The 5 things Nokia should do to bring Windows Phone into the U.S.
As Windows Phone vendors gear up for the "Mango" version of Microsoft's (NASDAQ:MSFT) platform (HTC last week announced a pair of Mango phones for Europe and Asia) all eyes are on Nokia (NYSE:NOK)--currently the world's largest handset maker by volume--to see exactly what the company will do with its first batch of Windows Phone gadgets.
There is no doubt the odds are stacked against Nokia. Market momentum is behind Apple's (NASDAQ:AAPL) iOS and Google's (NASDAQ:GOOG) Android--particularly in the U.S. market. Further, Nokia's position in the United States has long been flimsy; Americans largely have remained uninterested in the company's high-end offerings, most of which ran Symbian. The "Nokia" brand carries about as much weight with Americans as "Siemens."
Moreover, Nokia faces an uphill battle in the U.S. market because the first launch of Windows Phone devices late last year was pretty much a non-event. Check out these Microsoft market share figures, as derived from comScore, which measures U.S. phone ownership every month. (These figures include sales of both the legacy Windows Mobile platform and the new Windows Phone platform.)
As Horace Dediu with asymco points out, in the past 12 months Android gained 25 million users in the United States, iPhone gained 9.5 million and BlackBerry lost 3.2 million--Microsoft lost 1.6 million.
"To put the mountain-sized hurdle in perspective, Android now has 7 times more users in the U.S. while iPhone has about 5 times more. To become the largest mobile platform in the U.S., as some analysts are predicting, Microsoft has a 12:1 disadvantage that looks to continue to grow."
That said, Windows Phone is a very good smartphone operating system, and Nokia can make excellent hardware. All the pieces are there. So what does Nokia need to be successful in the U.S. market when it launches Windows Phone devices? Here's a list of my suggestions for the company:
1. Get the carriers on board. Nokia hasn't had much luck to date with U.S. wireless carriers. None of them agreed to sell its MeeGo-powered N9 or its high-end, Symbian-powered N8. As a result, Nokia has been forced to play in the unlocked GSM phone space, which is where expensive phones go to die. Nokia needs to replicate the kind of partnership that Verizon and Motorola forged for the original Droid launch.
However, as Ramon Llamas at IDC points out, Nokia's play in the United States likely will be confined to the GSM side of things. Nokia has only dabbled in CDMA feature phones and its 2006 teaming with Sanyo for CDMA smartphones produced squat. Thus, it's reasonable to assume that Nokia's only real option, if it remains a GSM-only company, will be to partner with AT&T Mobility (NYSE:T). (T-Mobile USA is simply too small and troubled of a player in the U.S. market to successfully help Nokia break into the USA.)
2 Marketing, marketing, marketing. "Nokia needs to be prepared to drop eye-watering sums of money in support of its launches," said CCS Insight analyst John Jackson.
Nokia is pretty much an unknown entity in the United States. The company's last major launch in the United States was the Nokia 3650 (the Symbian phone with the circular keypad) almost 10 years ago. Oh, and remember the N-Gage?
This time around, Nokia needs to dominate the advertising scene with ads that resonate--and not in a creepy way like Palm first tried with its webOS phones or in an overly muscular way like Motorola Mobility (NYSE:MMI) is attempting to do with its Droid Bionic advertising.
Instead, I think Nokia needs to find one or two key selling points that separate its phones from the competition--including competition from other Windows Phone licensees. This could involve the high-end hardware that Nokia is clearly capable of making: Something like the Carl Zeiss camera lenses on its N8. Or maybe Nokia could offer a free keyboard dock with its phones that would support additional computing capabilities, sort of like what Motorola tried to do with the Atrix laptop dock (but not so expensive).
"We believe Microsoft must identify some ‘hero' usage scenarios for its platform. Just stating that the Mango release offers 500 new features is not enough, especially when most consumers have little idea of the core benefits of the original Windows Phone 7 devices," wrote research firm CCS Insight in a recent research note on Microsoft, though the comments could apply to Nokia as well. "Possible candidates include Threads, a unified text-messaging service across SMS, instant messaging and Facebook chat, and the Bing-powered search capabilities which include smart features such as Local Scout, which serves locally relevant content in easy-to understand Quick Cards. These summaries offer information on topics such as restaurants and shops."
3 Go LTE. If Nokia doesn't offer LTE support in its first batch of Windows Phone devices, the game is over. Nokia absolutely must include LTE functions if it expects to get support from the likes of AT&T, which plans to cover up to 75 million POPs with LTE by year-end. AT&T will be keen to promote new LTE devices in a bid to counter Verizon's (NYSE:VZ) LTE push, and a Nokia LTE phone would likely enjoy significant support from AT&T in that effort.
Further, Nokia has deep and extensive wireless engineering expertise in the radio side of things, and the company would be remiss not to leverage that. Finally, it would give Nokia a selling point against the next-generation iPhone, which likely will be released this fall but probably won't include support for LTE networks (most expect an LTE iPhone to be launched next year).
4 Go prepaid. Research from New Millennium Research Council shows that about three out of five new wireless subscriptions in 2010 were for prepaid cell phone service vs. contract-based postpaid service. And, as Recon Analytics' Roger Entner recently pointed out, the number of prepaid net additions in the second quarter of this year was almost double the number of postpaid additions (699,000 postpaid vs. 1.4 million prepaid).
To date, high-end smartphones have been withheld from prepaid users because the phones are too expensive. Android phones in the $200 range have finally, in just in the past few months, trickled down to prepaid carriers like Leap Wireless and Virgin Mobile.
If Nokia is able to build a relatively inexpensive Windows Phone device--and the company should be able to do that, given its experience building cheap feature phones for emerging markets--the company should offer it immediately through the prepaid channel. In doing so, Nokia could tap into the vast and growing market for U.S. prepaid while at the same time cultivating the Windows Phone ecosystem. Third-parties will be much more willing to build Windows Phone apps and accessories if they see Nokia's market share balloon on both postpaid and prepaid.
5 Exclusive (or free) apps. Let's face it: Apple's "there's an app for that" marketing campaign helped usher in the mass-market smartphone revolution. Americans are now primed to download and use smartphone applications. But the only thing most smartphone vendors to date have done is provide users access to these apps.
Thus, in order to separate itself from the pack, Nokia should give customers free or exclusive apps. I'm not talking about trial versions or carrier crapware, I'm saying Nokia should pre-install full versions of popular apps like Gameloft's N.O.V.A 2 or Electronic Arts' Tetris, apps that users will use and enjoy. Or--better yet--instead of pre-installing select apps, Nokia should provide a $10 credit to all Nokia phone buyers to the Windows Marketplace.
Yes, this will cut into Nokia's profits, but if Nokia wants to be successful in the U.S. market, I think the company needs to forgo profits in favor of market share, at least through 2012. Windows Phone is Nokia's Hail Mary, and the company needs to go all out.
Nokia faces an uphill battle, but it's not insurmountable. Microsoft's Windows Phone is an elegant platform, and the Mango upgrades only reinforce it. Further, both Gartner and IDC predict Windows Phone will grow to 20 percent of the market by 2015.
Nokia will likely find Windows Phone successes in emerging markets and in Europe and Asia. But in the United States, Nokia will have to circumvent the launch of the iPhone 5 in the fall, and then the likely launch of Research In Motion's (NASDAQ:RIMM) QNX smartphones early next year. That leaves little breathing room for a major Nokia Widows Phone launch--but the company must make whatever it launches stick in the marketplace. Otherwise it risks being eclipsed by Android, iOS, QNX BlackBerry, other Windows Phone devices, potential entrants like Amazon--the list goes on. +Mike Dano