Tech Industry

Apple's Schiller talks iPhone, iPad birth -- and gambling

To pitch its case of originality in its trial with Samsung, Apple turned to marketing chief Phil Schiller to talk advertising and investment.

Apple VP Phil Schiller at a recent Macworld keynote presentation.
James Martin/CNET Networks

SAN JOSE, Calif. -- To help tell the story of how it came up with the iPhone and the iPad, Apple enlisted the same man it uses to sell the products to potential customers.

Apple's marketing chief, Phil Schiller, who is a frequent face at the company's product launches, retold the creation story of the iPhone and the iPad -- a slightly expanded version of the tale jurors heard during the company's opening statements earlier this week. He also gave the world a glimpse of a secret portion of Apple's marketing strategy -- how much it spends on the ads that are plastered across billboards, magazines, and TV screens.

At the heart of it, Apple was trying to get across the risk involved with the iPhone and iPad, something Schiller referred to as a gamble with both devices, though especially with the iPad.

"This was a new category of devices," Schiller said. "People were already buying phones. And companies had tried to make tablets before, and failed miserably."

Schiller made the case that Apple had come out on top, but not without the potential to have lost everything if things had gone pear-shaped. It was just part of Apple's effort to show how much of an impact it had on the technology world. That's a crucial angle for the company as it hopes to convince a jury of its originality when compared with Samsung.

To that point, Schiller said he was "shocked" when he saw Samsung's first Galaxy S phone and tablet, saying he believed it looked similar to Apple's iPhone.

"I was pretty shocked at the appearance of the (Samsung) Galaxy S phone, and the extent to which it appeared to copy Apple's products, and the problems that would create for us as a marketing team," Schiller said. Later on, he added that he had a similar reaction when seeing Samsung's first tablet.

"My first thought was, 'wow they've done it again, and they're just going to copy our whole product line,'" he said.

Samsung attorney William Price took Schiller to task over pre-existing technology, breaking out an internal Apple e-mail that included mention of LG's Prada smartphone as a device with a touch-screen interface. Price also made the case that the form of the devices is derived from function, suggesting that microphones and speakers would naturally be in certain places, and that corners would obviously be rounded.

Price then put up side-by-side slides of the iPhone 3GS and a pair of Samsung's Android-based smartphones, including the Continuum and the Droid Charge, asking Schiller about various design aspects, ultimately asking if people really could confuse the gadgets when making a purchase. "I believe (customers) may get confused with the devices," Schiller responded.

Apple's ad budget, market research
During the testimony, Schiller -- as expected -- went into detail about how Apple advertises its products, from online to video ads. That included viewings of initial iPhone and iPad TV advertisements, which Apple wanted to depict as ways the company was illustrating for consumers how to use its products.

Where things got interesting is that Schiller took some of the secrecy out of how much Apple had invested in advertising, saying the company spent $97.5 million on advertising just for the iPhone in 2008, $149.6 million in 2009, and $173.3 million in 2010 -- all part of a U.S. ad campaign he said he considered successful. That figure ballooned with the addition of the iPad in 2010, with Apple spending $307 million during its 2011 fiscal year.

Apple's advertising budget for the iPhone and iPad, information included in Schiller's testimony this morning. Click to enlarge. Apple

Of note, Schiller also went into how Apple performs market research, a controversial topic given the fact that late Apple co-founder Steve Jobs once pooh-poohed such studies, saying the company would design products people didn't even know they wanted yet. Apple brought up market research in this case to point out how important design is to consumers, 85 percent of whom, according to Apple's own 2011 study, said design and appearance were important.

Schiller did his best to finesse how these surveys came to be, saying they didn't go out to random people but to customers who'd already purchased one of the company's devices. Schiller also said that Apple purchases third-party reports of market trends and other data.

This morning's testimony is a continuation from earlier this week. Schiller first took the stand on Tuesday, providing approximately 10 minutes worth of testimony before the court adjourned for the day. Up after him is Apple's president of iOS software, Scott Forstall.

Update, 11:21 a.m. PT: Adds details from continuing testimony.