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5 things Microsoft should do to save Windows Phone

By Joe Wilcox, Betanews

Friday’s apocalyptic post “Windows Phone 7 is doomed” generated among comments assertions that I’m an idiot and demands that I be fired (Sorry, I’m a lowly freelancer). Nevertheless, I do read comments and seriously regard the ones written to extend the discussion (rather than just belittle the author or other commenters). Commenter rwalrond asked: “How about you write an article about how Microsoft can leverage its existing platforms to make WM7 a contender.” Actually, Microsoft’s trying to leverage its enterprise apps is part of the problem — the Office and Windows hawks driving off the consumer and cloud service doves. But the spirit of rwalrond’s comment is offering solutions, and that I will do here in response.

I don’t want to open up a religious debate here, but the Biblical accounts of Nineveh and Sodom and Gomorrah are good metaphors for my “doom” proclamation and Microsoft’s mobile future. In that context, I’ll call my “Windows Phone 7 is doomed” assertion a prophecy. If Microsoft repents of its wicked ways, the company could end up like the Biblical account of Nineveh, which was spared destruction even after its doom was prophesied. The citizens of Sodom and Gomorrah didn’t repent and, according to the Biblical account, they were burned with fire and brimstone. To reiterate: I don’t want to open up a debate about God, the authenticity of the Bible or people’s lifestyles (why these cities were targeted for destruction). I’m trying to say that Windows Phone 7 doesn’t have to be doomed, if Microsoft is willing to radically change its behavior. I don’t see much hope in that, particularly given how fast the mobile market is changing and how quickly upstarts Apple and Google are gaining market share and consumer and developer mindshare. So I’m sticking with “doomed,” but hoping to be proved wrong.

With that introduction, there are several ways — and I’ll give five of them — that Microsoft should apply some outside-the-Office-and-Windows-box thinking concurrent with the launch of Windows Phone 7 devices. But these things require dramatically different thinking — well, dramatic for today’s Microsoft but not as much for the scrappy dog that conquered the PC market in the 1980s and 1990s. None of these things has anything to do with phone features or developer tools. It’s too late for them to matter enough, given the tilted competitive landscape.

So, here are five things Microsoft should do to save its mobile strategy, presented in order of importance:

1. Immediately launch a global mobile money/payment system. Money/payments will be the killer application for mobile devices, and that’s something already being seen in emerging markets. According to analyst data and that from World Bank, about three-quarters of the planet’s 4.6 billion mobile subscribers live in developing countries. Mobile money/payments is one of the hottest and most life-impacting trends underway in many emerging markets. Citing World Bank, Economist reported in September 2009: “An extra ten phones per 100 people in a typical developing country boosts GDP growth by 0.8 percentage points.”

However, the greatest impact comes when people can make purchases using cell phones and even more when they can receive money on them. United Nations Conference on Trade and Development’s “Information Economy Report 2009” highlights just one of the regional trends:

African countries are pioneering mobile banking and electronic transaction services. In Kenya, Safari- com’s M-Pesa service allows previously ‘unbanked’ microenterprises to transfer money (and make pay- ments) via SMS through their mobile phones. As of May 2009, M-Pesa had 6.5 million subscribers and handled around million in daily transactions.

According to the same Economist article: “The incomes of Kenyan households using M-PESA have increased by 5-30 percent since they started mobile banking, according to a recent study.”

Microsoft already has some of the infrastructure necessary for mobile money/payments around Windows Live IDs. Global handset leader Nokia already is there, and Apple and Google are just steps behind with iTunes and Checkout, respectively.

I combine mobile money and mobile payments, although they are more typically separated by banking institutions, government agencies and NGOs (non-government agencies). Mobile money typically refers to banking, such as the cell phone acting as a personal ATM. Mobile payments are more transactional — buying stuff. But other than local regulations, there is no reason why the two must be separate. What’s so different about an iTunes or Xbox Live account with a gift certificate credit balance from future versions where money is deposited? The same account should logistically be capable of receiving money and making payments.

Microsoft’s money/payment system should be widely available for any handsets but offer specific advantages for Windows Phone users, such as integration with hosted Office applications or access to additional services offered by local Microsoft partners in each of the countries. Microsoft would make a long-term, strategic commitment to mobile money/payments but one that looks beyond mobile applications, where Apple’s lead is simply enormous. Rather than win by playing by rules established by others, Microsoft should reinvent the game to its strengths. One strength: Existing emerging market programs. Another is Orlando Ayala, chairman of Microsoft Emerging Markets and one of the company’s most successful, tactical executives.

2. Subsidize the cost of the first 5 million Windows Phone 7 handsets. Microsoft needs to build momentum — and that means sales and mindshare — as quickly as possible. As such, the company should make regaining market share the priority over profits. Microsoft can start by paying the subsidies on the first x million handsets– I arbitrarily chose five. The approach gives manufacturers more reason to commit to Windows Phone 7, because they’ll be paid by Microsoft whether or not carriers sell the devices. Microsoft should then use larger subsidies to reduce some handset’s prices, even to zero dollars. The Microsoft subsidies could be branded as a launch promotion, with understanding that carriers would resume paying subsidies to manufacturers after receiving their first Windows Phone 7 handset shipments. The subsidies would also encourage more manufacturers and carriers to have Windows Phone 7 handsets for launch day.

Granted, Microsoft will take some snipes from bloggers, journalists and pundits about having to pay people for Windows Phone 7. Big fraking deal. Yesterday’s news is easily forgotten. Windows Phone 7 buyers are committed for years, and the sales can drive up market share and mindshare — and Microsoft desperately needs both.

3. Release a branded Microsoft Windows Phone 7 handset. Google had the right idea with Nexus One. Six months ago, it galled me to read all the wrong punditry about Google adopting a new way to sell cell phones — direct, going around carriers. Nokia has done this for years, by offering its handsets direct and unlocked; Google wasn’t reinventing anything. As I explained in January: “By selling a handset direct, Google takes control of Android updates for a flagship phone that also acts like a baseline design model for handset manufacturers licensing the mobile operating system.” The HTC-created Nexus One is Google’s reference design. Microsoft needs one too.

From that perspective, Nexus One is a huge marketing success. Critics harp on low sales numbers, failing to recognize it’s not how many sold but who is buying (or getting N1 for free). The Google-branded smartphone:

  • Successfully established a reference design that Android manufacturers either tried to meet or exceed; handsets that came after Nexus One (and admittedly Droid) are much improved.
  • Helped Google reduce Android fragmentation by establishing one device with the newest OS version. Now more than half Android handsets run v2.1 or v2.2.
  • Became the reference design handset that Google freely gave to developers. They had the platform in hand around which to build their mobile applications.
  • Wooed mobile enthusiasts, who not coincidentally hugely influence other potential buyers. Many enthusiasts choose Nexus One because it’s updated fastest.

Microsoft should learn from Google’s success and imitate it. There is precedent. In November, Microsoft gave thousands of free Acer laptops to developers; the 11-inch portable is a reference design for developing Windows 7 applications. Microsoft should do something similar with Windows Phone 7, even selling the branded device direct.

4. Subsidize the data costs for the first million Windows Phone 7 subscribers. If you’re going to give away something for free, make it meaningful. Smartphones are about data, but for many people the cost is prohibitive or the plans too limited. Microsoft should work with carriers to offer a promotional, unlimited data plan either for x number of days or handsets. In the United States, AT&T recently capped data plans. How much more appealing would a Windows Phone 7 handset be, compared to Android smartphone, BlackBerry or iPhone, with unlimited data for the same price — or less — than the 2GB plan?

5. Rebrand consumer Microsoft phones. Microsoft spent millions launching KIN, much of that in marketing. Last week’s KIN killing shouldn’t mean the end of the brand. If anything, given the amount written about KIN during the last few days, Microsoft should strongly consider reviving the brand. Normally, I would recommend against rebranding, particularly with Windows Phone 7 launching within months and the astoundingly stupid way Microsoft bungled the KIN killing announcement. But, given that Microsoft needs to take desperate measures, I must recommend keeping KIN as the brand for Windows Phone 7 consumer handsets. Microsoft should relaunch the brand now. Begin the marketing as soon as humanly possible. Build buzz and counter iPhone 4 marketing by advertising something else — even if it’s not yet ready. As a brand, KIN works. The marketing concepts are sensible, so don’t throw out the baby with the bathwater, as the over-used saying expresses.

Copyright Betanews, Inc. 2010

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