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 (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 past 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 (VZ, VOD) and Motorola (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 (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 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.

Completing the Puzzle

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 innovative user interface instead of borrowing from the boring, old Windows Mobile platform. Next was the Apple (AAPL)-like 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 the second quarter of this year were smartphones, according to Gartner (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.

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