Time and time again Microsoft re-launches in the mobile market with a promise of “this time we have it right”. Their product has improved, bloggers like it, but it fails to capture the market. In fact, Mobile 7 had a short blip (at a significant marketing expense) and then fell away into nothing. The irony in all of it is that Microsoft makes more money from IP licensing to Android OEMs than it does on the Windows Mobile licenses.
With Windows Mobile 8 on the horizon the market is buzzing with the question – will they get it right this time? In my opinion, the answer is no. Here is why:
1. It isn’t about the carrier – it is about the OEM: Microsoft spends copious amounts of resources on in-country coverage of carriers around the world. These resources meet with the carriers and talk about new product launches, how to align with the local subsidiary and try to influence the carrier into stocking more Windows Mobile products. You could eliminate that organization and it would have no impact on Windows mobile sales for a single reason – they have no marketing money to invest because each license is $14 and are therefore irrelevant. The carriers might talk to them out of courtesy, but they are not taken seriously.
The war is won and lost with the OEM. As so many Windows Mobile reps in the field found out this year, if the OEM does not choose to range the OS, then there isn’t much to talk about.
Think of the math this way:
A carrier decides to range a device that will cost them $400. They decide to order 50K. Revenue to the OEM: $20M. That OEM will offer incentives to the carrier (millions) in co-marketing to move the product.
Microsoft’s revenue for 50,000 units – $700K. Irrelevant.
2. The licensing model is broken: As you can see by the above, $700K in licensing leads to one question – how is Microsoft ever going to make money in this market? We know how the competition does it – Google released Android to drive search revenue and app store, Apple drives revenue from high margin hardware, the application store and iTunes.
Microsoft doesn’t have many applications and $14 per device isn’t going to scale. Even if they sold 200M units – that is only $2.8B inside a $65B company. Which is why Microsoft needs to rethink the mobile strategy and drive revenues by taking a holistic mobile first product view for ALL products.
Google gets that if they give Android away to the OEM, they drive share and their core products. If Microsoft were to give away Windows Mobile and ensure that their other products were mobile ready and ready to monetize, the revenues would sky rocket. But for that to be successful on the Windows Mobile platform, it requires the 3rd point – that is the biggest hurdle.
3. Build an OS agnostic product strategy: Microsoft’s history is built on products that drive users to the Windows platform. SQL Server never made it to Unix, only Windows, Office isn’t out on iOS (although that is changing) and Hotmail is driving users left and right to GMAIL because it doesn’t support IMAP (Although they did make the desperate move to allow iOS to work like IMAP but not on a Mac).
Windows Mobile will thrive if Microsoft unleashes their products to all mobile operating systems. Just think of the Office numbers alone. One of the first things I did when I bought a Mac was install Office 2011 and it is fantastic. On mobile, there isn’t a single good alternative to Office but at the same time, users will not convert to Windows Mobile to get a great Office experience (which is core to Microsoft strategy).
If they took every product and made it work on the other 2 OSs (Android/iOS), then it would build Microsoft brand loyalty that is bound to positively flow to Windows Mobile and maybe even have some try their newest phone.
Unfortunately, their current strategy drives us away. I am a great example:
- Left Hotmail because there is no IMAP support which means a terrible experience on our Mac and on my Android phone.
- Left Office OneNote (great product) for Evernote because it isn’t cloud and won’t work on other platforms (My Mac, my Android tablet, my iPhone).
- Don’t use Bing because the above irritate me.
- Don’t use SkyDrive because unlike Dropbox it doesn’t support every device.
The list goes on. One last point, think of this – 200M devices with Office mobile at $10 a unit $2B and it would drive Bing, OneNote and others if they took the same approach.
In summary – I am willing to bet that Windows mobile 8 will not be a success simply because it does not appear that Microsoft gets the root of the problem. Sure, they will spend gobs of money on the marketing campaign, they will have a fancy multi-screen pitch showing how well Windows PC, XBOX and Windows Mobile work together and it will make a big splash in the fall. But in my opinion, that isn’t enough. Like Windows 7 phone, it will be a short bump.
I will keep using my iPhone and my Samsung tablet (can’t wait for the pen). We now have 3 Apples PCs in the house (2 laptops and a iMac) which have dramatically reduced the ‘Dad technical support calls’ and over the next 12 months as our last 2 PCs start to wear, I will probably remove them too. Starting at a new company this week I was allowed to choose devices and I took a MacBook Pro and an iPhone (It is kind of like that joke that is floating around: What is the first thing a Microsoft employee does when they quit? Buy an iPhone).
Unless Microsoft changes. The fact that their tablet will be using a skinny Windows desktop OS instead of doing what Google and Apple did – putting the mobile OS on the tablet – are indicators that it won’t happen. Their Windows desktop centric culture remains to strong, and too out-dated. Too bad that there isn’t anyone left who can shift the company with a memo.
Who knows, I could be wrong. But as a recently departed Telco executive who talked to and influenced clients about mobile trends every day, I don’t think so ….