Windows 8 Ups the Ante for Facebook and Groupon
“Microsoft’s software has less than 3% share of the world-wide smartphone market, according to research firm Gartner,” says The Wall Street Journal.
The most successful operating systems, Android and iOS, are created by Google and Apple , respectively. These two software giants control an astounding share of the mobile software space – 80% of new mobile units carry either Apple’s or Google’s software.
Moreover, these two giants have a lock on developer talent. Developers who create paid apps often target the iPhone, because the perception is that iPhone users are more likely to pay for apps. The Android operating system takes second, because developers can either sell their apps or develop free apps and have them distributed to a wide audience, earning them a share of ad revenues.
The lock on talent means that Apple and Google have more than 700,000 apps, compared to Microsoft’s paltry 120,000.
But despite the struggle, Microsoft is planning to gain meaningful market share in one of tech’s most hotly contested markets. Furthermore, Microsoft says that its app offerings will include 46 of the top 50 most heavily-used apps, including Zynga’s hit “Words With Friends,” which could spur further sharing.
Boost for Big Techs
Microsoft’s ambition to increase its presence in the mobile software space is a boost to itself, and it is an encouraging proposition for big-ticket apps. Two examples are the apps of Facebook and Groupon , both of which would benefit from Windows 8’s new “tiles” layout.
Samsung, Nokia, and HTC are large sellers of Windows 8 phones (Samsung and Nokia own over 40% of the market, according to Gartner). Facebook would do well on one of these phone company's Windows 8 devices because users can pull Facebook’s app directly to their home screen. The screen would automatically populate with a user’s News Feed, for example.
The benefit for Facebook is increased mobile usage. The downside is that Facebook is struggling to find ways to monetize its mobile audience, because displaying ads on small mobile phones is difficult. If Facebook is able to monetize mobile users, however, Windows 8 phones would likely provide a boost in user interaction, and thus revenues.
Like Facebook, Groupon also benefits from “home page” exposure and auto updates. Through Groupon’s app, its daily deals could automatically populate on a user’s home screen, giving users more opportunities to seize a new deal.
Getting additional distribution is a plus for Groupon, whose stock was hit hard after its third quarter earnings release. Groupon announced that its revenues grew 32% year-over year, but they failed to meet analyst expectations. Also, the company posted a loss of almost $3 million.
In the past, Groupon has been criticized with shaky accounting principles that saw it booking large or entire chunks of revenue from selling deals, even though some of that revenue had to be distributed to partner companies. With its flurry of bad news, Groupon’s stock has sunk to around $3 – an approximate 85% drop from its IPO. Thus, a new, auto-updating distribution channel would be a plus.
The mobile space is becoming increasingly competitive. Apple’s sandbox is the clear choice for developers because of customers’ willingness to buy apps and because of Apple’s strong developer toolbox. Google’s Android is also a favored platform.
The question for Microsoft is if the company can attract talented developers to build high-usage apps on its Windows 8 operating system. Having top apps like Facebook’s and Groupon’s will be a boost for Microsoft. But it is also a benefit for these companies because it increases their app distribution.
Increased usage is always a plus – but at the end of the day, success comes down to how well these tech firms can monetize.
Copyright © 2009 The Motley Fool, LLC. All rights reserved.
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