Show Me the Money
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I want to make a small point here about this week’s Windows Phone 7 launch from Microsoft. Now you can take this with a grain of salt given that I was an iPhone user until I switched this summer to Blackberry for my Startup Tour. So I am not exactly unbiased. But is it just me or are you, too, having a hard time seeing the $400 million that Microsoft claims to be spending on this product launch?
Redmond spent $100 million launching Windows 95, a number that set something of a record for its time and stood for long as the standard amount to spend if big companies were trying to make a point based mainly on the depth of their pockets. For Windows 7 (not Windows 7 Phone) I recall Microsoft set a new record, blowing-through $200 million. So when I read that they’d be spending $400 million on Windows Phone 7 — now this was something I had to see. I expected to find a Microsoft billboard on my garage door.
Not yet.
Given inflation (remember that?) $400 million doesn’t buy what it used to, but I still expected Windows Phone 7 to be as omnipresent as Windows 95 or Windows 7. And it’s out there, but the effort simply doesn’t feel like $400 million worth of marketing oomph.
But maybe this just isn’t the kind of oomph we’re used to, I thought. Maybe Microsoft is putting half or more of the money into subsidizing the handsets. If that were the case, though, wouldn’t the new Windows Phone 7 phones be cheaper than they are?
From what I have read these new phones are all around $200, which is the going rate for high-end smart phones these days on two-year contracts. So they are being subsidized, certainly by the carriers and perhaps by Microsoft, but the companies are just matching the competition: they aren’t trying to buy market share with lower prices.
I think that’s a mistake. I think lower handset prices right now are exactly what Windows Phone 7 needs to have a chance of building market share. Maybe that’s what Microsoft intended but the carriers are keeping the prices up by taking the Microsoft subsidies for themselves. If that’s so then the carriers are betting on Windows Phone 7′s eventual failure.
Maybe Microsoft had to give the carriers those subsidies in order to get enthusiastic adoption of yet another smart phone platform. This could all be more or less out of Microsoft’s control, much like getting Matt Lauer to correctly pronounce Steve Ballmer’s name on the TODAY Show.
How can you mispronounce a name like “Ballmer?” Lauer can, but I can’t even phonetically replicate his effort here, it was so strange (and he did it twice).
Microsoft is in trouble right out of the gate because the rule of thumb is you need two or more clearly superior points of differentiation in order to gain share from an underdog position in a technology market. I don’t think Microsoft has two.
Microsoft is counting on the innate newness of Windows Phone 7, on its clever streamlined interface, on what Redmond believes — really believes (I know these guys and they love their product) — to be superior performance. That’s plenty of points of differentiation only some of them aren’t real.
Microsoft isn’t Apple. Even Microsoft knows that. So the value of “new” isn’t very much in this case. It didn’t work for the Kin, did it? It didn’t work for Bob, either. New never works if it doesn’t also mean “better,” and this doesn’t — at least not yet.
While Windows Phone 7 may or may not be technically superior, it isn’t so much superior that I can make a judgement that will stick. These phones aren’t out yet, nobody has really used them, and they haven’t been proven on a network (remember Antennagate at Apple?). So Windows Phone 7 may be dramatically superior but who would know? Is the sizzle alone enough to keep us from buying or renewing an iPhone or Android phone while waiting for the Windows Phone 7 handsets to ship? I doubt it.
Then there’s the App Store, or sparseness of it. iPhone and Android have between them about 250,000 more native applications available than does Windows Phone 7. Ironically Microsoft is the underdog here, fighting uphill againsst its own favorite strategy of market dominance. I don’t doubt their heart or determination to do so, but this is new territory for Redmond and I’m not sure they can make it.
So if I was Microsoft and had $400 million marketing dollars to throw at this new platform, I’d make every phone cost $99 or less. I’d bull my way into the market through sheer financial muscle, sending signals all the way down to my Mom in Arkansas that there’s a new sheriff in town.
Only Microsoft didn’t do that.
Maybe they couldn’t force such pricing on the carriers. More likely they are holding price cuts in reserve to be used only if needed — if the market doesn’t otherwise respond to what Microsoft sees as its clear advantages.
I can tell you right now that’s a mistake. If the goal is to get consumers to wait before buying a phone there will have to be some economic component of that motivation in the form of dramatically lower prices.
Having not started with lower prices from the very first minute, Microsoft may well have already lost the battle, no matter how good the phones actually are.
Keep the posting up. I never thought I would find an individual that had close to the same grasp of worldly knowldege , however, you are that beacon of hope in humanity!I hope you continue to bring your knowldge and enlightenment to the world and never let your expression be squelched! Live strong!
You know Bob,
For all the fanfare that surrounds these smart phones, and for all the marketing dollars these companies (microsoft, google, apple, whoever) put into marketing their product… I have yet to see one that works reliably without freezing, losing information, or any number of other serious problems nobody would ever tolerate from pc’s.
I’ve never tried Android, but considering that Google can’t even put out an app that works for Windows Mobile, I have my doubts there. Iphones may be great status symbols if you’re gay, but how is any mere mortal supposed to justify paying that much for a smart phone that is clearly not top of the line?
And while Windows Mobile is widely available, and easy to come by… it’s about as reliable as windows 98 before the service packs, in my opinion. Just today, I had to take my phone apart when it stopped working (a task that they do not make easy), in order to find a reset button that’s not covered anywhere in the owners manual.
Why should a reset button be necessary in the first place?
All I want is a smart phone that actually works for a change.
Maybe smartphone 7 is the ticket.
I’ll let you know when how the upgrade goes…
I’ve never had the problems you describe on Android. There are a couple of apps that crash regularly, but they don’t take the phone down, just open a windows to “force close”. That just closes the app.
There are other examples, but the reality is that there are always other applications that do not have the same problem.
If your whole phone freezes up, then replace the phone.
can i get the bandit in the uk yet
Whoa, I did not even know this phone had already launched, I are right Bob, seems like they didn’t spent that advertising money wisely.
Here’s a fun little fact: windows phone 7 was the 7th suggestion google showed me when I typed in the word windows.
I watched an interview from cnet news.com with Steve Ballmer by Ina Fried about the windows phone 7. “The Ballmer” didn’t bring his usual enthusiasm along this time, in fact he hardly seemed interested in promoting the array of smartphones he had besides him, and why all the different variations? Couldn’t they just have done one with keyboard and one without? Simple, two variations.
This made me think of something Steve Jobs said about microsoft once: “…they have no style, and I don’t mean that in a small way, I mean that in a big way.”
I have to agree with him here, better just keep it simple microsoftboys!
P.s. I also noticed something in the interview I didn’t like, I’m paraphrasing this, Ina asked why customers should want that particular phone and Ballmer (sort of) says, because it’s by microsoft.
your blog.
Title…
Not Long After 150 Thousand Enter the Android Market Applications…
Bob-
It seems to me I read recently that MS gave out 90,000 phones with their new mobile OS installed to developers. Assuming an actual cost + a lost revenue cost of, say, $200 per device, that could certainly be booked at 18,000,000. With some interesting book-keeping, you could probably justify doubling that figure, and that would be 10% of the $400M number right there.
Who knows? Maybe they’ll be the exclusive sponsor of the Super Bowl…
-B
I’d be inclined to clinch the deal with you one this subject. Which is not something I usually do! I really like reading a post that will make people think. Also, thanks for allowing me to comment!
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Oh,nice article. Good informations..
I will tell fairly … the first time has come on your site on purpose “clever spam”.
But to write that that close on a theme it is necessary to read. Has started to read – it was pleasant, Has subscribed and with pleasure I read. Very to be pleasant your site – interesting The maintenance, pleasant design for reading … 
Oh,nice article. Good informations..
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But the bigger question is, why are they spending money they will most likely never recoup? How much are they making off of each phone? $10/license? That’s a lot of phones (40M) to sell just to break even on the marketing dollars. And that doesn’t include all the R&D and admin costs internally at MSFT. This is a no-win situation for MSFT. They will lose at this venture, big time. And humbly either try one more time or give up the ghost in mobile.
Apple played their cards correctly: brilliant phone, brilliant, new OS and the usability that no one could match out of the gate. It turned the mobile world upside down. That’s what MSFT has to do in order to be a player. And it just isn’t going to happen.
Your place is valueble for me. Thanks!…
I can tell you where part of that marketing $$$ has gone. I watch a lot of TV shows (mainly while I’m on the treadmill or exercise bike) and this year it seems that every character in every major show has switched from an iPhone to a phone running Win7 with an MS logo prominently displayed on it. They also make a big show of paging through the screens on the phone, which, frankly, look poorly designed and clumsy.
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I’m going to write about this same thing on my blog. Thanks!
Holy crap! I couldn’t have said that any better
I can tell you where part of that marketing $$$ has gone. I watch a lot of TV shows (mainly while I’m on the treadmill or exercise bike) and this year it seems that every character in every major show has switched from an iPhone to a phone running Win7 with an MS logo prominently displayed on it.
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