The Nokia Lumia 900 launch: A huge gamble that will pay off

AT&T will release the Nokia Lumia 900 this Sunday, and the marketing blitz has begun with a series of commercials that point out the flaws of the iPhone and Android devices. That campaign is the opening salvo of what AT&T says will be the biggest product introduction in its history, surpassing even the iPhone launch. And I think those marketing efforts will be the fuel that powers Windows Phone to become a thriving mobile operating system alongside Android and iOS.

Marketing and carrier relationships are still key in the U.S.

There’s no question that effective advertising is crucial in selling handsets. Apple wrote the book with its iPhone commercials, of course, and Verizon Wireless (and its wallet) was instrumental in moving the Motorola Droid in 2009. Meanwhile, Palm’s webOS flopped when the manufacturer’s ads for the Pre were confusing and creepy and its carrier partner Sprint declined to support the phone with an aggressive ad campaign.

Network operators bring more than deep pockets to the table, too. They offer high-profile brands and massive retail footprints, which AT&T will lend the Lumia 900 by giving the phone prime real estate in its stores. Also while AT&T hasn’t disclosed how much it’s paying to subsidize the device, it will offer the Lumia 900 at $99 with a two-year contract – a remarkably cheap price compared to comparable handsets like the iPhone 4S (which starts at $199) or the Samsung Galaxy S ($199). In fact, bargain hunters can already preorder the Lumia 900 for just a penny at Amazon.

And while both Microsoft and Nokia have struggled mightily over the last few years, they have teamed to offer a top-notch product. As this head-to-head comparison from PCMag.com illustrates, the Lumia 900 offers a larger screen than the iPhone 4, and the new version of Windows Phone (dubbed Mango) is comparable to Apple’s iOS. Almost as importantly, its support for LTE enables substantially faster network speeds. Also, Windows Phone Marketplace recently surpassed 80,000 applications and is adding about 10,000 new apps a month, clearly indicating that developers are increasingly building for the newer platform.

Alliances borne of necessity

Both Microsoft and Nokia have learned the hard way that strong carrier relationships are imperative in the U.S. mobile market. Microsoft’s Kin was doomed when Verizon Wireless packaged the feature phone with full-blown data plans – creating a pricey albatross that might not have existed if the companies had better relations. And Nokia’s failure to forge alliances with U.S. operators is well documented, from its insistence on offering competing content services through Club Nokia in 1998 to its refusal to customize user interfaces to include carrier branding.

But the newfound strategy for both companies comes as carriers are aching for a platform that can compete with Android and iOS. Google’s operating system continues to struggle with fragmentation problems that will only get worse as more Android tablets come to market, and Apple – which has never been a strong carrier ally – will become increasingly inflexible as the iPhone’s audience grows. Meanwhile, BlackBerry continues to flail and no other operating system has emerged as a viable threat to the two leaders.

The Lumia 900 will eventually be available on other carriers in markets around the world, of course. But Microsoft and Nokia are clearly going all-in with AT&T, which means next week’s launch will go a long way toward determining the success of Windows Phone in general. Failure likely means the end of Microsoft’s hopes of regaining relevance in mobile, relegating Nokia to a second- or third-tier handset manufacturer with precious little to differentiate itself. But all the pieces are in place for the Lumia 900 to be a runaway hit for AT&T in the coming months. If that happens – and I believe it will – mobile will suddenly become a three-horse race between Apple’s iOS, Google’s Android and Microsoft’s young platform.

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How important is AT&T’s launch of the Nokia Lumia 900 to Windows Phone?
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Colin Gibbs

Colin Gibbs

Mobile Curator Gigaom Network

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9 Comments Subscribers to comment
  1. To be brief, I agree.

    People shouldn’t kid themselves that consumers make their own decisions, and that everyone wants an iPhone. The people entering AT&T stores today, and asking for their first smartphone are late adopters. They don’t really WANT any OS in particular at all. They are not geeks, not tech savvy, and don’t know enough to care. They’ll ask for an iPhone cuz that’s what their nephew Jeffy said to get.

    But what if the sales guy is really motivated to show off a Mango phone? What if he has a bonus riding on it? What if it has the best placement in the store? What if AT&T, Nokia, and Microsoft (three 800 pound gorillas) all throw marketing money into a advertising blitz on TV and everywhere? What it if is half the price of the current iPhone? What if it offers an easy, simple-to-use OS (which the iOS is less and less)? What if the branding offers some familiarity? What if it meets their needs? I think lots of people can be swayed by ads, and by in-store manipulation towards a good alternative…and never regret it.

    And I didn’t even mention the specs, which can be debated to be better for Android, iOS, or Windows. But who cares, because late adopters don’t buy phones on specs.

    The end result will be great for MSFT, and Nokia will be a viable player again…although it’s unclear what the long-term play is for Nokia: if Windows Phone is successful, then other OEMs will come on board, and how will Nokia be different enough to keep margins? Of course, that’s still a better problem than irrelevance, which was the alternative.

  2. I beg to disagree with your optimism.
    Displacing leaders in a market with a “me too” product is almost impossible, has it was brilliantly explained, 10 years ago, by Clayton Christensen on its seminal book on innovation.
    ^^^Today, iOS and Android have about 90% of the smartphone market with new buyers in the US and these products cover very well the needs of most users.
    Linux was never able to make a dent on Windows on the PCs ; WM7 will not be able to take more than 2 to 5 % of the market for smartphone.
    This is not because it’s a bad product, but simply put, it has nothing really amazing to offer compared to existing leaders.^^^

    1. Louis,

      There are a lot of reasons I disagree with your argument. I believe you make a lot of false parallels.

      But the biggest flaw I see is that you discuss “displacing” leaders. That is NOT what Windows Phone will do. Most users who already have iOS or Android will stick with it. What Nokia/MSFT are out to do is solicit NEW smartphone users. No displacement is necessary.

      In the US, we have 50% smartphone penetration, and it’s rising fast. That means that half the market is still addressable without having to displace an incumbent. That’s where the market opp is for MSFT. And that’s in the US, the rest of the world has lower smartphone penetration and more addressable market.

      False parallels:
      – Linux UI sucked, Windows Phone is great
      – Linux went up against a single, dominant incumbent, Windows Phone is up against multiple leaders in a fragmented market – that’s easier (consumers already have to choose).
      – Linux was attacking a slow-growing mature market, Windows Phone is attacking a fast-growing, shifting market
      – Apple once offered simplicity that late adopters could enjoy, now Windows Phone offers it.
      – Linux excluded you from the Windows ecosystem of apps, drivers, documents, etc. But what ecosystems matter today? Is it the OS, or is it Twitter, Facebook, SMS, email, WhatsApp, FourSquare, etc? Because those are all available on Windows Phone.

      Real Parallels:
      – Palm was the leader in smartphones. Poof!
      – RIM was the leader in smartphones. Whoosh! You see what happens when you are the leader, but there is still a lot of addressable market left?
      – Android phones are a confusing array of similar-looking, bland, black boxes. Nokia stands out.

      You’re right:
      – Windows Phone isn’t 10x better than anything out there. It’s just generally competitive.

      Don’t ignore that three 800 pound gorillas will be willing to sink money into the assured success of WinPho as a strategic imperative (MSFT, Nokia, AT&T). Don’t forget that carriers worldwide hate Apple and Google’s new-found power, and another major player reduces the power of the OS vendors in general.

      I figure Windows Phone will reach 10% market share by year end. Not great, but going in the right direction. Let’s check in by year-end on this page and see how it went.

  3. Thanks very much to both of y’all for your comments. This kind of discussion is one of the best things about Pro.

    I won’t rehash any of the arguments presented here in support of Windows Phone’s prospects, but I do want to address Louis’s argument that it will be almost impossible for Windows Phone to displace either of the two dominant operating systems.

    Derek is right that WP doesn’t need to displace anyone to see substantial growth, but I think Microsoft will steal some Android users in the coming months. Android’s fragmentation problems are starting to surface among consumers — I’ve experienced them myself, and I won’t be returning to Android anytime soon. Windows Phone won’t need to be amazing to win some of those users, it will just need to be more consistently solid than Android.

    Android and iOS will continue to dominate the space for the foreseeable future, but I think MSFT/Nokia/AT&T will begin to move the needle in the coming months. Looking forward to revisiting this later in the year.

  4. Thanks for your interesting comments on my “Christensen view of the market”… and … Time will tell.

    Sadly for this MSFT/Nokia/AT&T trio, the bug which prevents access to data will not help!
    Today, on April, 11th, Nokia shares were down 18% when I was writing this comment.

    My bet, but I may be wrong: By the end of 2012, Windows Phone 7 will have less than 5 % of the US market for Smartphones, and the Nokia Lumia 900 will not be the best selling WP7 phone!

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