When it was revealed in September that Microsoft (NASDAQ:MSFT) hopes to have a 15% market share in the smartphone market by 2018, a lot of people were skeptical. Given that the company currently controls only 3.9% of the world smartphone market, the jump to 15% in only five years in a market dominated by Google (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL) seemed unlikely at best. Microsoft may have a better shot at this than you might think, though.
The little phone that could
Back in April, Nokia introduced a low-end Windows Phone known as the Lumia 520. It was relatively decent for an economy smartphone, with enough power to run most Windows Phone apps, expandable storage, and a 5-megapixel rear camera. Hitting the street with a retail price of $99 and availability on AT&T's prepaid GoPhone service, it was a nice little entry-level Windows Phone device. I even bought one myself.
Jump forward to August and the Lumia 520 is the best-selling Windows device in the world. Note that I didn't say "Windows Phone" there; a $99 smartphone was outselling not only all other Windows Phone devices, but was outselling Windows PCs, tablets, and laptops as well. Add to this the fact that Nokia devices control a full 90% of Windows Phone market share and it's no wonder that Microsoft bought the company's smartphone business.
The Lumia 520 proved that there is a market for Windows Phone devices. Whether Microsoft can hit its 15% goal depends on how large that market is and how well the company and its manufacturers can tap into it.
Numbers around the globe
While Windows Phone only has 3.9% of the global smartphone market share, its numbers are more impressive on a country-to-country basis. Adoption of the platform in the United States is slow, but it has made significant strides in Europe. As of August 2013, Windows Phone has achieved a market share of 10.8% in France, 12% in the U.K., and 9.2% in the combined "Big Five" European countries (France, the U.K., Spain, Germany, and Italy.) In Germany, the mobile OS was within 1 percentage point of surpassing Apple's iOS.
Likewise, the platform's handsets are doing well in emerging economies where lower-priced phones such as the Lumia 520 are more attractive than higher-priced competitors. In the second quarter of 2013, Windows Phone achieved a 15.3% market share in Vietnam (dwarfing the 1.6% held by iOS) and a 15% share in Thailand. Some Latin American countries have seen as high as a 20% market share, while Finland (home of Nokia) is reported to have 30% of the market claimed by Windows Phone.
Facing the competition
In order to gain market share, Windows Phone has to size up with its competition. Apple's iPhone defined the modern smartphone and is still seen as the epitome of the market by some, and Google's massively popular Android operating system dominates the market by an essentially unreachable margin. While Windows Phone is overtaking iOS in some emerging economies, Apple maintains a wide moat in its key markets, which will prevent Microsoft from aspiring to the no. 2 spot anytime soon.
One of the biggest things that has held Windows Phone back is a lack of "must have" apps for the platform. Because it has such a small market share, many app developers don't bother creating apps for the device. This in turn leads consumers to choose Android devices or iPhones over Windows Phone devices since they have the apps that consumers crave. It's a vicious cycle, but it's one that may be slowly lessening as time goes by.
Recently, Windows Phone has started getting a larger number of popular apps such as official Instagram, Waze, and Vine apps. An increasing number of popular games such as Angry Birds and Star Wars: Tiny Death Star are being released on the platform as well and updated along with the versions appearing on other platforms. While Windows Phone still has a long way to go before it has anywhere near the amount of apps offered by the Apple or Google app stores, the recent additions will certainly make the platform more attractive to consumers who are on the fence.
Microsoft hopes that it will be able to boost Windows Phone adoption with the Xbox One as well. The new console will share a video store with Windows Phone, and both platforms will potentially be able to share "Microsoft dollars" through a central account as well. Additional Xbox One features will appear in Xbox-branded Windows Phone games as well, allowing the handheld games to interact with the console versions.
Is there hope?
Even with its initiatives and emerging economy support, a 15% global market share by 2018 might be a stretch for Windows Phone. In a recent release, data firm IDC estimated Windows Phone to only achieve a 10.2% market share by 2017. Even if Windows Phone maintains its adoption trend from there it would still likely fall short of 15%. That's still not bad, however, and a market share of 15% or greater is likely quite reachable by 2020 if current trends continue.
John Casteele owns shares of Apple, Microsoft, and Google. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.