Feeds

It costs $450 in marketing to make someone buy a $49 Nokia Lumia

Smell of death emanating from mobe maybe puts people off

New hybrid storage solutions

Every Windows phone Nokia sold in the US has been backed by a $450 slice of AT&T marketing cash, it's estimated.

The mobile network threw its weight behind the handset maker's comeback device, the Lumia 900, with its biggest-ever advertising blitz for a phone: $150m, according to Ad Age. Nokia also spent $25m on Lumias for AT&T employees.

Back-of-the-envelope numbers by blogger Horace Dediu suggest the mobe has made a negligible impact so far on the market, however. Dediu uses the latest monthly figures from ComScore, which give all Windows devices (phone and mobile) a market share of 4 per cent, to extrapolate a figure of 330,000 Lumias sold in the United States. You can see his calculations here.

Bernstein Research analyst Pierre Ferragu isn’t far away with his predictions. Ferragu thinks that only 3 million Nokia WP devices will ship this year, based on sales of 1.1 to 1.4 million so far worldwide. The analyst wrote:

Windows Phone 7 has insignificant traction and Windows Phone 8 is likely a 2013 story only, with a risk that consumers waiting for the new system weigh on Lumia shipments towards the end of the year.

The Lumia 900 sold for $99 up front, allowing AT&T to claw back up to $32m of its marketing costs, although for some of this period the cost was slashed to zero. And naturally, the carrier will amortise the marketing cost over a longer period than just three months. However AT&T slashed the $99 to $49 at the weekend.

When operators invest heavily in promotion they expect some return. Samsung shifted some 25 million units of its first Galaxy phone worldwide and last year’s successor is likely to exceed that. Continuing heavy promotion on a niche ecosystems represents a significant opportunity cost.

Ominously, the enormous promotional expenditure for Nokia’s Windows Phone was accompanied by generally warm reviews. Critics emphasised the unusual design of Windows Phone’s Metro UI, rather than the functionality that is missing. But the market hasn’t moved, and for Ferragu, this confirms his bearish view that smartphones are a race with room for only two winning platforms:

We maintain our view that there is no room left for the third ecosystem and any material success of Windows 8 will attract increased competition from HTC and Samsung, limiting upside for Nokia.

Nokia is entitled to point to excellent customer satisfaction ratings from Lumia owners. 93 per cent of Lumia 900 owners say they would recommend them to their friends and 85 per cent would make a repeat purchase, according to Nielsen. But there may be other explanations for this: the fanatical tribal brand loyalty exhibited when choosing an "outsider" brand, for example. Less charitably called Stockholm syndrome.

Long after Microsoft won the desktop war, small numbers of OS/2 users continued to hold out - no doubt giving high satisfaction scores and recommending the product to friends. If Ferragu is right, Windows Phone is going to become the smartphone world's OS/2.

It’s too early to tell whether the widespread publicity given to Microsoft’s official roadmap for Windows Phone deterred sales. Windows 8 is based on an NT kernel, and today’s phones - including the Lumia line – won’t be able to run the new system. This was widely known in the technical community – and reported here – but it only hit the headlines in late June. Lumia sales were already sagging.

The handset giant will release its earnings on Thursday. ®

Secure remote control for conventional and virtual desktops

More from The Register

next story
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
Radio hams can encrypt, in emergencies, says Ofcom
Consultation promises new spectrum and hints at relaxed licence conditions
'Serious flaws in the Vertigan report' says broadband boffin
Report 'fails reality test' , is 'simply wrong' and offers ''convenient' justification for FTTN says Rod Tucker
This flashlight app requires: Your contacts list, identity, access to your camera...
Who us, dodgy? Vast majority of mobile apps fail privacy test
Apple Watch will CONQUER smartwatch world – analysts
After Applelocalypse, other wristputers will get stuck in
Shades of Mannesmann: Vodafone should buy T-Mobile US
Biting the bullet would let Blighty-based biz flip the bird at AT&T
Drag queens: Oh, don't be so bitchy, Facebook! Let us use our stage names
Handbags at dawn over free content ad network's ID policy
prev story

Whitepapers

Providing a secure and efficient Helpdesk
A single remote control platform for user support is be key to providing an efficient helpdesk. Retain full control over the way in which screen and keystroke data is transmitted.
Top 5 reasons to deploy VMware with Tegile
Data demand and the rise of virtualization is challenging IT teams to deliver storage performance, scalability and capacity that can keep up, while maximizing efficiency.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.
Secure remote control for conventional and virtual desktops
Balancing user privacy and privileged access, in accordance with compliance frameworks and legislation. Evaluating any potential remote control choice.