The State of Windows Phone

on December 4, 2014

I’ve just published an in-depth report on the state of Windows Phone as an operating system (and, by implication, Microsoft’s mobile phone business which makes up around 95% of sales on the platform). You can download the whole report for free here, but I wanted to provide a brief summary for Tech.pinions readers as well. It fits with some of the other writing I’ve done here on Microsoft over the last few months (e.g. here, here, here, here and here).

My reasons for writing a report about Windows Phone are simple: so much of the coverage of the platform simply writes it off as a hopeless case, oversimplifying and exaggerating the problems without recognizing there is growth there and it’s so strategically important to Microsoft at this point that the company will continue to invest. As such, the purpose of my report is not to put another nail in Windows Phone’s coffin, but to offer a nuanced analysis of what ails the platform and what Microsoft can do to make it better.

Windows Phone’s challenges

In all this, I’m under no illusion that Windows Phone isn’t struggling. Among the major issues are:

  • Though shipments are growing, market share is actually falling, because iOS and Android shipments are growing more quickly. As such, even though Windows Phone needs to be catching up, it’s actually falling behind. Shipments also aren’t growing rapidly and even suffered a brief dip recently.
  • There continues to be a vicious circle between the lack of developer appeal and the lack of user appeal, with no obvious way to break it. Despite all the high profile coverage of the smaller number of apps on Windows Phone (and Microsoft’s frequent defense to such charges on the basis of quality), Windows Phone has a serious quality as well as quantity problem.
  • Windows Phone is becoming, increasingly, a low end operating system. I cite exclusive AdDuplex, Counterpoint and Kantar Worldpanel data which shows more and more of Windows Phone sales are in the lower price brackets. This is damaging because Windows Phone now exhibits both much smaller scale than either Android or iOS and a base that’s less likely to spend on apps than iOS, leaving it without much appeal for developers.

Solutions for getting Windows Phone going again

The good news in all this is Microsoft appears to recognize the challenges and is actively seeking to address them. However, the challenge is that many of the things it’s doing are either going to make little difference and, in some cases, may even be counterproductive. I’ve talked here about the mistakes it risks making with Windows 10 in an effort to give Windows Phone a boost, but the recent doubling down on the low end is another worrying sign. Microsoft instead needs to:

  • Invest in creating and marketing a true flagship for the platform. Windows Phone has never had a single flagship to rival the iPhone, the Galaxy S5 or comparable phones from other vendors and it badly needs one. Given Microsoft Mobile’s dominance of Windows Phone, this phone needs to be a Lumia, it needs to be more competitive, and it needs to be sold across carriers, with none of the market-limiting exclusives of the past. Microsoft can afford to market the device heavily on its own. Unless Windows Phone claims a stake at the high end of the market, it risks becoming exclusively a low end carrier.
  • Establish clearer differentiators for Windows Phone as a platform, especially among high end users. Microsoft has struggled from the beginning to articulate why Windows Phone is better than the two established platforms for mainstream users, and it’s no closer today to figuring out what that is. The answer likely is in ties to Microsoft services, photography and other areas, but even Microsoft doesn’t really seem to know, and this needs to change.
  • Do more to bridge “the app gap” and that starts with recognition that simply paying for the initial port of an app to Windows Phone isn’t enough. This is the single greatest factor holding the platform back today and, unless Microsoft fixes it, it will never attract significant numbers of high end users.

Prospects for Windows Phone

Can all this turn Windows Phone around? I think there are good precedents in Xbox and Microsoft’s Online Services division to suggest Microsoft will be willing to stick with the platform for the long haul, even as it struggles in the short to medium term. Strategically, Microsoft needs a mobile platform which serves more than just a thin slice of the market, because its two major competitors – Apple and Google – own the other two platforms and both are reinforcing their internal ecosystem, which will damage Microsoft’s ability to participate with cross-platform services alone. In addition, Microsoft’s single biggest advantage is its existing base in PCs, but as that base stagnates and falls even further behind smartphones in total size, mobile only becomes ever more important for Microsoft. But significant changes are required if the platform is to succeed and Microsoft’s current strategy doesn’t appear to be on the right path.