Posted on March 28, 2017
A quick glance at Microsoft’s financials is awe-inspiring. The 2016 Annual Report lists revenue at over $85 billion (a down year, mind you), and a virtual war chest of over $113 billion in cash, cash equivalents, and short-term investments. The deeper you dive, the better the story gets. That is, until you look at recent numbers for its mobile division.
It all starts with the September 2013 acquisition of Nokia for $7.2 billion. And the mobile story continues to decline. According to www.theverge.com, Microsoft’s global mobile market share dropped from 2.5% in Q1 2015 to 0.7% a year later. www.IDC.com reports that Q3 2016 numbers show a decline of 32.5% in Microsoft smartphone sales, and says that all signs point to continued declines, as the company places less effort on attracting the consumer market. These numbers fly in the face of the world’s growing adoption of mobile devices – according to Comscore, the number of mobile phones is approaching 2 billion users, and now exceeds desktop computers by almost 200 million devices globally.
Which leads to a few very simple questions: How did a mobile pioneer lose its way so quickly? With incredible brainpower and almost unparalleled financial resources, why can’t Microsoft right the ship? Shouldn’t market share numbers be pointing in a different direction? Surely the folks at Redmond see the future, and understand the role mobile will play. Intuitively you would think that Microsoft should be an archrival of Apple, and yet, it’s becoming a faint blip on the mobile radar.
We think that the game is far from over. With a few smart initiatives and calculated investments, Microsoft can see a significant market share resurgence. For starters, here are four concepts for Microsoft to consider right away:
(1) Upgrade Hardware Aesthetics, Fashion: In the mobile realm it really comes down to this: without the right hardware, you’re out. Take a look at recent video reviews of Lumia models. Most don’t “kill” the look and feel of the phones, but they don’t speak glowingly either. One simple step forward is to take R&D budget and get a feel for Generation Z. Start young and win over the next generation of mobile users with fun, innovative design concepts. Impress them with better battery life, screen resolution, performance, and wireless charging,
Or how about sponsoring a major, big-budget, global design contest with top design firms or leading universities? Ferrari had significant success with this concept with its 2015 Top Design School Contest, leading to the introduction of the uber-sleek Manifesto model. There is no doubt that Microsoft can do even better here. Make the promotional budget and prizes significant enough so that no one can ignore participation. The PR alone behind the contest might be enough to give market share a boost.
(2) Introduce More Software: Intuitively one would expect to receive more free software from a Microsoft phone. This is another situation that can be remedied, with the addition of new application packs that offer both utility and fun.
(3) Address the Windows Store Deficit: One could easily argue that the root cause of market share loss is the Windows store itself. A recent article published by VentureBeat estimates that the Windows store has at least 600,000 less apps than Apple’s App Store and Google Play. That’s more than significant.
Here Microsoft finds itself in a quandary. With fewer users and declining market share, developers have less incentive to create apps for the platform. And without new and exciting apps, there is even less incentive for consumers to buy Microsoft phones. Accordingly, Microsoft needs to do some immediate work to inspire app development, perhaps starting with something as simple as leveraging the company’s in-house brainpower to create the best utility apps, and providing them as a separate download pack./p>
From there, Microsoft can “extend out,” by making its platform the most enticing place for an outside app developer to create. Here there is significant opportunity for creativity. For starters, it can again resort to traditional contest incentives with substantial prize money awarded for the best app designs. Or how about incenting top developers with a lower fee structure than iOS or Android (which take 30% off the top) for the first 5 years? What about offering 5 years of free mobile Azure services for select developers who deploy on the Microsoft platform?
(4) Leverage Marketing Might to Bolster User/Developer Engagement: As the right improvements start to be made, and new apps are introduced, unleash the power of the Microsoft Marketing war chest and engage influencers in innovative, new ways. Be humble, acknowledge the mistakes of recent years, and learn from critics as part of the process. If we’ve learned anything from the world of Marketing and Pop Culture in recent years, the world loves a good comeback story. Create this story, and tell it as only Microsoft can.
Onc thing is crystal clear: Microsoft mobile business is salvageable, and could emerge as an amazing turnaround story. But its strategy must be redefined. As app developers ourselves, we here at ImpTrax would love to see a Microsoft resurgence in this space. We can only hope that they see the strategic value behind it, and have a willingness to dip into that massive reserve of cash liquidity to make it happen!