I was talking to some friends yesterday, one of who had a Nokia Lumia. I asked him what he thought about the Lumia and his first words were, “you know, it’s not a bad phone“. The Windows Phone OS is actually pretty good and is the best alternative to iOS right now (sorry, Android fans). But Windows Phones are not more popular for simple and (now) obvious reasons:
- Microsoft was late, too late in this case. Android ate their lunch and made it to market as the cheaper alternative to the iPhone and got the right partnerships in place. What Google did is what Microsoft would have done. I realize that there’s still an opportunity out there, internationally mostly, with feature phones. But the rate of adoption of Android should be scary enough to know that is going to be a dog fight. Besides, it’s a tough sell to OEMs when they have to pay Microsoft for Windows Phone licenses when Android is free (well, sorta).
- At the end of the day, no matter how good your OS or even your phone hardware, it comes down to how well a carrier can sell it. AT&T was in bed with the iPhone for a while, and reaped the benefits. Verizon and Microsoft have some bad blood because of the Kin. Sprint was in, but the first release of WP7 didn’t support CDMA. It didn’t matter though because AT&T and Verizon are the big dogs. A similar picture was painted internationally as well. On the other hand, we all know that the direct to consumer approach is not easy to pull off. It certainly didn’t go over very well for Google with the nexus one.
- Let’s just be honest – the name “Windows Phone” sucks. I understand Ballmer’s desire to brand everything Windows (to quote him: Windows is the air we breathe). But this was a different ball game – he knew it, we all knew it. And new branding could’ve actually helped. When people think Windows, they think of the clunky bloated OS that their PC ships with. People don’t want Windows (as they know it) on their phone. I was a big proponent of calling it the ZuneOS (ZOS?). But I’ll save that story for another post.
Microsoft has another headache with Bing. Bing’s has been flailing. Again, anyone who has used Bing (even non-softies) will tell you that it’s actually not a bad search engine. The similarity between Bing and Windows Phone from a consumer adoption standpoint is quite similar - these products are not good enough or differentiating enough to displace Google Search or Android. It’s time for Microsoft to stop focusing on just the competition and go back to basics – think about what problems consumers are facing, and solve those.
The interesting fact about the smartphone market is that we’ve always been “premium” customers. We pay a monthly subscription fee for using a carrier’s network. As a startuper/entrepreneur, I know that having a repeatable subscription business model (that applies to the world’s adult+teen population) is the holy grail of business success. To a lot of people, a smartphone is still considered a luxury good. My wife and I pay about $250 a month to AT&T for our two iPhones (maybe we can optimize our spend a bit). That’s affordable for us and we’re mostly happy with our service (my wife may tell you otherwise).
$0* for unlimited voice/data
I wonder how many more customers a carrier could acquire if the carrier provided the option for you to get their service for $0*. You get a phone for free and you commit to a contract for 12 months. Instead of paying $X/month (where X is typically >= 40), you get to sign up for the service for free, but, your usage of voice and data will be made up for by serving you ads. The ads will not be limited to just search related intents, but will be pervasive. You will get asynchronous notifications (push, SMS) that are geotargeted ads. There could be ‘tiles‘ that are just ad tiles and can’t be removed or moved. The ads would be hypertargeted thereby demanding higher CPMs since the carrier knows pretty much everything about you. When you call someone, instead of the typical ringtone, you, the caller, may hear an ad instead of the ringtone till the other party answers. The phone app screen could also show contextual ads while you are on a call, based on the type of conversations you are having. Sounds scary, I know, but hey, you paid $0 for this – just like you pay $0 to you use Google or Gmail. Sure, there may be issues where someone gets a phone and never uses it thereby costing Microsoft some $$. I think that number is probably going to be pretty small and negligible.
Panacea* for Microsoft?
If Microsoft were to pioneer this in to the OS, work out an ad rev share with the OEM instead of charging $ per Windows Phone OS license, and recruit a carrier like Sprint (that needs to differentiate) this could be huge. $0 is a hard price to beat and will definitely appeal to the mid-low end market. Advertisers are probably not going to flock to Bing initially if they don’t have traction, but Microsoft can throw money at that problem to pump life into the ecosystem. Bing wins, Windows Phone wins, consumer wins.
My hunch is that it would be ideal if Microsoft or Google or Apple could sell phones without the need to worry about carriers at all. Microsoft could easily do this if they had a wireless spectrum readily available and just use Skype as the de facto call app. But that is certainly not minimally viable.
What do you think - would you sign up for service with Sprint if they offered you a Windows Phone for free and charged you $0/month for unlimited voice and data, but served you with ads throughout?
PS: I’d left the Windows Phone team right about the time Windows Phone 7 launched. So I’m not privy to the details behind WP8+.