What do the Windows Phone 7 sales numbers mean?

Some already say "it's toast"

Microsoft reported, finally, that 1.5 million Windows Phone 7 phones had been sold in six weeks [Updated from original "months."]. But those sales, as the online interview made clear, are by handset manufacturers to carriers. So, is that figure evidence that Windows Phone 7 is a success or, as Business Insider's Dan Frommer just opined,  "toast?"

The number was revealed in an online Microsoft interview, with Achim Berg, Microsoft’s vice president of business and marketing for Windows Phones. (Nearly everything else in that interview is being ignored by pundits and bloggers; more on this below.) Plenty of opinionators point out that the business-to-business sales likely don't correspond directly to Windows Phone 7 activations on AT&T and T-Mobile in the U.S., and at other carriers globally.

Neither Microsoft nor its carrier partners have so far released numbers for activations, or for retail WP7 sales. The general attitude of many pundits is "what are they hiding?" It's pretty clear that WP7 has not achieved the iPhone's spectacular, and deserved, success. And it probably hasn't yet achieved the uncompromising standard set by Microsoft CEO Steve Balmer, when he told the Wall Street Journal in a revealing interview earlier this year: "Job one here will be selling a lot of phones, and if we sell a lot of phones, good things are going to happen."

Microsoft has a long way to go, as executives there from Balmer on downward apparently know well. In the last quarter, for example, Apple and RIM each sold over 14 million handsets globally; and sales of smartphones running the Android OS are growing fast.

Dan Frommer, for one, flat out doesn't think Balmer will sell many WP7 handsets. "Why not? Because there simply aren't many reasons for anyone to buy a Windows Phone instead of an iPhone or an Android device."

To me, it seems like you can turn that "analysis" inside out and come up with "There simply aren't many reasons for anyone NOT to buy a Windows Phone instead of an iPhone or Android device." Lack of copy-and-paste? Zillions of iPhone users didn't get that until mid-2010 and seemed to have thrived without it. And for many of the common run-of-the-mill tasks for which you'd want to use copy-and-paste, WP7 takes care of that for you, intuitively.

What about the fact WP7 doesn't yet enable multi-tasking? I think the question almost answers itself. My impression is there are relatively few first-time smartphone buyers who have "multi-tasking" - or any of the technical features beloved by those that love technical features - at the top of their "must have" list.

Microsoft has fewer apps? The company just announced there are 4,000 WP7 apps in the Zune Marketplace, more than triple the number available on October 30.  But plenty of pundits are dismissive even of that.

What IS different about WP7 is not, as Frommer mistakenly says, that it's UI is pretty, or prettier than Android. What's different is...that it's different: it's a different experience of working with an Internet device that's always on. A good example of how Windows Phone is different is this detailed description  by Paul Dawson, with EMC Consulting, of his first two weeks living with a Windows Phone (he's used iPhone, BlackBerry, and most recently, an Android phone):

"With other phones I have to think about which calendar my itinerary is stored in. I have to think about which phonebook my mum’s phone number is in. None of this with Windows Phone....[Windows Phone] feels flowing and linear. What I mean by this is that I’m not constantly thinking about menu structures. Any combination of operating system and applications has a means of navigation, to which each of us applies their own cognitive model – “go up to the top level” is an indicator of the type of mental map someone has made of a particular system for example. With Windows Phone, I don’t have a mental model of its hierarchies. Instead, it feels like I have an anchor – the windows button that takes me to the live tiles, but after that, I have no concept of what ‘apps are open’ and it doesn’t matter."

As an example of how Windows Phone flows functionally, Dawson recounts his first-ever attempt to sync music on his smartphone. He entered a store, heard a song being played, and tapped the Shazam app on his Windows Phone (Shazam http://www.shazam.com/ "listens" to a song or score and then calls up information about the track, the album, and artist).

"Shazam listened to the song, then (much more quickly than my Android used to) told me what it was. Whilst I was thinking to myself “I must remember to go find that later” I saw a little Zune icon at the bottom of the app. I touched it. I was then in the phone’s music player, looking at the album art, a track listing and the first track on the album playing. I could have listened to the whole album for free (courtesy of my Zune pass) right there and then. Being a savvy geek though, I wanted it downloaded in my local collection rather than streaming, and one tap of the screen later it was all downloading....There were no walls in this process. There was no visibility of the fact that Shazam is an app built by a third party, no wait whilst the music player app opened, or even any acknowledgment that I had moved into the music player, or that it had to log in to Zune, or that the music was streaming, no retrying of downloads because the 3G connection dropped… none of that."

This is what Microsoft is focused on: creating a user experience that flows out of what people want to do with an always-on mobile Internet voice-and-data device. You can see this focus in Berg's interview, where he repeatedly emphasizes how consumers are responding to the phone. Here's what he says: "...[E]arly customer survey data on the overall software experience is very positive and the willingness to recommend our phone is very high."

"With a new platform you have to look at a couple of things, first of all customer satisfaction. As I mentioned before, we’ve seen great response on the complete mobile phone experience."

"We introduced a new platform with Windows Phone 7, and when you do that it takes time to educate partners and consumers on what you’re delivering, and drive awareness and interest in your new offering.  We’re comfortable with where we are....Our opportunity is to make sure people get to play with a Windows Phone. Once they do, they love it."

"We have a different point of view than just delivering apps, and we have received great customer feedback on our approach. We are working on updates that will take us to the next level."

Berg's comments are only suggestive rather than definitive because, typically for Microsoft, he doesn't provide either specific details or aggregations of this "customer feedback." And I've been a critic from the start of Microsoft's advertising/marketing campaign for Windows Phone precisely because, in my opinion, it doesn't actually show the uniqueness of the Windows Phone experience.

I've seen very little written about how and why people buy smartphones; about the difference in buying a smartphone for the first time, compared to buying a replacement for a first smartphone purchase; about how people evaluate phones and value them, or what they consider important in terms of feature; or how those factors vary with demography and geography.

But recently, Asymco's Horace Dediu analyzed the adoption of Android by handset makers and mobile operators, and smartphone pricing trends. One of his conclusions is that iPhone single-handledly reversed the chronic price erosion in mobile phones: his data shows the average selling price for smartphones, with any OS, is actually trending upwards. He makes two points: one, that iPhone has triggered "the shift to software as the component that drives price power;" and two, that "the competition is not between [smartphone] platforms but between smart and non-smart [phones]."

He notes also that "iPhone’s traction was always in markets which had been seeded by some smartphones: the US with RIM and Europe with Symbian. Such a smartphone-soaked world will have better mobile broadband infrastructure, users with more demanding tastes and awareness of the value that a smart device can bring."

It seems to me, if I understand him correctly, that those same dynamics could work in Microsoft's favor, and more quickly than one might otherwise expect. If so, Steve Balmer will end up selling a lot of phones and some very good things will happen.

(For the record, Didiu elsewhere predicts http://www.asymco.com/2010/12/13/verizon-strikes-out/ that if iPhone comes to Verizon, the carrier could sell 8-12 million of the handsets in the first 12 months).

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