A couple of weeks ago Microsoft CEO Steve Ballmer stood on stage at the San Francisco Civic Auditorium and ticked off the ways that Windows Phone 8 and Surface machines would make Microsoft competitive again against its main rivals Google and Apple. Before that we’d just been given an hour-long feature tour of Windows Phones by Microsoft VP Joe Belfiore: bold design, great camera, personalization, novel apps (e.g., “kids corner,” “Data Sense”) and so on.
And while Windows Phones (8) do have some unique features and the UI is nicely done, none of those individual OS features is likely to lure most iPhone or Android users away.
Aggressive pricing may grab the attention of feature-phone upgraders or parents looking for lower cost smartphones for their kids. However it takes time to adapt to the Windows UI if you’ve been using iOS or Android.
Microsoft isn’t relying exclusively on the intrinsic appeal of the handset or its features to capture mobile market share. It’s banking on something else: the larger Microsoft ecosystem. Ballmer made a point of emphasizing that Windows Phones are deeply integrated with and a “perfect companion” for Surface tablets, Windows PCs and Xbox. They’re part of a complete, multiscreen device universe tied together by cloud storage in the form of Skydrive.
Microsoft is counting on the idea that some percentage of the millions of Windows PC users will want the kind of device interoperability that Ballmer and Belfiore were talking about. “There is no better phone for you,” Ballmer said, addressing his remarks to the “hundreds of millions” of Windows PC users out there.
Taking a page from Apple’s retail strategy, Microsoft is also hoping that direct tactile exposure to the new products will boost sales. To that end Redmond claims that 15 million people have already walked through the doors of the various Microsoft retail and pop-up stores in the US:
“We’ve welcomed more than 15 million customers and counting so far, and have learned a lot from them,” Adashek said. “Having this direct connection to our customers has really helped us better understand their tech needs.”
All these factors do suggest that Microsoft will see improved mobile device sales in Q4 — though conventional PC sales (especially at the lower end) continue to decline. The question is how good will sales be; will they be big or just modest. Windows Phone sales to date have not been very strong.
Microsoft’s ecosystem strategy is a sound one on the white board. The problem is that it confronts nearly identical approaches from Apple and Google, each of which nearly match the others’ entertainment offerings, cloud storage and cross-device strategies. Amazon is another one with a similar though somewhat less developed ecosystem approach.
The dilemma for companies such as Microsoft, Amazon and Google (Apple to a lesser degree) pursuing this sort of ecosystem strategy is whether and how robust to make their products for competitors’ ecosystems. For example, the anticipated launch of Microsoft Office for iOS and Android devices eliminates the need to buy Windows Phones or Surface tablets to gain access to Office on a mobile device. Similarly a native iOS mapping app from Google diminishes Android’s argument against the iPhone.
And will iPad users who can access Amazon Prime streaming movies or the Kindle app be less inclined to buy an Amazon tablet? I would say probably so.
Yet neglecting competitors’ ecosystems holds risks. You run the risk that your software will simply be replaced by something else: Google docs, Apple Maps. Neflix/Hulu or other third party tools. Accordingly, by keeping Office accessible across device platforms Microsoft will help ensure that people continue using Office even as their PC time declines. If the company were to make mobile Office exclusive to Windows Phones it would mean in excess of 100 million smartphone owners might simply get used to using something else.
Like the US commercial airwaves in the final days leading up to the presidential election Microsoft has vowed to flood the market with ads for Windows Phones and Surface — its marquee products for holiday 2012. The company hopes that barrage of marketing and the increased awareness it brings will indeed boost unit sales. Windows Phones in the US have a less than 4 percent smartphone market share.
Yet Google, Apple and Amazon’s ecosystems are also appealing and strong. And notwithstanding its vast war chest, new product designs and marketing resolve, Microsoft faces the most competitive market it has ever seen.
And while the ecosystem marketing strategy may ultimately succeed for Microsoft, the Windows PC ecosystem isn’t quite the powerhouse it once was.