After purchasing Nokia's (NYSE: NOK ) hardware business, Microsoft (NASDAQ: MSFT ) is more committed than ever to its Windows Phone platform. But it has its hands full -- for now, Windows Phone remains in distant third place behind Google's Android and Apple's (NASDAQ: AAPL ) iOS.
Could that change? A slew of major apps are finally coming to the Windows Phone platform, and that could help Microsoft turn around its struggling platform.
It's the apps, stupid
No doubt, apps play a big role in the success of a mobile platform. According to research firm Flurry, of the time mobile users are on the Internet, 80% of it is spent in apps. More broadly, gaming and social networking takes up 63% of the overall time people are on their phones -- two activities that largely rely on apps.
Now with BlackBerry actively shopping itself, it seems quite clear that its new operating system, BB10, was a failure. Although critics praised the company for delivering a snappy, polished operating system, the lack of apps was seen as a stumbling block -- who wants to buy a phone without any apps? Obviously not many; the company sold few BB10 handsets.
Will Windows Phone suffer a similar fate? Microsoft has much deeper pockets than BlackBerry, but even still, with little app support, Windows Phone remains a difficult sell.
The big names are coming
But that's slowly changing. Most recently, some of the biggest third party apps have been announced for Microsoft's platform, including Instagram, Vine, Flipboard, and Temple Run 2. For a would-be buyer, the lack of an app as big as Instagram could've been a deal breaker; now, users of Nokia's Lumias will be able to upload their photos to the popular social network.
Still, even with those additions, there are still plenty of big names missing. HBO Go, for example, as well as Pinterest and Citibank. In time, these apps may eventually make their way over, as Vine and Flipboard did. But owners of Nokia Lumia will have to accept that, in developers' eyes, they're second-class citizens -- they'll have to wait for apps, assuming they make it at all.
Moreover, new, "must have" apps are appearing all the time. Tinder is just over a year old, and has already exploded in popularity; Snapchat is about two years old, and is worth an estimated $3.5 billion. It's reasonable to expect more apps to appear in the future, and when they do, buyers of Nokia's devices probably won't get them -- at least not initially.
Can Microsoft capture some iPhone converts?
Then, there's the issue of lock-in. iPhone owners are famously loyal: According to a study from Consumer Intelligence Research Partners, 81% of iPhone owners stick with Apple when it's time to upgrade. In part, this could simply be due to the quality of their devices (Android owners aren't as loyal) but there's also Apple's ecosystem.
A consumer who has invested hundreds (or even thousands) of dollars into Apple's ecosystem isn't likely to consider buying a Nokia Lumia when it's time to upgrade. Even if they prefer Nokia's hardware, they'll lose access to all the apps and books they've bought, while any music they purchased will be a struggle to bring over.
Opportunity in emerging markets
With almost two-thirds of handset owners in the US having upgraded to a smartphone already, Microsoft's window of opportunity is rapidly closing. If growth is possible, it may be in emerging markets. In fact, that's what Microsoft is planning to do: Microsoft has said it will target emerging heavily in the next 12 months.
Nokia's new low-cost phablet, the Lumia 1320, could be key. Phablets (large phones too small to be a tablet) have taken off in emerging markets, and Nokia's upcoming -- which retails for just $340 -- could do well. Apple has yet to release a phablet, and though that hasn't seemed to weigh on iPhone sales in the US, it could affect Apple's business in emerging markets.
Microsoft is fighting an uphill battle
Even with the addition of key apps like Instagram, Microsoft's mobile platform is definitely challenged. There are still plenty of key apps missing, and while Nokia may make some great handsets, Apple seems to have already locked much of the US.
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