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Part 1 – MSFT Getting Their Act Together in the App, Tablet and Smartphone Market – Is There a Strategy?

The app market according to Gartner is expected to reach $58 billion by 2014 and Microsoft wants a slice of this BIG pie. And with the announcement of the Windows touch tablet, the wheels continue to get oiled but it is still a steep hike to meet the Androids and the iOSs. Microsoft was sitting on the side-lines for quite some time when developers were pouring their efforts into iOS and Android to establish a healthy app ecosystem.

IDC forecasted less-than-stellar performance for their Windows 8 OS in 2012. Largely irrelevant for traditional PCs, and effectively no upgrade activity from Windows 7 to Windows 8 in that form factor.

So what’s their strategy to play in this market with the Windows 8 tablet and their Windows Store and their Windows Phone? How has their game evolved to compete with the titans?

Luring developers to build ‘metro’ style applications

Getting into the game slowly but surely, they reached out to developers to build their next best application for them. Especially since developers are reluctant to invest time and money in an app for an unsure marketplace, Microsoft found other tactics to entice them.  Incentives like giving away free phones and the promise of prime spots in the app store and Windows phone advertising were all part of that package. They also tried running some contests to get more app submissions to their Windows store.

They also presented some generous revenue sharing models for developers by taking smaller cuts than Google and Apple on successful apps. Although it would take 30% on all apps, it will reduce its commission on strong selling apps. The revenue share base is 70 percent, but when an app achieves $25k in revenue — aggregated across all sales in every market — that app moves to 80 percent revenue share for the lifetime of that app.

They promised a more transparent certification process with more guidance and feedback to developers on how they could monetize better. Their premise – it would help developers spend more time to write more innovative applications and less time to navigate through all the approval processes.

Has this helped them to out-market the Droids and the iOSs? The answer is no. Why not?

Relationship with Carriers

Despite spending millions in marketing, Windows phone still does not seem to be a popular choice. Microsoft believes that it’s got nothing to do with the technology; it is not being able to gain the support of their device manufacturers who haven’t push this hard enough as Android. Microsoft’s focus on end-user first did not really work in a world where Google tied up with carriers and device manufacturers closely.  Let’s dive a bit into this ecosystem.

Carriers own the customer, sales and the physical pipe. They also own the marketing money. Device manufacturers own the hardware, industrial design and not the customer, OS providers own the customer experience but since they don’t build the hardware, they are not directly connected to the customer.  Users own the disposable income and are highly influenced by advertising. Developers deliver most of the end user benefit and target platforms that show the most promise and definitely care about monetization

Apple successfully cut the device manufacturer our and forced the carriers to provide pipe and nothing more than that. Google was successful because it worked with carriers and device manufacturers to provide tons of choice to the user by making their platform open source and letting developers innovate in the end users best interest.

Windows however put a lot of emphasis on end user experience and did not care so much about the device or the carrier. But, it forgot that end users are very influenced by carriers who own the marketing money and spend billions of dollars to gain mindshare of their customers. So despite being a better product, Windows phone could not sell like hot cakes.

Will it’s partnership with Nokia help to get them ahead in this race? What should they have done better with their app strategy which Android and Apple did not do? Will Windows 8 help them put on a better show? Let’s find out in part 2 of this blog.



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