tl;dr: Microsoft’s new CEO must make mobile work, and since Android and iOS have a huge lead, the best strategy is to buy the top 100+ apps on competing platforms while making Windows Phones zero margin like the Kindle.
Microsoft dominated desktop computing by relentless iteration.
Word, Excel and Windows were far behind WordPerfect, Lotus 1-2-3 and the Mac when they launched. But Microsoft grinded it over twenty years from the mid eighties until the 2000s.
And they won. Big time.
It’s time for Microsoft to grind it out again, and there is a clear analogy here: people don’t buy operating systems, they buy the apps that run on them.
For a time, typically early in a technology cycle, people are obsessed with hardware. But when hardware parity is reached – as it is today in smartphones – folks tend to focus again on apps.
In the ‘80s and ‘90s, people bought PCs based on their hard disk space, memory and CPUs. People actually knew the names and speed of their CPUs!
Now folks buy based on color.
Nokia was a great purchase for Microsoft because they got it at half price (they used offshore money that would have been taxed to all hell if repatriated), and they got a really sexy phone line in the Lumia.
Lumia phones blow the hardware profile of the iPhone out of the water, what with wireless charging and Carl Zeiss lenses.
Carl. Zeiss. Lenses.
They’ve had these awesome features for well over a year. They are stunning.
But they trail Samsung’s and iPhone’s by a significant margin.
It’s the apps.
Microsoft needs to drop everything and buy the top 100 apps on their competitors’ platforms. So, whatever the top apps are on Android and iOS, snap them up!
After you do, you keep building them for iOS and Android.
Things like Evernote, Sunrise and Tinder come to mind.
1. Because if you buy them, you’ve instantly infected the iOS and Android ecosystems!
2. They’re proven.
3. You get talented people on your team who can build the next generations of apps.
4. You can start releasing new features first on Windows and get the halo effect for your platform.
Now, this is a five-year strategy, with the first two years buying and the last three exploiting.
If you have the brass to spend $7b on hardware that’s largely commoditized, you better have the brassier ones to double that on apps.
Apps are what matter.
Marissa Mayer bought a couple of dozen teams that built finely crafted apps, but failed. Apps like Rockmelt were gorgeous and showed a real understanding of mobile – but they failed to attain commercial success.
That happens, and let’s be real, acqui-hires are all Marissa could really afford. She can make a few big bets like Tumblr – but not more than a couple.
She can spend a billion or two, but she can’t spend $20b.
Yahoo has $2.6b in cash and a market cap of $28b.
Microsoft has $68b in cash and a market cap of $264b.
Microsoft could literally spend $10b a year – for several years – on apps funded by their profits and cash on hand. Fuck it, overspend. It’s a huge market and if you don’t own a material part of it, you’re going to lose the desktop.
Google isn’t making laptops, Google Apps and Chrome OS for no reason – they’re coming for Microsoft’s core business!
Microsoft should then give these app startup management teams bonuses based on downloads, DAUs and MAUs across *all* platforms over the next five years.
Can you imagine these teams on a mercenary mission to take over the app space? Getting huge bonuses based on downloads and active users?
It would be like Microsoft in the '80s and '90s – cutthroat!
Here’s a starting point:
Zynga/’With Friends’: You get a former Microsoft exec and dozens of mobile games. And a slick office in San Francisco
Evernote: it’s what creative people use instead of Word/Office
Sunrise: it’s stunning calendering by people who are obviously thinking differently
TuneIn/Stitcher/Swell: awesome radio & podcasting apps
TWIST: awesome social mapping
RunKeeper: fitness is huge, these folks have a big vision
Whisper: more kids
That’s about $10b, give or take.
Can you imagine if $msft owned those?
Hire some biz dev killers in the Valley and open your checkbook.
I did a short video about this:
1. LAUNCH Mobile & Wearables has a killer speakers list - Sept 30 & Oct 1st, San Francisco:
2. My interview with life-coach & reformed VC Jerry Colonna broke 10k views in 8 weeks--so we did a second one.
First interview: http://youtu.be/VEqrGfHgNT8
Follow up: The 6 Biggest Mistakes Founders Make, and How to Avoid Them: http://youtu.be/0nky5JbWmkU
3. LAUNCH Hackathon has over 300 developers RSVPed already. It’s free, and I’m going to invest $100k in the winner. Perhaps we’ll invest in 2-3 of the startups. The last winner got accepted into a top accelerator. Apply here: http://hackathon.launch.co.
4. LAUNCH Coworking space has room for three more startups: http://launch.co/cowork/
5. Quick thank you to the partners who are making LAUNCH Mobile & Wearables possible (we are giving 75 founders scholarships!): Xtreme Labs, DYN, Factual, MicrosoftVentures, New Relic & Tandem Capital. Really hoping a couple of handset folks buy lunch and give away free phones/watches (hint! hint!). Email firstname.lastname@example.org.
6. Quick thank you to this past quarter’s partners for This Week in Startups: Audible, Hiscox, MailChimp, Mandrill, New Relic, Snapterms, SquareSpace, Turnstone, & Walker Corporate Law. On behalf of the tens of thousands of folks who watch the show each week, I personally thank you! Doing the show is the most rewarding part of my week. http://www.youtube.com/thisweekin