Microsoft’s Future With the Consumer Is in Jeopardy (Premium)

For the past few years, Microsoft has been evolving in several different ways. On the positive side, the company has found its position in the cloud market and will be around for decades to come with its massive infrastructure but on the consumer side, the evolution has been telling a much different story.

After watching Microsoft’s keynote today at IFA and looking back at how they have been pushing new products to consumers, I’m growing more concerned each week that the company’s consumer-based future is dwindling to a point that the company may not ever be able to recover.

Let me point out that I do not think that Microsoft is doomed in any capacity. They will continue to make boatloads of cash from their enterprise channels and to some extent Windows, but what I fear is that they will have significant trouble competing in the consumer space with new products.

To start off with what the company has done well, that would be Xbox and Surface. The Xbox brand, despite being in second place to Sony, is a powerful asset and the gaming console will help keep Microsoft relevant with the console and gaming crowds. The Surface brand, despite getting off to a rough start, is now a premium PC brand and I expect it to continue to do well going forward.

But, the Surface brand is for PCs and we all know that fewer computers are being sold each year and that mobile devices are the future. Still, the Surface brand stands a good chance of sticking around for a very long time but the problem is that as consumers move to other devices, Microsoft is no longer relevant.

We all know the story of Windows Phone and if you think a Surface Mobile is going to grab a billion users like Android and iOS, you are delusional. Hell, even Windows 10 is not there yet with the company still saying that there are 500 million devices which is the same figure shared back in the spring. Although the company may be holding off to announce a larger number at Ignite, you would think that if they passed a significant milestone, they would share that figure as soon as possible.

Aside from phone, the company tried and failed to make a dent in the fitness market with Band and now they are likely to do the same with digital assistants.

The Invoke, which was announced in late 2016, got no mention in the company’s post announcing the Fall Creators update release (many other upcoming devices did) and we have yet to see other vendors jump on the Cortana speaker train too. Further, Google and Amazon are getting all the love for new speakers that were announced at IFA for including those digital assistants; Microsoft is once again behind in a segment where it once had a clear advantage.

You could argue that the new Cortana and Alexa cross-talk announcement gives life back into Microsoft’s strategy but I’m not so sure that I agree. This arrangement was made out of necessity, if Microsoft had the ability to compete by itself, I don’t think they would be looking for these types of partnerships.

And then there are the mixed reality headsets. With both Apple and Google now having AR platforms built into their mobile operating systems, this is a significant challenge for Microsoft. Without a mobile play, the company is forced to tether devices to the PC which is far less appealing than holding up your phone out in the real world. Granted, one day they will have a wireless headset but what comes first, all the developers flocking to iOS/Android for AR/VR apps or these headsets reaching mass adopting and developers choosing Windows?

Remember, Apple and Google each have well over 1 billion users out in the world using their software and hardware, while not all are AR/VR capable, the subset that is capable is still far larger than what Microsoft has today which is just about zero as no mixed reality headsets are being sold at retail. Further, I would expect that if Microsoft seriously thought this market was going to explode, they would have built a first-party mixed reality headset.

While you can argue that HoloLens will make a big splash when it arrives in 2019 at the earliest for consumers, Apple and Google will also have headsets around that same time as well. But the difference is that Google and Apple will have apps as their mobile platforms will foster development with ARKit/ARcore while Microsoft will need to convince developers to build for Mixed Reality to get apps ready for HoloLens.

Skype is another interesting product for Microsoft. On one hand, it is still doing well with 300 million monthly active users but on the other, you look at WhatsApp which has over a billion daily active users; Skype should have been WhatsApp but it failed to deliver.

Microsoft has been late to several markets where it should have been the clear leader, mobile and ambient computing. The company had Windows Mobile and failed to iterate and maintain market share and with Cortana, the company did not move fast enough to bring it to new devices and is now falling far behind Amazon, Google and Apple.

And it’s not for technical reasons, Microsoft is fully capable of building magnificent products but it’s their slow approach and release of new devices that is holding them back. They are moving faster with Windows but ironically, that’s not what needs to move faster, it’s their individual assets like Cortana that need a jumpstart not the underlying OS.

I worry that Microsoft is backing themselves into a corner where not even money can buy their way into relevancy. The company lost tens-of-billions trying to move into the mobile space and they cannot afford to keep making those costly mistakes.

Microsoft’s corproate future is not in jeopardy as the enterprise is attached to the company’s cloud and productivity software with a tether that is extremely hard to cut. But the consumer has many more viable options are already using mobile devices and assistants not offered by Microsoft which may prove to be nearly impossible to recover from unless they can devise a new strategy.