Live and let Die,…or Live?

Microsoft has been struggling with their mobile operating system, Windows Mobile, for years. Recent statistics do not speak in favour Microsoft either: their market share shrunk from 9% to 5% over the past year. During the same period Apple iOS grew from 13% to 14% and Google Android exploded from 2% to 17%. (Gartner, August 2010)

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This development is of course not news to Microsoft who since long has announced the much anticipated next version of Windows Mobile, now dubbed Windows Phone 7. Release dates are set for October/November, just in time for the holiday sales. Early reviews have generally concluded that it looks promising but has its share of issues that need attention. Microsoft’s new mobile OS is not likely to shake the earth when it hit stores but may at least halt their loss of market share.

Even if Windows Phone 7 lacks features to really set it apart from iOS and Android it does seem to have something quite unique: the Xbox Live gaming network. Xbox Live thrives and Microsoft claims some 25 million registered users. Looking at the mobile gaming competition, Apple’s iOS has some very popular games but they cannot really compare to the titles available for Sony PlayStation Portable (PSP) or Nintendo DS. Quality games for Android are generally hard to find, likely a consequence of Google’s inability to having launched paid applications in more than 13 countries so far. In the fierce competition on mobile operating system market share, Xbox Live and good portable gaming experience may indeed be the differentiator Microsoft needs for their new OS release.

If Microsoft can convince just some percentages of the current 25 million Xbox Live users that they need Windows Phone 7 for great mobile games, their market share will increase by significant numbers. Microsoft needs to hurry though: iOS shows high growth on the portable gaming market as well, mostly nibbling share from Sony’ PSP according to Flurry. To approach tomorrow’s market, there are important lessons to be learned from both present and past:

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First, make sure you understand which features are essential and which are key differentiation attractors. Make essential features as good as the competition, but focus efforts on making the key differentiation attractors outstanding. Apple’s overall iPhone strategy was clear: you can get away with “good-enough” hardware as long as the device user experience is excellent. Microsoft should take on a follower approach in the user interface and then focus on the things they do really well. One of the reasons that Nokia’s N-Gage phone/game device failed a number of years ago was the split focus. N-Gage was neither a good phone nor a good gaming platform and on top of that too expensive.

Second, make sure that consumers can pay for applications and games immediately in all countries where the OS is launched. Failing to do this will alienate users as they will not be able to access premium quality content and developers because they don’t get paid. This is the problem Android phones face with Android Market in most countries. Make sure the best game titles are available and you will attract consumers, but avoid being middle-of-the road with content that is readily accessible elsewhere. Microsoft is in a good starting position as the Xbox Live infrastructure is already in place.

Third, in providing third party applications through an app marketplace, strike a good balance between open and closed. At present Android Market represents the fully open while Apple’s App Store is the closed alternative, both with their respective pros and cons. We believe there is a middle road here allowing for developer openness while curating the experience for consumers to find the best and weed out the worst. Microsoft’s intention with Windows Marketplace for Mobile is not clear yet.

There is little doubt Windows Phone 7 will have significant challenges in trying to grab market share from iOS and Android, but Xbox Live could turn out to be just the thing Apple and Google lacks. Microsoft has to carefully navigate with their strategy to please the market and stay in touch with their users. For instance, Microsoft announced that multiplayer support will not be part of the initial Windows Phone 7 release. Such features might prove essential and not only nice-to-have when you are up to the kind of competition that Microsoft is facing. Microsoft needs to get these things right or risk losing in both the smartphone and portable gaming market opportunities.

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