Early this morning, Microsoft and Nokia announced a partnership that will see Windows Phone 7 become the primary platform for Nokia’s high-end smartphones. It’s a bold move that will help solve Windows Phone 7′s small market share problem in one fell swoop if it goes as planned. But is it enough to seriously challenge Apple, arguably the two companies’ most entrenched competition?
In a word, no. Bobbie Johnson argued in his piece that just combining two companies with flawed strategies does not necessarily mean that each will shore up the other’s weaknesses. That’s true, and it’s the weaknesses of both that left the path open for Apple to gain and keep its significant advantage in the high-end smartphone market. Here are the core advantages Apple’s mobile products have that Nokia and Microsoft playing nice simply won’t solve.
No Devs, No Dice
Windows Phone 7 has had some success attracting developers in the short-term, but there are indications this might have had more to do with grand gestures and publicity stunts, and less to do with the long-term viability of the OS’ app platform. In the very early days, prior to launch, Microsoft was said to be offering cash to potential devs to get them on board. And even as recently as November of last year, some were claiming Microsoft is offering comped devices to make WP7 development more appealing.
Despite a promising start, it’s not all roses for WP7 development. One successful (top 50) developer for the platform recently revealed his sales figures, and they were dismal. The revenue from the sale of his app was barely enough to keep the lights on, let alone build a business on.
Of course, Nokia, as the biggest smartphone maker in the world, should have a healthy developer pool to draw from. It should, but it doesn’t. Even before the move today, developers had been frustrated with Nokia’s development platform efforts. Now that the company is basically telling devs they should throw out what they’ve learned and switch to a completely different set of tools (since Nokia’s cross-platform Qt development framework isn’t part of its WP7 strategy), I wouldn’t be surprised if most just throw up their hands and move to a stable model with a proven ability to generate revenue, like iOS.
App Gap
The app gap is oft-cited as a prime reason behind Apple’s success, but it bears repeating. iOS currently has almost 350,000 active apps available to consumers through the App Store. Windows Phone 7 has about 8,000 apps. Even with a growth rate of 125 apps each day, Apple’s advantage at this point may be insurmountable. Each Apple iOS device averages more than 60 downloaded apps, and the App Store remains the top destination by a huge margin in terms of time spent browsing app marketplaces by consumers.
In terms of making users feel like they have a financial stake in a mobile platform, little else compares to apps. Changing platforms means buying all new apps, so if a platform is good at selling software, it’s more likely to result in subscriber lock-in or loyalty. Apple has the added advantage of offering multiple, non-phone platforms that also use and encourage the sale of apps (iPod touch and iPad), which adds to the perceived value of software purchases for consumers. Try as it might, Windows can’t gain purchase in the personal media player market, and WP7 doesn’t seem poised to make the jump to tablets anytime soon.
The Holistic Approach
Under the new arrangement between the two companies, Nokia builds hardware, and Microsoft builds software. Apple builds both. The advantage of having both hardware and software teams constantly working together to deliver the best possible consumer experience as a total product cannot be overemphasized. Any partnership between two companies, no matter how closely it may resemble an actual merger, isn’t one. Corporate cultures, offices and ultimate goals remain distinct. In this case, that’s especially true, since Microsoft announced this was a non-exclusive deal, and it would still be working with other hardware partners (though their history of doing so isn’t exactly encouraging).
Apple’s ability to pair the hardware and software development sides of making a smartphone not only allow it to win the UX game, but also advantageously affects cost and the pace of breakthroughs and advances, and downplays the importance of internal specifications. It’s why an iPhone that’s almost a year old can still compete with just-released hardware from competitors in terms of real-world performance, and it’s a big part of why Apple enjoys the high margins that it does on the sale of each piece of hardware it makes.
Because Nokia and Microsoft aren’t starting from scratch, it’s most likely that the partnership will bear all the earmarks of success, at least from the outset. If they do it right, we’ll see the simultaneous release of a bunch of shiny new handsets sporting WP7, and these will be decently well-received by Nokia’s existing customer base. But without significant changes from either camp in the way they think about how to make phones and software, Apple doesn’t have to worry about being knocked off its rock just yet.
Related research from GigaOM Pro (subscription req’d):
At the moment this is basically complete conjecture and most of the time leads to people coming to read your story only to find out it was the search engine’s fault for providing them with this tripe. Nokia is one of the most successful mobile phone companies in the world, especially in Europe, and their development org is not only trustworthy but they are also have company pride. This decision to take on Windows Phone will not be taken likely, but if don’t right could be the most successful re-launch of the company in a decade. How is that for conjecture?! (better than your garbage)
You do not make any sense. Apple is entrepreneurial type company and will never be able to hold biggest market share in any market for too long unless they change their business model.
To what?
LOL! So an Apple sycophant thinks this partnership is not enough to challenge Apple. Here’s the thing you dope. Microsoft is not trying to challenge Apple. They’re trying to challenge and kill Google, and I know for a fact that Apple would love nothing more than for Microsoft to slay Android.
As for apps counts, who cares. WP7 is very easy to develop for, and Microsoft is kind when it comes to developer relations. App counts don’t matter. Quality apps do. 95% of the iPhones apps are garbage. Most apps will be garbage on any OS. That’s why app counts only matter to sycophants like you.
Of course, Apple’s iOS isn’t threatened. The iPhone, iPod touch and now iPad have destroyed the crappy cell market known previously. Apple is delivering better tech than anyone else. They market hard. They are incredibly efficient and single-minded. Their aesthetics and design are awesome. Of course, iPhone et al has nothing to worry about.
Microsoft and Nokia are fighting for 2nd place against Android. Android has the lead with its free OS and seemingly endless accommodations to carriers and manufacturers. Android has no enterprise presence.
But Android hasn’t distinguished itself as a great OS. It’s just the 2nd entrant, free alternative to Apple/iPhone. Both Windows Phone 7 (simpler and more polished) and WebOS (better at the web than Android) are better tech. Google knows that Android is *old* tech cobbled together – that’s why Chrome OS is around — it’s future leaning but has no marketshare at all except as a browser. The Android market is a mess with its *openness*, lack of app sales, incompatibilities, bloatware etc.
There’s some truth to the Google Gundotra’s *2 turkeys don’t make an Eagle* tweet. It will be hard to gain traction. But these are still early days in mobile and digitization.
Windows Phone 7 is cool software (maybe not as cool as WebOS but certainly no worse than Android). MS has a great developer program and lots of good feelings from developers — way better than Apple’s rapport with developers.
MS has the sprawling Windows market and a solid Windows 7 OS. Windows has utter dominance in the enterprise. MS even has cool tech and technologists which they can demonstrate when not hampered by having to stay compatible with legacy technologies – see Kinect.
Nokia has great hardware design. Incredible European loyalty. Amazing distribution channels for cell phones. This alliance boosts Microsoft and Nokia in Mobile.
These are early days for great mobile devices. It won’t be easy, but if Microsoft can really focus and Nokia can work with them and play well with others, they can carve out a spot for themselves leaning towards (1) enterprise and (2) simple for ordinary consumers — the silent majority who don’t want to load their devices with endless apps.
Android running on a number of HW OEM platforms is giving Apple a run for its money, with all the flaws this post identifies in the MS+Nokia partnership – no integrated HW/SW development, smaller app store, low revenue potential for most app developers.
Sheer size of the App store does not seem to be a real sustainable competitive advantage. Few iOS App developer make enough money to continue their activity long-term. Most Apps have close to zero awareness in the market place, as would be expected of the thousands of “mediocre” offerings that swim in a sea of Apps, without any marketing backup. As a consumer, I love having that choice. But that does not a sustainable developer business model make.
The MS=Nokia partnership creates a 3rd business model for the industry, in between the integrated Apple model, and the general platform model of Android – a more focused, semi integrated HW/SW development partnership, backed by tons of engineering and money resources.
It could prove to be a viable model, if MS+Nokia can execute on it. That is the risky proposition – can these two behemoths with large egos and such huge internal inertia that they’ve fallen behind the market by 3+ years, truly get rid of their corporate bureaucracies and become flexible and nimble engineering houses capable of releasing the products consumers want at a rapid pace?
Of course it’s going to fail. Both companies are losing mobile, I guess they’ll go down together.
Android running on lots of different HW gives Apple a run for its money with the flaws this article identifies in the MS+Nokia partnership.
On the developer side, with 350K apps in the store, Apple does not necessarily offer a viable model for most developers – most developers make little to no money, have little to no market awareness and will not be able to sustain their engineering investment. And if they’re not in it for the money, but the fun of the ride, then that model holds true for Android and WP7 as well.
MS+Nokia provides a 3rd type of business model, in between Apple’s fully integrated model and Android’s “any HW” model. MS+Nokia becomes a focused partnership, with substantial market reach, and well-funded engineering capabilities. It is a model with potential.
It success is dependent on the ability of these two behemoths to execute well, and with the speed and agility they need to catch up Apple and Google. Can they set their respective egos aside, and change their bureaucratic cultures to adopt a truly flexible and nimble engineering process that overcomes the enormous internal inertia they have both accumulated in the past 3-5 years?
What I don’t see being discussed by bloggers is the effect that this pseudo merger will have on Nokia’s existing distribution channels. No Nokia/WP7 device will make it to market before ’12 giving much time for Nokia’s distribution network to pull Symbian and in effect Nokia. In addition, WP7 is high end where the majority of Nokia’s sales are low end to 3rd world countries.
Nokia is going to have an extremely difficult ’11 as employees leave and are let go. Developers leave for other platforms as well as distribution fading as we wait on the first device to hit the market. The stock price will suffer accordingly making it all the more difficult for this merger to gain any traction.
Just my thoughts, but points that don’t seem to have been discussed.