or Connect
AppleInsider › Forums › Mobile › iPhone › Microsoft to spend over $500m to catch up to iPhone, Android
New Posts  All Forums:Forum Nav:

Microsoft to spend over $500m to catch up to iPhone, Android

post #1 of 188
Thread Starter 
Marketing costs for Microsoft's Windows Phone 7 launch will add up to more than half a billion dollars as it re-enters the smartphone market, a new report claims.

According to Kim-Mai Cutler, in a guest post on TechCrunch, Microsoft is prepared to make up for lost time in the smartphone market with an expensive marketing push.

Jonathan Goldberg, an analyst at Deutsche Bank, estimated that the Redmond, Wa., company will spend at least $400 million on marketing the Windows Phone 7 launch, which should come before the end of the year. In addition to marketing costs, Microsoft has already agreed to subsidize handset manufacturers' "non-recurring engineering" costs.

This is make-or-break for them. They need to do whatever it takes to stay in the game, said Goldberg.

Microsoft executives told Goldberg during a recent visit to company headquarters that the company, carriers, and manufacturing partners, would spend "billions" of dollars in the first year on marketing and development of Windows Phone 7. Another source estimated a $1 billion price tag for the launch, with half of it going to marketing.

$500 million is roughly the equivalent of Apple's entire advertising budget for its 2009 fiscal year. In its 2009 Form 10-K filing to the SEC, the Cupertino, Calif., company listed $501 million in advertising expenses. Microsoft's fiscal 2009 advertising budget was $1.4 billion.

According to the report, Microsoft, in order to attract third-party developers to its platform, is offering revenue guarantees and other financial support. The company will have an uphill battle against Apple and Google, which already have well-established ecosystems for third-party applications.

At Apple's annual developer conference in June, CEO Steve Jobs announced that over 5 billion apps had been downloaded from its App Store in just 2 years, earning over $1 billion in revenue for developers.

Microsoft remains undaunted. Greg Sullivan, senior product manager at Microsoft, says the company is taking a "long-term view" of the market, since "it's still in the early stages." Anand Iyer, also a senior product manager, asserts that there is strong interest in Windows Phone 7, noting that downloads of the company's development tools have exceeded 300,000.

In July, Microsoft pulled its KIN line of youth-oriented phones after just 48 days on the market. In an official statement, the company outlined its plan to "focus on [its] Windows Phone 7 launch." The KIN team was folded into the Windows Phone 7 team.

During a ReMIX Microsoft conference in France, the company referred to IDC data to estimate total sales of 30 million Windows Phone 7 devices by the end of 2011. In comparison, Jobs set a goal of 10 million iPhones sold in 2008, the first full calendar year of availability for the smartphone.
post #2 of 188
Let's see who Microsoft will copy this time: a tight control over the ecosystem Apple style, or a mish mash of whatever happens hardware and software wise of Google. So far it looks like a hybrid of different hardware manufacturers with dictated microsoft standards and a fairly controlled eco-system, but we'll see what happens after launch.

I'm sure Ballmer (if he is still around) will have a lot of sleepless nights trying to figure out how to set up the copiers.

PS I am just not exited at all about Phone 7. Not that it's bad, it's just I don't care what they put out, and after the flop of KIN they better nail this launch or they are history in the phone business. This time I truly believe that.
--SHEFFmachine out
Da Bears!
Reply
--SHEFFmachine out
Da Bears!
Reply
post #3 of 188
i expect another kin congrats microsoft...i guess 500M will buy a lot of xerox machines
post #4 of 188
Wow, Half billion dollars right down the drain.
post #5 of 188
Quote:
Microsoft executives told Goldberg during a recent visit to company headquarters that the company, carriers, and manufacturing partners, would spend "billions" of dollars in the first year on marketing and development of Windows Phone 7. Another source estimated a $1 billion price tag for the launch, with half of it going to marketing.

Big waste of money.
post #6 of 188
Quote:
Originally Posted by NasserAE View Post

Big waste of money.

--SHEFFmachine out
Da Bears!
Reply
--SHEFFmachine out
Da Bears!
Reply
post #7 of 188
Quote:
Originally Posted by sheff View Post


This what happens when the CEO of the company is a salesman. He thinks everything can be solved by dumping money into marketing.
post #8 of 188
Microsoft Windows Phone 7 launchgate!
It's not AI without it!

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
Reply

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
Reply
post #9 of 188
I don't think it will work for them. You can advertise your way into this space, you need to innovate your way in. While I don't think they will right out flop, I do think it's a bad investment. As a developer though, I'd rather support MS Phone 7 than Android because I know the tools will be great. I'm not sure they can beat Apples SDK, but they sure can out do Android.
post #10 of 188
As an iPhone owner, I'm looking forward to WP7 because it's the first real competition to Apple's dominance. It's interesting how pro-Apple mags like Engadget and Gizmodo are stoked about what M$ is bringing to the table. After running the demo, I have to admit that Apple's GUI seemed kind of dated.
post #11 of 188
Maybe the money would be better spent building a school in Los Angeles:

http://theweek.com/article/index/206...by-the-numbers
無心 The idea of wilderness needs no defense, it only needs defenders., Wilderness is not a luxury but a necessity of the human spirit__Edward Abbey
Reply
無心 The idea of wilderness needs no defense, it only needs defenders., Wilderness is not a luxury but a necessity of the human spirit__Edward Abbey
Reply
post #12 of 188
Quote:
Originally Posted by AppleInsider View Post

Greg Sullivan, senior product manager at Microsoft, says the company is taking a "long-term view" of the market . . .

This is the cue for MSFT stockholders to dump their holdings and run for the hills. What Microsoft is telling you is that right next to the bottomless pits labeled "XBox" and "Longhorn/Vista", they have a dug a fresh new hole named "Windows Phone 7" and they will (again) be dumping billions upon billions of stockholders' money into it for the next few years.
post #13 of 188
It's simply that simple.
post #14 of 188
half a billion already down the drain with the Kin. now he doubles down on WP 7. if it's not a real hit, he's screwed the pooch.
post #15 of 188
Microsoft is attempting to buy their way into the market... again. Just like they did with the XBox.
post #16 of 188
WTF are "non-recurring engineering" costs, someone?
post #17 of 188
Microsoft - this is Reality speaking.

Here's a word of wisdom - save your money and suck this one up as a loss.

Start planning the next big thing that will bring you to triumph.

Accept the fact that Apple got you & that you'll never make a better iPhone, mainly because they invented the iPhone and that's what people love, not the cell phone. They love the 'iPhone', which is a category of it's own.

I hope you make the smart strategical move. Otherwise, let me know now so I can sell off whatever is left of my Microsoft shares. \
post #18 of 188
Ahhh... gotta love the Microsoft way of thinking, throw hundreds of millions if not billions of dollars at the problem then get on your knees and pray it works. Who needs innovation when you have such deep pockets?

They waited too long, iPhone and Android are too deep entrenched and whoever doesn't have one of those has a Blackberry. I foresee worse than Blackberry Torch type sales for WinMo7 phones.
post #19 of 188
The fact that MSFT needs to spend upwards of $500 million is a symptom of a big big problem, not an indicator of enthusiasm or lofty goals.

Apple is one company doing software, hardware and sales & marketing. Google on the other hand has anywhere from 5 to 10 OEMs doing software, hardware and sales & marketing. MSFT will be no different.

Still, who makes the most money of them all? Apple. All by itself.

Why don't investors in MSFT and Google question the effectiveness of their business model in delivering competitive ROI?

Google claims to be activating 160,000 devices each day, while Apple is somewhere around 120,000.

Apple, 1 company, 2 handsets, 120,000 units per day
Google, 10 OEMs, 50 handsets, 160,000 units per day

I'm sorry, but this is not a success story for Google and its investors, this is a failure. Their business model is incredibly inefficient. There are so many redundant expenditures amongst Google and all its OEMs who then have to divy up collective revenues and profits that are less than Apple earns all by themselves.

Now, MSFT is embarking on the exact same business model that allowed them to be leapfrogged by the rest of the industry. Why don't investors question how the company plans to acheive a different outcome by doing the same thing again?

I say stop the insanity. If MSFT wants to spend billions on getting back into the phone market then spend 25 billion and buy HTC. Make it a WM7 shop and boom: instant hardware, instant distribution and it wipes out the best Google hardware vendor.

If mobile is the future of MSFT then 25 billion is worth it (if spent correctly).
post #20 of 188
Quote:
Originally Posted by FireFish View Post

Microsoft - this is Reality speaking.

Here's a word of wisdom - save your money and suck this one up as a loss.

Start planning the next big thing that will bring you to triumph.

Accept the fact that Apple got you & that you'll never make a better iPhone, mainly because they invented the iPhone and that's what people love, not the cell phone. They love the 'iPhone', which is a category of it's own.

I hope you make the smart strategical move. Otherwise, let me know now so I can sell off whatever is left of my Microsoft shares. \

Problem is, there is no next big thing. Unless you're talking about Office 2012 or Windows 8 or Xbox720. They're totally out of ideas, clueless, and desperate to be seen as relevant in the mobile space.
post #21 of 188
Quote:
Originally Posted by Daniel001 View Post

WTF are "non-recurring engineering" costs, someone?

Just a guess; it might mean they will eat the cost of R&D, design, and initial implementation (both hardware and software) of the device and establish its cost basis primarily on parts/manufacturing plus some markup...whereas with Apple the devices are expected to pay for these things (amortized over the market lifetime of the product of course).
post #22 of 188
Quote:
Originally Posted by Daniel001 View Post

WTF are "non-recurring engineering" costs, someone?

"They didn't do anything in the first place so they won't have to pay to replicate the initial effort"
OMG here we go again...
Reply
OMG here we go again...
Reply
post #23 of 188
Quote:
Originally Posted by Daniel001 View Post

WTF are "non-recurring engineering" costs, someone?

Basically a sh1tload of money spent on what should have been spent on actually making a product that is useful.

Quote:
Originally Posted by TNSF View Post

I say stop the insanity. If MSFT wants to spend billions on getting back into the phone market then spend 25 billion and buy HTC. Make it a WM7 shop and boom: instant hardware, instant distribution and it wipes out the best Google hardware vendor.

If mobile is the future of MSFT then 25 billion is worth it (if spent correctly).

If they bought HTC, in 6 months they'll probably kill all the models and come out with MicrosoftPhone hardware, ie. a flop while absorbing (read: destroying) the bought company.
post #24 of 188
Quote:
Originally Posted by NasserAE View Post

This what happens when the CEO of the company is a salesman. He thinks everything can be solved by dumping money into marketing.

That's what MS has been doing for the past twenty-five years or so and look where it got them. I wouldn't underestimate their advertizing power so much. I bet Windows mobile 7 has a very smooth integration with Exchange servers, which is a reason for buying for many, many companies out there. Plus the fact that Windows phones can be in a service contract together with all the other windows software many companies have.

Quote:
Originally Posted by rtm135 View Post

As an iPhone owner, I'm looking forward to WP7 because it's the first real competition to Apple's dominance.

Apple has strong competition already. Android phones are sold more than iPhones world-wide. Here in Europe the iPhone crazyness is over already, and many people dump the iPhone for better phones.
post #25 of 188
For a minute I thought they were spending it on R&D and not Marketing.
post #26 of 188
$500M should be good for a couple more Gates-Seinfeld commercials. That comedy team is a riot!
post #27 of 188
Quote:
Originally Posted by tsa View Post

...Apple has strong competition already. Android phones are sold more than iPhones world-wide. Here in Europe the iPhone crazyness is over already, and many people dump the iPhone for better phones.

Good. Please ask Apple and the telcos to send all the Europe iPhone4s to the rest of the world where it is mostly not launched and still desperately awaited.
post #28 of 188
Quote:
Originally Posted by rtm135 View Post

As an iPhone owner, I'm looking forward to WP7 because it's the first real competition to Apple's dominance. It's interesting how pro-Apple mags like Engadget and Gizmodo are stoked about what M$ is bringing to the table. After running the demo, I have to admit that Apple's GUI seemed kind of dated.

It's interesting that you think that this is competition for Apple. IMO (and obviously I am, like most other Tech prognosticators, more likely to be wrong than right) WP7 will be a greater challenge to Android than the iPhone. The reason is the market. Apple is selling the iPhone to customers. Google is selling Android to handset manufacturers, just like MS. Its likely that the manufacturers will decide it doesn't make sense to spend resources maintaining compatibility with 2 OS'es, and might opt for either WP7, or Android.

And thanks for the laugh, calling Gizmodo a pro-Apple mag...

They are as much a pro-Apple mag as any other magazine is a "Earth revolves around the sun mag". The reason they appear pro-Apple, is because for the past 3-5 years, no one has been even close to exciting customers with new and useful products as Apple has.
post #29 of 188
Quote:
Originally Posted by mdriftmeyer View Post

For a minute I thought they were spending it on R&D and not Marketing.

Yeah, that would actually be big news. "Microsoft innovates for the first time in living memory; everyone dumbfounded"

Seriously, I am quite lucky to almost never have to use a Microsoft product nowadays. Apple doesn't give me all I ever need, but MS hardly gives me anything I do require.
post #30 of 188
but just because the going is tough, I wouldn't make the mistake of counting them out entirely. They have large cash reserves and the chutzpah to pull this off, if:

*they don't let their toxic corporate culture drive the results: if they can gain the right focus on what's being delivered by their competitors, AND deliver a truly smooth WinPhone7 product, this just could work.

*they fail to distract Google/Android from targeting Apple as the team to beat. If WinPhone7 has a slow but steady uptake, chances are good that Google will ignore them. If Redmond brings in some hot guns, really splashes the media with a blitz, AND sells a boatload (heavily subsidized or otherwise) Google will take their eyes off Apple, and see Microsoft as the new threat.

*entice handset builders with their classic carrot and stick approach: "here, we'll help subsidize our products on your hardware initially, AND we'll waive licensing fees for the touch interface you are using as long as you give us better parity in production." Down the road with the target marketshare established (again) they will revisit the subsidies, wean the handset makers off them, and start trying to move the platform into the less-red, perhaps even nominally profitable zone. They will throw some cash at the carriers - maybe subsidize a three-for-one deal.

Make no mistake, Redmond's pockets are deep enough to buy-back some of their lost marketshare. But this means that with RIM, Apple and Google all highly competitive platform sources, we will want to watch to see who loses marketshare to feed Redmond's recovery. My guess is that it will be Google Android - because that's where most of their marketshare came from in the first place. They will want to regain those loses, and then go after RIM and Apple share. They may even try to hedge Nokia out of the US market by offering a revamped feature phone that runs a small version of WinPhone7 just so they can count them as devices as well.
post #31 of 188
Quote:
Originally Posted by Daniel001 View Post

WTF are "non-recurring engineering" costs, someone?

It's a few million easy dollars any number of phone manufacturers will happily take from MSFT and run, laughing, all the way to the bank, knowing that months or years later whatever they come up with will be crap compared with the iPhone since it will be shackled to a stinking OS they have no control over.

By then all the $500M will have been spent, a CEO or two will pull his golden ripcord, while millions of MSFT shareholders will be left holding the bag.
A is A
Reply
A is A
Reply
post #32 of 188
Quote:
Originally Posted by FireFish View Post

Microsoft - this is Reality speaking.

Here's a word of wisdom - save your money and suck this one up as a loss.

Start planning the next big thing that will bring you to triumph.

Accept the fact that Apple got you & that you'll never make a better iPhone, mainly because they invented the iPhone and that's what people love, not the cell phone. They love the 'iPhone', which is a category of it's own.

I hope you make the smart strategical move. Otherwise, let me know now so I can sell off whatever is left of my Microsoft shares. \

What he/she said.

Also, it sucks for them that they missed the market. But it's really going to suck if they ever realize that they missed the market, spent billions, and then missed the market again.

They could really learn from that company that made that Zune gadget that was going to kill the iPod.

Oh, wait...
post #33 of 188
Quote:
Originally Posted by LewysBlackmore View Post

Make no mistake, Redmond's pockets are deep enough to buy-back some of their lost marketshare. But this means that with RIM, Apple and Google all highly competitive platform sources, we will want to watch to see who loses marketshare to feed Redmond's recovery. My guess is that it will be Google Android - because that's where most of their marketshare came from in the first place. They will want to regain those loses, and then go after RIM and Apple share. They may even try to hedge Nokia out of the US market by offering a revamped feature phone that runs a small version of WinPhone7 just so they can count them as devices as well.

Times have changed. MSFT can't outspend Google and/or Apple. MSFT isn't the big dog anymore. Outside of Windows and Office suite they are not the market leader in any other product segment. Investors will not be too pleased if the continued big profits from Windows and Office Suite continue to be squandered on other money-losing ventures (zune, kin, Xbox, WM7, etc).

There is plenty of room for MSFT in the market if only they can achieve the right innovation with the right go-to-market model. They look to be on track with the innovation (although I still have concerns they will find a way to screw it up). Now they need to find the right go-to-market model and I don't think its "make software and let all the OEM vendors crap all over it with shazbutty hardware, disjointed sales & marketing, etc etc."
post #34 of 188
As far as the WP7 platform goes this advertising\\marketing push is very good news.

They have actually managed to create a phone OS that can compete with, and in some cases is better than iOS\\Android\\Blackberry. It would be sad to see it languish simply because of a poor advertising\\marketing.

Not that I know much about the numbers, but $500m doesn't actually sound all that excessive considering the market they are trying to crack. No doubt Microsoft know best based on their experience with the very similar push they had into the console market.

As far as the financial side goes goes... I just can't see this being a great idea. They aren't like Apple and their phone hardware markups of hundreds of dollars. I'd be surprised if Microsoft were to make any more than $20 or so per phone OS license (that means 25 millions phone sales to break even... just on the marketing!).

Then again, I don't own Microsoft shares so I couldn't care less about Microsoft's financial position. I'd be interested to know if there was anyone here that actually did!

To me it's far more important that there is another phone OS on the market that doesn't only successfully compete with iOS, it does it by being different... not just another clone. A successful WP7 will push Apple to continue to improve iOS.
post #35 of 188
We shouldn't underestimate M$ and their checkbook too much. Remember they have a successful history of doing this. They are also shameless when it comes to copying and they are much better at marketing and advertising than google and most of google's android partners. Besides, when you have pockets as deep, $500 million isn't that much money.

It wp7 doesn't flop early, it's going to be more of a threat to android than to iphone or rim. It's going to be interesting to see how this turns out.
post #36 of 188
Quote:
Originally Posted by _Rick_V_ View Post

Microsoft is attempting to buy their way into the market... again. Just like they did with the XBox.

This is true, but it really doesn't matter. Microsoft can continue to do this as long as they keep raking on money from Windows and Office. The Xbox has become a decent machine, especially since Sony royally screwed up the launch of the PS3.

Apple isn't going anywhere, but I think MS has a real chance to give Google a run for its money. WP7 will give people who either don't like Apple or whatever restrictions Apple is placing on their handsets an alternative, without being subjected to the 3rd rate Android app store and crapware from Android handset vendors. Not to mention Microsoft's advantage with Windows IT shops. If Microsoft can pull off an Xbox-style win, even if it takes them 5 years like it did with the Xbox, they'll be in pretty good shape.
post #37 of 188
Quote:
Originally Posted by _Rick_V_ View Post

Microsoft is attempting to buy their way into the market... again. Just like they did with the XBox.

The Xbox is doing pretty well. It hasn't beaten the Wii, but it is ahead of the PlayStation3. Furthermore, unlike the Wii, it is not just games; the other services they are pushing on the Xbox seem to be doing okay as well. They haven't released precise numbers but there are a lot of people using it to stream TV and rent movies. I wouldn't be that surprised if movie rentals on the Xbox are doing better than AppleTV.
post #38 of 188
If Microsoft fails in their efforts it will sink their mobile business. Fortunately for them the Windows Phone 7 (WinMo 7 sounds better) looks pretty good and isn't a me-too offering like Android or WebOS. Personally I believe they'll remain a player. My wife has a WinMo 6.5 phone (it stinks) so there's hope with 7.
post #39 of 188
I'm not sure why so many are wishing MS to fail. That wouldn't be good for the mobile phone business. Competition is needed.
post #40 of 188
Quote:
Originally Posted by Orlando View Post

The Xbox is doing pretty well. It hasn't beaten the Wii, but it is ahead of the PlayStation3. Furthermore, unlike the Wii, it is not just games; the other services they are pushing on the Xbox seem to be doing okay as well. They haven't released precise numbers but there are a lot of people using it to stream TV and rent movies. I wouldn't be that surprised if movie rentals on the Xbox are doing better than AppleTV.

Depends on your definition of doing well. Sure the Xbox is a popular gaming system, but they've never made any money off it. Not a penny. If they could leverage the Xbox to make money in other ways that might okay, but they haven't done that yet either.

Maybe this will change with WM7 though since Xbox will have some integration with WM7. Maybe finally things will start to come together... maybe.
New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: iPhone
AppleInsider › Forums › Mobile › iPhone › Microsoft to spend over $500m to catch up to iPhone, Android