Posted Dec 26, 2011 – Updated April 17, 2012

People ask me all the time why, if I think Windows Phone is such an excellent product, sales appear so lackluster. My belief is Microsoft’s “end-user first” approach with WP7 has a impedance mismatch with the carriers & device manufacturers while Google’s approach reduces friction with carriers & device manufacturers at the expense of end users. The question is: will end-user dissatisfaction with Android’s inconsistencies and fragmentation be strong enough to allow the better product to succeed.

NOTE: This post was inspired by a comment I posted on Hacker News in response to Ed Bott’s article on the Android ICS update fiasco.

The fact that Windows Phone has, thus far, avoided fragmentation (almost every WP7 device from every manufacturer & carrier automatically got updated to WP7.5 “Mango” this fall) actually points to one of the core reasons:

The device manufacturers, mobile operators, OS providers, developers, and end users operate in an overly complex virtuous cycle

A virtuous cycle is one where each side of the market both gives and receives positive value from the other sides. So much positive value is exchanged, with low friction, that the cycle grows and grows, like a snowball rolling down hill. The more sides to the market that exist, the more complex the system and the harder it is for the cycle to start.

In the mobile device space the five primary sides of the market are not actually aligned very well. In fact, there is such deep misalignment that there is great instability. Android has succeeded (in raw unit numbers at least) by capitalizing on that misalignment. Apple has changed the game by cutting out one of the sides of the market. Windows Phone is attempting a different strategy…

The five primary sides of the mobile device market:

Carriers: Own the customer. Own billing. Own Sales. Own the physical pipe. They also own the marketing money. They hate being just a fat dumb pipe, but their capex structure means they will never be anything but a fat dumb pipe.

Device Manufacturers: Own the hardware. Own the industrial design. They hate not owning the customer. But their HW bias (and manufacturing capex structure) prevent them from breaking out of this (there are no proof points of large hardware manufacturers becoming successful software companies).

OS providers: Own the core of the customer experience. Think they own most real innovation. They hate not owning the customer. Their core business models (search, desktop/server OS, office, …), as well as the fact they can’t build HW, means they are always at the mercy of some middleman between them and the customer.

Users: Own the disposable income. They are highly influenced by advertising. All they know is they buy phone service from mobile carriers and/or buy a phone from a carrier. They love speeds & feeds and will generally buy anything they are told to by television ads and RSPs (Retail Sales Professionals).

3rd Party Developers: Deliver the most of the end-user benefit. Actually own most of the real innovation. They will target whatever platforms have the greatest promise of ‘eyeballs’. Some care deeply about monetization features of the platform; others care more about distribution. They despise the inter- and intra-platform fragmentation that exists.

[EDIT: I edited the above to explicitly add developers instead of leaving them off; my original intent was they were not relevant for the particular point I was making in this post, but it was was clear people mis-understood this nuance.]

As noted above, Apple has been successful (at least in terms of generating revenue) in this space by cutting the device manufacturer out. They have then used that fact to force the carriers into being even more of a fat dumb pipe. A topic for another day, but my belief is over the long term this strategy will start to deteriorate for Apple; for now it’s serving them very well.

Google has been wildly successful with Android (at least in terms of units) because Android was built to reduce friction between all sides of the market. The extreme flexibly of Android ‘bows down’ to the device manufactures AND the carriers. It enabled device manufactures to do what they do best (build lots of devices). It enabled carriers to do what they do best (market lots of devices). It enabled users tons of choice. My hypothesis is that it also enables too much fragmentation that hurts developers will eventually drive end users nuts.

With Windows Phone Microsoft has taken a different approach by putting the end user experience above all else. By focusing on delivering a consistent, well designed (and therefore less flexible) user experience WP raises its middle finger at both the device manufacturers and mobile carriers. WP says “here’s the hardware spec you shalt use” (to the device manufacturers). And it says “Here’s how it will be updated” (to the carriers).

Thus both of those sides of the market are reluctant. Especially the carriers, but also the device manufacturers. Remember that end users are highly influenced by advertising and RSPs. Carriers own the marketing money and spend billions a year. The money is provided by the other sides of the market: OS providers & device manufactures, but the carriers get to spend it; they are the aggregation point where the money actually gets spent. The carriers choose what devices get featured on those TV ads. They also choose what devices to train their RSP (retail sales professionals) to push. They choose to incent the RSPs to push one device over another.

This is why, despite being a superior PRODUCT to Android, Windows Phone has not sold as well. Spending marketing dollars on advertising Android devices is and easy decision for the carriers. Pushing RSPs to push Android is easy.

Spending marketing dollars advertising WP7 requires Microsoft to push hard on the carriers. Getting RSPs to push WP7 requires Microsoft to push hard on the carriers to incent their RSPs correctly.

I would like to believe that at the end of the day the superior end to end experience for the end user matters more than anything. But, unfortunately that is a naïve belief.

The question in my mind is whether Microsoft’s continued investment in WP and close partnership with device manufactures such as Nokia will eventually enable a breakthrough here. I know that MS can be very persistent & patient; it’s been so in the past. We will see.

In the meantime Android devices will continue to sell like hotcakes and fragmentation will continue to get worse and worse.

NOTE: Given this is such a popular post, I’ve made minor edits to this post since I first wrote with the hope of making it more readable. Last update 4/17/2012.