2013 will be the year that Microsoft becomes relevant once again.
It will begin to use its dominant position on the desktop and in gaming to build an exciting ecosystem that will make Microsoft a compelling choice for consumers, and by extension an increasingly important advertising partner for marketers.
Studying trends is very useful when making predictions because a prediction in essence, should be the observation of a trend with the expectation that it will continue at a certain pace, to materially change the reality of the people who will live that change.
Within that context, we have the luxury this year of a number of observable trends:
- Google’s market share of search dipped below 90% in the UK, its lowest point in five years, Microsoft’s Bing picking up the difference. (Source: Experian Hitwise)
- The Apple iPad has seen its market share drop from 60% to 50% this year (Q3 2012), with devices from the likes of Samsung and Google making steady progress (Source: IDC )
- 140% more Microsoft Mobile OS systems were shipped this year (Q3 2012) compared to last (Source :IDC)
- Netflix’s market share grew, against analyst predictions that Amazon, Hulu and HBO Go would decimate it.
- On mobile devices, it’s not Netflix but YouTube that dominates bandwidth usage (Google Play was 7th, followed by Netflix and iTunes -Source: Sandvine Inc).
- In two-way communications, Microsoft’s Skype increased its market share of the instant messaging (IM) market, and now holds 83% of it with the absorption of Windows Live/Messenger (Source: Opswat)
- On desktops, Google Chrome, Firefox, and Apple’s Safari all lost market share to Microsoft’s IE9 this year
- Data so far suggests Microsoft’s Xbox will be the best selling games hardware of the year, aided by the release of Black Ops 2, Halo 4, and the securing of the third Skyrim expansion pack, ‘Dragonborn’, ahead of a PC or PS3 release.
For me, taken in aggregate, these trends suggest that Microsoft has been stealthy like a ninja, making significant inroads into its competitors businesses whilst the world’s gaze has been focussed on Apple, Facebook and Google over the last 12 months.
Bing has for the first time eaten into Google’s UK dominance to a newsworthy degree. Whilst Google has made amazing progress against Apple in the world of devices (from 46.9% market share with Android to 68.1% this year, according to IDC).
Its core product,Search, hasn’t proved as resilient to Microsoft as everyone might have assumed. This trend is likely to continue due to Microsoft’s market gain in desktop browser usage; IE9 has increased its share of the browser market to 54% at everyone’s expense including Google’s.
With IE10 around the corner, preloaded into Windows 8, this puts Bing in front of even more people by default.
In devices, Apple’s dominance is declining, with a very public assault from the likes of Google, Samsung, and Amazon. Lesser publicised is the 140% increase Microsoft has seen in the number of MS Mobile OS systems it has shipped this year compared to last (Source: IDC).
In fact, of all devices only Android and Microsoft has increased its market share this year.
In two-way communication...
Microsoft’s Skype is growing in dominance, largely due to Skype now absorbing Messenger/Live to give it an 83% market share (Source: Opswat).
Whilst IM has been waning in terms of usage, the new Skype will be part of all Microsoft products, including the lounge-owning Xbox, which means Microsoft is set to dominate two-way communications, which it will attempt to mirror on mobile.
The Xbox, located under 70m TVs in the US alone, gives Microsoft the opportunity to control people’s living rooms in a way that Google TV and Apple TV can only dream of.To put this in perspective, Xbox is in 26% of US homes, the iPad is in 15%.
An even more interesting statistic is that the Xbox this year captured 28% of all non-PC/Mac video viewing versus the iPad's 27.1% (Source: FreeWheel).
Xbox advertising has grown by 142% since 2010 (Source: Microsoft/Ben Kuchera,The Penny Arcade Report).With the Xbox’s market share increasing and the iPads decreasing, the Xbox is increasingly looking like the next big thing for advertisers – I’d say it is the advertising worlds best kept secret right now.
Again, some stealthy ninja skills from Microsoft, carving out that market and now using it for advertising.
The Xbox 720 is scheduled for a release next year too, and it doesn’t take a crystal ball to predict that this will be a huge development. We already know that it will support an always-on power state and will utilise a chipset that can allow concurrent apps.
Add SmartGlass to this and you have the Xbox as a media (and advertising) delivery mechanism in the home that is always on, feeding from and feeding into every other networked device.
There are already various clues around how Microsoft could compel people to accept being advertised to all the time too – for example, the Xbox 720 will likely go on sale for just $99 if you also sign up for a two year Xbox Live Subscription, i.e. opt-in advertising.
This looks likely as Microsoft is already trialling this with a specific 360 package today.
A potentially formidable ecosystem...
If you add up all these small victories, a strong case could be made that Microsoft has most of the ingredients necessary to build a great ecosystem for consumers, and the trends above suggest it might be on the right track.
It dominates the desktop and gaming domains, is using both of those to increase the advertising it can sell in search and display, whilst also getting ready to push its new mobile offering aggressively at an opportune time when Android has already weakened Apple, and there are questions that the latter may have lost its mojo.
There’s space for a third player in that market, particularly given the decline of Nokia and RIM.
Some of you will disagree and say that Microsoft can’t compete however much it tries because the only real strength it has on the desktop and given that the PC is dying, it cannot leverage the PC for much longer to push Bing via IE10, or use it as a compelling part of a wider ecosystem.
But whilst it’s fashionable to suggest that the PC is dead, the argument doesn’t stand up to reason, nor do any numbers support that view. In short, the PC will survive for a multitude of reasons – simple ergonomics (I have iPad RSI right now), large screens, storage levels, number crunching power, keyboards (far more valuable than we have given them credit for), and more.
In terms of numbers, the economic woes out there have had a bigger impact on PC sales than any questions over their utility – Lenovo for instance has seen an increase in sales this year by 23% (Source: Gartner).
The trend is not suggesting death at all. Don’t take my word for it – if we take a basket of search terms to represent desktop machines, e.g. ‘PC’, ‘desktop computer’, ‘laptop’, etc, and have Google plot their popularity as search terms over time, you get the graph below, which clearly shows that the demand for desktop machines has maintained, as opposed to suffering a certain free fall to its death as the media has led us to believe and we’ve blindly accepted without question:
Source: Google Trends
My prediction for 2013...
2013 will be the year that Microsoft becomes relevant once again. It will begin to use its dominant position on the desktop and in gaming to build an exciting ecosystem that will make Microsoft a compelling choice for consumers, and by extension an increasingly important advertising partner for marketers. It has all the ingredients, bar one, to make this possible.
The missing ingredient would be something like Netflix, which leads me on to my final prediction - Microsoft will buy Netflix in 2013.