute suggest that a video capture enabled iPod Touch or Nano could be a more dangerous to Flip than the iPhone. "They're adding functionality to a media player, and the devices are sold at similar places," explains Chute.

Flip's direct competitors pose the greatest risk, analysts say. Sony, Sanyo, Creative and Kodak have all launched products in the "Point and Shoot Flash" camcorder category. As Flip looks to expand its presence globally, it will face intense pressure from these contenders, many of whom already have brand equity in international markets.