While it's obvious that Windows Phone is stuck as a distant third in the smart phone ecosystem race, it's equally clear that the biggest danger to the platform isn't failure, but rather the perception of failure. And in a market in which the distant number two player, Apple, can do no wrong, Microsoft faces an uphill battle that it may never win.
I wrote about this topic recently in It's Too Early to Write Off the Third Smartphone Ecosystem. What touched this whole thing off was a single quarter of data from a single source, IDC. As I explained, I don't think a rush to judgment is fair in this case, because so many new Windows Phone hardware partners have just signed onto the platform, and none of the many devices they're making have come to market yet.
But whatever. Windows Phone's problems aren't really just the most recent quarter. The platform has been a distant third since it overtook Blackberry over a year ago. The issue was never Blackberry, which is this generation's Netscape, always doomed to implode from ineptitude. The issue is Apple.
Apple does very well in the United States and a few other key Western countries, and while the iPhone has shown surprising sales growth despite a years-old design and a tiny screen, it has fallen further behind Android quarter after quarter. Unlike with Windows Phone, we don't see anyone writing the iPhone's obituary because the product is super-popular in some markets and, more important, it makes a ton of money.
But as I've often argued, market share—i.e. unit sales—matter. Period. There's a trickle-down effect that happens when consumers embrace a single platform at the expense of your platform: Developers turn their attention to that platform. So do hardware accessory makers. It's a virtuous circle. It's the engine that drives success, defines success.
By this most important measure, Windows Phone is not a success. It's not a success by any measure that matters to the companies that make the platform and its devices and its apps. It is a success to those who use it, because Windows Phone offers important advantages over Android and iPhone, even today. The issue is simply that none of those advantages matter if no one uses the platform.
Microsoft has a lot of money. The firm can invest in Windows Phone for years, if it chooses, and put the weight of big Windows behind it. What Microsoft may or may not do is interesting on a number of levels, but what I'm most curious about is the sudden spate of obituaries that have appeared in the wake of this one IDC report. It's like watching sharks circling blood in the ocean.
Take, for example, The Motley Fool. This site, aimed at the financial investment community, has just declared that Microsoft should "concede" the smart phone market to Android and Apple. Except that it wasn't written like that. It was written like "Apple and Android." It's apparently important that Apple be first for some reason. Even though Apple is a distant second. It's not even alphabetically first.
What kind of rankles me is comments like this. "Microsoft ... has clearly become the No. 3 player in smartphones. Unfortunately, the company is at best Royal Crown Cola to Android's Coke and Apple's Pepsi."
That's a great line. Really funny, even memorable. But is it true?
According to this report, Coke controls 42 percent of the total carbonated soft drink market, compared with Pepsi's 30 percent. (Obviously, not my area.) And here's what a bar chart of that market looks like. (Minus Royal Crown, sorry.)
Here's what the comparable chart for smart phone market share looks like, using IDC's numbers. (I threw in Windows Phone for the heck of it.)
Those charts aren't the same. They're not even close. But this guy—who is there to give you investment advice by the way—can throw out a factoid (i.e a lie) like that and it just hangs in the air unchallenged. Windows Phone is like Royal Crown Cola. No one drinks Royal Crown Cola. Do they even make Royal Crown Cola? It just adds to the collection of preemptive obituaries out there, that growing perception of failure. We cannot allow that kind of thing to go unchallenged.
And not that it matters, but since we're having fun with math here, let's look at one other related fact. I was looking at the bar chart showing the relative sales of Android phones, iPhones and Windows Phones in the previous quarter and something struck me: How well does each platform perform when compared to the platform just above it? I mean, that's the goal, right? Move one notch up the ladder?
iPhone. Compared to Android, Apple sold 13.8 percent as many iPhone handsets.
Windows Phone. Compared to iPhone, Microsoft's partners sold 21 percent as many Windows Phone handsets.
Blackberry. Compared to Windows Phone, Blackberry sold 20 percent as many Blackberry handsets.
So when you compare the secondary platforms to their most direct competitor, Apple comes in last, and by a wide margin, even when compared to Blackberry. Apple, like the rest of the market, is losing ground to Android. But Windows Phone is gaining ground on Apple's iPhone, granted, mostly because Apple is losing market share so rapidly. (That explains Blackberry's position too.) The big story here isn't Windows Phone. It's that iPhone is dropping so rapidly despite Apple's success in selling these devices.
The point is, there are many ways to measure success. Apple fans will wave their hands excitedly and try to turn your attention to revenues, or profits, or whatever else makes that company look best, and do whatever they can to draw your attention away from the places it's doing poorly, like market share. Unless it's doing well there, in which case market share is suddenly very important.
Yeah, I'm a Windows Phone fan. But my job isn't to fool you about the platform's chances, and I've only been very honest—and very strident—about this platform from day one. But if it's OK for Apple fans to constantly change the discussion to focus on some other area of success, then it's certainly OK for me to point out that Microsoft just signed a bunch of new hardware licensees to the Windows Phone platform. So let's see what they do before we write the whole thing off, eh?
Two more points.
The smart phone market isn't really Apple and Android. Or even Android and Apple. It's Android. And then everything else. Apple's a big fish in a small pond. Android is a killer whale.
And if you are looking to invest money in the stock market, I bet Apple would be a good choice. That is of course is not my area of concern. Nor should it be.