In the same vein as some of the shameless product plugs that recently propelled Days of our Lives into media scrutiny and mockery, Microsoft hasn’t been shy about spreading its marketing dollars beyond the conventional small screen advertising mediums as part of a Windows Phone marketing campaign speculated to exceed $1 billion. A couple of weeks ago, I caught a couple of brazen WinPhone product placements during some primetime television shows, Chase and Hawaii 5-0, with the latter being an incredibly awkward interjection by one character saying, “Just ‘Bing it’ on your phone” (subsequently followed by what seemed to be a 10 second close-up on the phone itself).
The ultimate fate of Microsoft’s renewed focus on its mobile business has been the subject of unfaltering media attention, analysis, and scrutiny. If nothing else, however, the above speaks to Microsoft’s commitment to reestablishing itself in the market. Looking back at the past decade, we can see a parallel in what was the other half of the since dismantled MED business group, the Windows Embedded Business (WEB) group. Whereas Microsoft remains a market leader in the embedded space, it wasn’t always profitable. In fact, there was a time when MED division as a whole was consistently losing over $200 million a year.
The one glaring difference now when looking at the mobile phone application OS market is that this market is not nearly as highly fragmented as that of the broader embedded OS market. Under normal circumstances, Microsoft’s spending spree would probably not bear the same results as its attrition tactics did in the embedded market years ago. The mobile OS market, however, is now growing too fast and moving too quickly than to allow for unassailable positions of leadership incumbency. This dynamic – combined with Microsoft’s corporate scale – affords the company the opportunity to spend its way to non-trivial market share in the near term until it can hit the proverbial ‘home run’ (or until one of its competitors stumbles).
Moreover, one thing that Microsoft does have that Google/OHA and Apple do not, is an established footprint in other non-PC device form factors. Sure, Android and Apple have momentum in areas such as set-top boxes and other consumer electronic devices, but Microsoft WEB platforms appear in range of other systems, from industrial control to automotive IVI to medical systems. As more and more of these devices transition to web-connected and/or mobile form factors, Microsoft should be well positioned to extend what was its “three screens” vision into new verticals and leverage the channels and brands it already has established.
At the same time, however, the evolution of these other industries will present additional opportunities to mobile platforms such as Android or MeeGo, which are available without a royalty cost. As mentioned above, there are not as many competitors in the mobile OS market as in the embedded OS market; however, Microsoft’s main competitors in the mobile market are all being driven by fundamentally different business drivers. They are either advertising/service firms (i.e. Google) or they are phone manufacturers (e.g. Nokia, RIM, etc.) – in other words, there are not any other ISV’s remaining that have a substantial brand/share in the mobile OS market. As a result, we expect that Microsoft’s ability to succeed in the mobile sector over the long term may in fact still rest with its ability to out-market competitors that need to make their money by selling hardware or advertisements, as opposed to focusing exclusively on the component that is driving an increasing amount of the end products’ value – the software.
We will be keeping a watchful eye on the dynamics of this market throughout 2011 and VDC has already planned publication of reports on the Mobile Operating Systems, Android and Linux in Embedded Systems, and the Embedded and Real-time Operating Systems markets. For more information on this upcoming research, please click here.
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