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Killer Feature of Windows Phone 7? Hint: Not the Phone

In a bid to reverse declining market share and relevance in the smartphone space, Microsoft (s msft) is prepping Windows Phone 7, expected to launch this fall. The new platform has taken shape like a puzzle, piece by piece over the last year, but the cornerstone for potential success finally looks to be in place: Microsoft will reportedly spend at least $400 million — and possibly billions — to market Windows Phone 7, says TechCrunch.

Nearly half a billion dollars may sound like too huge a sum to throw at a smartphone platform, but this investment combination of advertising, increased brand awareness and a consistent message can reap vast rewards. Likewise, reliance upon word-of-mouth marketing has proven ineffective. Take the example of the $100 million marketing campaign by Verizon (s vz) and Motorola (s mot) on last year’s original Droid handset and the utter lack of marketing dollars for Google’s own Nexus One. As the first phone with Google’s (s goog) new Android 2.0 features and improved user interface, the Droid benefited heavily from a massive media campaign. Yet the Nexus One, with hardware and software superior to that of the Droid, faced lackluster direct sales without marketing.  The marketing dollars helped make Droid become a top seller for Verizon and gave Motorola a needed boost, starting the handset-maker’s return to profitability, while Google ended up killing the Nexus One direct sales model.

Indeed, marketing may be the latest “feature” that Microsoft brings to Windows Phone 7. I’ve used the company’s mobile handset products since 2000, back when Windows Mobile was known as Pocket PC. In the decade since, I can count on one hand the number of times I saw a television spot or major media advertisement for the platform. Even worse: the branding focus for Microsoft-powered products was on the device manufacturer; I had a Compaq (s hpq) Aero, for example, not a Microsoft Pocket PC. The challenge is to market the Microsoft brand, because the average consumer doesn’t know or care what platform their phone is running. The company’s best bet is to leverage the branding of its ecosystem, which may be the most valuable, intangible asset Microsoft currently has: smartphone support for Office, Windows Live services and the Zune music store, for example.

Of course, marketing alone won’t turn a bad product into a hit, which is why I see the entire Windows Phone 7 effort as a jigsaw puzzle. With each piece added, Microsoft looks to finally bring a credible competitor to market. First was the difficult decision to start from scratch and add an an innovative user interface instead of borrowing from the boring, old Windows Mobile platform. Next was the Apple-like (s aapl) control around standard hardware, a centralized app store, and a framework for items like multitasking and notifications. Smartly leveraging the Xbox Live brand with handheld gaming is another piece in the right position. Solid developer support from Microsoft has always been a strong point and the company is already witnessing developer interest in Windows Phone 7. If the hardware and software pieces are all in the right places, the only major missing item for potential success is now marketing dollars, provided that Microsoft and its partners build a compelling ad campaign.

Why invest half a billion, a billion or more dollars? Consider that for all of the recent buzz around the smartphone market, there’s still far more growth potential to come. There are roughly 4.6  billion handsets currently in use around the world, but only a scant 61 million of them sold in second quarter of this year were smartphones, according to Gartner (s it). Microsoft knows that it must invest now — both in product development and advertising of such products — in order to reap benefits of the growing mobile market. Revenue from the desktop is still huge for Microsoft, but the brighter future is in mobile, and that’s well worth a billion dollars today. Microsoft’s Windows Phone 7 still has to deliver in terms of features and functions — no amount of marketing money changes that — but at least the company will advertise the platform to give it a chance at success.

Related research on GigaOM Pro (sub. req’d):
To Win In the Mobile Market, Focus On Consumers

8 Responses to “Killer Feature of Windows Phone 7? Hint: Not the Phone”

  1. FreeRange

    About the author of this “article” who says ” I’ve used the company’s mobile handset products since 2000″ – not exactly the brightest bulb in the room. Typical MSFT – trying to buy their way into a market instead of building great products. Windows mobile has always been crap and this version is no different.

  2. Fail.

    Windows Phone 7 has no hope, whatsoever.

    “Windows Phone 7 still has to deliver in terms of features and functions.”

    If it is lacking features and functions, why would anybody buy it?

    According to that TechCrunch article, 5 of the 8 original OEMs have decided not to be part of the initial launch. They’re going to wait it out to see what happens.

    That’s very bad news for Microsoft and Windows Phone 7.

  3. Ken Jackson

    This story (not yours Kevin, but the TechCrunch one) is the implication that MS shouldn’t spend this money on the phone. It doesn’t make sense to have such a big bet and not throw everything into it.

    How smart would it be for MS to say a year from now, “WP7 was incredible but didn’t sell. Maybe we should have bought some ads for it?”

    • Ken, I agree with you – Microsoft can’t afford not to spend big marketing dollars. Mobile is the future and if they don’t commit to it — both with software/services and financial backing — they’re going to be on the outside looking in.