When deciding how to bring technologies to market, companies face the decision of whether to offer them in its own products, pursuing a strategy of vertical integration, or license constituent elements for inclusion in others' products. In the wireless operating system space, Apple, RIM and Palm (since Web OS) have chosen the former strategy while Symbian, Google (via Android and Chrome OS) and Microsoft have generally pursued the latter. It is difficult, if not unwise, for a licensing company to compete with its partners. Attempting to avoid this dynamic led to the disastrous split of Palm, Inc. into the PalmSource software company and PalmOne hardware company back in 2003. With the imminent release of its teen-targeted, social networking handset, though, Microsoft is seeking to have its Kin and eat it, too.
Microsoft's legacy is in licensing software PC operating systems to run on others' hardware, but the company began creating its own integrated platforms with Xbox. In a TechCrunch interview last September, Steve Ballmer logically laid out the case for when to integrate and when to license, with the main criterion being the size of the category. Here's Steve:
in January, following Google's announcement of the Nexus One, Microsoft's Robbie Bach was quoted in a Business Week article expressing skepticism regarding Google's ability to balance selling its own handset while supporting other hardware partners:"I think you can have an Apple in the phone business, or a RIM, and they can do very well, but when 1.3 billion phones a year are all smart, the software that's gonna be most popular in those phones is gonna be software that's sold by somebody who doesn't make their own phone. And, we don't want to cross the chasm in the short run and lose the war in the long run and that's why we think the software play is the right play for us for high volume, even though some of the guys in the market today with vertically oriented solutions may do just fine."
Now, Microsoft is indeed pursuing opportunities, but the Kin is more directly competitive with Microsoft's hardware partners than Google's Nexus One was with Android partners, although there's a key difference. While both the Nexus One and the Kin were actually made by separate hardware partners (HTC and Sharp, respectively), the Nexus One, unlike the Kin, runs the same core Android software and can access the same apps that other Android devices do. In contrast, while the Kin is considered a "Windows Phone," it will not be able to access the apps that Windows Phone 7 devices do."Doing both in the way they are trying to do both is actually very, very difficult. Google's announcement sends a signal where they're going to place their commitment. That will create some opportunities for us and we'll pursue them."
The Kin's paradoxical message to Microsoft's partners continues that of the Zune: Welcome to the social -- we're going it alone here.
Google's offering of the Nexus One exclusively direct and online, though, made it more of an experiment in distribution than in competition. Android handsets such as the Motorola Droid, then, are largely shielded from competition with the Nexus One because the Droid is promoted and sold by Verizon Wireless, the largest U.S. carrier. Indeed, the Droid continued to outsell the Nexus One despite the latter having earlier access to the latest version of Android. Leading Android devices on T-Mobile should also handily outsell the Nexus One.
Whereas Google kept its distance from the powerful distribution channel of the carriers with the Nexus One, Microsoft has dived into it, partnering with Verizon to offer the Kin. While the carrier has not yet revealed the price of the devices or their service, it would make sense to offer special data plan pricing to attract the targeted younger demographic that has so far been less likely to adopt smartphones because of the hefty monthly fees. And while the Kin is arguably closer to a feature phone than a smartphone, the strongest competition for it will come from smartphones that have access to rich social networking apps. Kin will compete with the likes of inexpensive handsets such as the iPhone, Palm Pixi, and the Motorola Devour with its social Motoblur interface, not touchscreen feature phones that have fine forms but minute minds.
There's another difference between Google's and Microsoft's approach in competing with its partners. Google launched the Nexus One more than a year after the first Android device appeared. By the time Google launched the Nexus One, the Droid was stealing share from Apple and RIM and Android devices were on three of the four major U.S. carriers, with an AT&T announcement imminent. Kin, in contrast, will be released months before we'll see the first Windows Phone 7 device, and is thus competing with Windows Phone partners before Microsoft's reboot even boots up. And while Windows Phone 7, in fairness, places relatively strong emphasis on integrating contact-centric social messaging into its topmost interface layer, Microsoft's skinning prohibition prevents its partners from creating overlays such as Sense and Blur that adapt smartphones to better compete with a device such as the Kin.
It has been noted that Kin has much in common with the Zune HD, but the two devices have parallel business models as well. When Microsoft launched Zune, it also decided to compete with its partners in pursuit of an integrated shared media experience. At least with Zune, though, the licensees on which Microsoft pulled the plug had had ample opportunity to take a shot at a surging Apple mobile device. The Kin's paradoxical message to its partners, then, continues that of the Zune: Welcome to the social -- we're going it alone here.
Ross Rubin is executive director of industry analysis for consumer technology at market research and analysis firm The NPD Group. Views expressed in Switched On are his own.