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Microsoft’s “Apple” Scare

Posted in The Technology Ecosystem by Manas Ganguly on April 6, 2009

One of the general principles of advertising is not to mention your competitor by name in your ads. That limits the field of your offering and also gives the feeling tht you are acknowledging the competitor as a benchmark (to Consumers/in products) or a threat (to yourself). This is especialy true for Market leaders.It is in this context that Microsoft’s Lauren ad has raised a few eye brows. After all, Microsoft retains a whopping 90% market share in the OS markets world over.It shows a young woman, Lauren shopping for a under $1000 laptop with a 17 inch screen and mentions Mac by name and feaatures the Mac Store. The ad is essentially about Bargain hunting (a reference to recessionary times) and comes up with a $699 price tag for the 17 inch Hewlett Packard laptop that Lauren wants. Watch the ad here.

The swipe at Apple may look like a reaction to losses registered in numbers of Windows users who have switched away from cheap PCs to Macs, and tiny losses in market share to Mac! However, it has more to do with other aspects in which Microsoft and Apple compete in the world markets. The ad is probably a reaction to the following that Apple has been trouncing Microsoft at:
1. The Music Space (with iTunes and iPods)
2. The Smartphone space
3. The Apps store space
4. Apple’s positioning campaign redefining PCs and Macs and adding the “cool” quotient. (View here)

It starts in the Music space, where Zune (Microsoft’s answer to the iPod) has made no headway in gaining market share from the iPod. Zune features down in the matching the “sexy” iPod looks and iPod trounces it when it is combined with the iTunes. (Read the comparison here)

Microsoft’s famous forbearance “errors” plagues it in the smartphone space as well. When Apple announced the iPhone in January 2007, Microsoft CEO Steve Ballmer infamously dismissed the iPhone as too expensive. to quote Steve Ballmer in the April 2007, USA Today interview, ““There’s no chance that the iPhone is going to get any significant market share”. “No chance. It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60 percent or 70 percent or 80 percent of them, than I would to have 2 percent or 3 percent, which is what Apple might get.”As it has turned out in the 2 years since, Apple has come from 0 to 10.4% in smartphone OS space, where as Microsoft has been at the 11.8 – 12.4% for sometime now. Covered in a previous blog:

To complement its smartphone growth and popularity, Apple already has the first and currently most popular (and “profitable”???) business in distribution of applications world over. This is something that Microsoft has not ventured in though one may have expected it to be a pioneer in this field given its technology advantage.

Apart from stiff competition, the popularity of the iPhone presents another problem for Microsoft: like the iPod, it’s introducing Apple technology to millions of Windows users. Among the factors in the rise in the Mac’s market share, the iPod “halo effect” cannot just be ruled out. Positioning oneself as a cool technology provider versus, Microsoft’s “straight jacketed, pin robbed, stiff and official” is where Apple is also making astatement with consumers. In face of that, “Lauren” could get nastier at taking swipes at Apple! Steve Balmer is already at it talking tough about overpriced Macs! (So he’s exploiting the bad economy with an ad like “Lauren” to depict Macs as an impractical choice. )

Cost advantage may be good speaking point in these recessionary times, but with Apple’s kind of brand equity building up steadily, one wonders if Microsoft is really the cocky confident it once was.

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