Saturday, April 7, 2012

Playing Catch Up In A Complex Ecosystem

Microsoft is throwing its weight around trying to catch up in the mobile market. However, the mobile market is far more challenging than prior Microsoft battles like the internet browser wars in the late 90s with Netscape. 

With Microsoft Internet Explorer they were providing access to universal content like HTML webpages on the internet. However, one of the best features of mobile products are Applications. Apps are generally operating system specific. It can be difficult to  create an app that runs for both Apple and Android (Much like you can't run a window's designed program on a mac). Therefore, for a late entrant to be competitive in the mobile market they have to create both a great product to access the ecosystem and artificially create a comparable ecosystem. 

The New York Times had a great article on the lengths Microsoft is going to create an app ecosystem. 

"It is even going so far as to finance the development of Windows Phone versions of well-known apps — something that app makers estimate would otherwise cost them anywhere from $60,000 to $600,000, depending on the complexity of the app. The tactic underscores the strong positions of Google and Apple, neither of which have to pay developers to make apps."

System Apps
Apple 600,000
Andriod 400,000
Microsoft 70,000

Assuming Microsoft needs an additional 50,000 apps to create a competitive ecosystem and a cost of $100,000 to transfer an app. Microsoft is looking at a potential $5 billion in developer subsidies. 

Cnet recently wrote an article about Microsoft's new Window's Phone. Here is the author's conclusion:

"At the end of the day, I was impressed with the Lumia 900. I like the Windows Phone OS. And I definitely liked the $99 price tag from AT&T. But for someone like me who is already locked into Apple, it's simply not worth it to go through the struggle of re-establishing my life in Windows Phone for this device." 

Not only do you need a great ecosystem but for pre-existing users, switching ecosystems can be difficult and is one of the reasons that 94% of iPhone users plan on staying with Apple.

It's very difficult to catch up in a complex ecosystem. 

Disclosure: Long Apple
See also: Apple: Buying At A High
Aswath Damodaran: Selling Apple

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Erin said...

Back when a Windows user's internet options were pretty much limited to either Netscape or IE, Microsoft seemed to have a really great thing going.

But between the news that Internet Explorer 10 will not support Flash, and now this, I'm curious to see where they are going to end up in the online realm.

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