Microsoft's New Mobile Strategy

For the past few years, Microsoft has been losing share in PCs to Apple. It’s been losing huge money on the Web. And it’s been badly shown up in mobile phones, where Apple and Research In Motion have far more momentum and even Palm seems to have more mindshare. But now, the company is preparing plans to do what no other company is as well-positioned—at least on paper—to do: tie the PC, Web and phone together.

On Feb. 16 at the Mobile World Congress, CEO Steve Ballmer will announce the outlines of the plan. He’ll unveil a service called My Phone, that allows anyone with a Windows Mobile phone to automatically have their photos, contacts, calendar items, favorite websites and other data backed-up on a web-site hosted by Microsoft. The service, which will be a beta version, will be free to anyone that has a phone running a version of Windows Mobile 6.

Specifically, Ballmer will show how My Phone can help people who want to do more with the photos they take with their phone. The service will automatically upload photos to the user’s My Phone site each day (the user will have some control over frequency, to help manage their data service fees). That way, users can later use their PC to edit, view or share the photos. Or they could delete lousy shots from their phone, and upload new ones from their hard drive—activities that are now possible but rarely used by most phone owners, according to the company. And since one of out of six phones are lost, stolen or damaged each year, according to the company, My Phone means photos and other content on those phones won’t be lost forever.

This will be first of a series of announcements over the next eighteen months designed to forge a more seamless world comprised of Windows-based PCs and phones, and Microsoft’s web offerings, says senior vice president Andy Lees, who runs the mobile effort. For example, in the future the My Phone service will be more closely integrated with Windows Live and with Windows PCs themselves. With the current version, consumers that want to send a photo on their phone to a friend would have to go to their My Phone website. In the future, that photo might well appear on your PC homepage next time you log on. Over time, the company hopes to strike deals so that photos could be easily shared automagically with various social networks or other sites. It’s possible that using facial recognition, all shots of young Johnnie could automatically be sent to grandma’s photo-sharing site, while shots of an old frat brother might go to your Facebook friends from college. That’s the idea, anyway. (By the way, the much-rumoured Skybox synchronization service will be less of a stand-alone service, a la Apple’s MobileMe, and more a capability baked into all Windows PCs and phones, I’m told.)

The strategic goal is to recast Microsoft from a provider of a mobile operating system called Windows Mobile, into the force behind a new category of “Windows phones” that are distinct from other so-called “smart phones.” It may sound like a minor distinction of importance only to marketeers. But it could have huge impact if Microsoft can execute. That’s a big if, given the struggles the highly decentralized company has had in getting its many businesses to work in synch. But the hope is that in the future, consumers will ask specifically for a “Windows Phone” when they go shopping—much as they ask for a “PC” as opposed to a “Mac” today. Contrary to persistent rumors, Microsoft sources say the company has no plans to build its own phones, but will rely on traditional phone partners such as Samsung, Sony Ericsson and others. Mary Jo Foley at All About Microsoft seems to have it right.

And while Windows Mobile historically has focused on making email and Microsoft Exchange available to business users, this time the focus is on appealing to people’s business and personal lives. Indeed, the company will launch a major consumer advertising and branding campaign in the weeks ahead. The campaign will be related to, but somewhat distinct from, the “Life Without Walls” ad campaign launched last year. But rather than try to drum up excitement for something completely new, “we’re going to double-down on the Windows brand,” says Todd Peters, head of marketing for the mobile communications business. Since people are so familiar with Windows both at work and at home, “it’s a brand that can transcend both.” Can being the operative word. While Windows Mobile was about productivity, “we’ve got to make our mobile brand more emotional, more people-centric,” says Peters.

I see this as an ambitious, albeit very difficult, gambit to do what Apple has done, but on a larger scale. Apple has brilliantly created an ecosystem in its somewhat smaller, more exclusive corner of the market. More than fifteen million people have purchased an iPhone, in large part because it integrates so well with iTunes. And because it does, the iPhone has undoubtedly convinced more people to buy Macs. That’s all very nice, but small potatos against what Microsoft could accomplish if it can make the Windows Phone into a household name. It won’t be easy—especially for a company that has struggled mightily outside of its core Windows and Office markets. Microsoft will have to get carriers and phone-makers to support its vision of Windows phones. Carriers, in particular, might not relish the idea of giving up even more control over the software and services that are available on the phones their subscribers use—a process that Apple has started with its App Store/iPhone combo. Then there’s developers. While Microsoft is sticking to its PC-like model of getting as many hardware makers to create scores of Windows phones to satisfy every type of customer, many developers I’ve spoken with are more interested in hitching their wagon to what Pandora Music CEO Tim Westergren calls “hero phones”—single models, like the iPhone, that garner monster popularity by their lonesome. That way, the developer doesn’t have to spend precious time and money making sure their software works on specific phones used on specific networks, that deliver far less volume.

But if Microsoft somehow figures all this out, the rewards could be huge. After all, there’s an installed base of hundreds of millions of PCs out there. If all those owners of Windows PCs decide they want a Windows PC to go with it, it might be the company’s best chance to leverage its PC monopoly to resuscitate its status in the booming mobile sector.

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