Most analysts who view the smartphone landscape believe the dust has already settled. Apple and Samsung have already won. Everybody else should pack up and go home. Such sentiments are foolish, and it ignores an important fact: Windows Phone is not going away. In fact, IDC now accounts it as the 3rd most popular smartphone OS behind iOS and Android.
But just who is driving Windows Phone’s success? Believe it or not, it wasn’t Microsoft. Rather, it was Nokia — a company that had been given up for dead by many. It’s Nokia that’s responsible for 81% of the Windows Phone’s market share. That’s one of the reasons why Microsoft announced it will purchase Nokia’s devices, patents and services for almost EUR 5.5 billion.
So what is Nokia doing that has made them such a great acquisition target?
Pureview Camera Technology
In the smartphone market, the only way to succeed is through differentiation. Apple established its differentiation through their large library of apps. Samsung established its differentiation through its high quality LCD displays rendered gorgeously with the Galaxy S and Galaxy Note.
How does Nokia differentiate itself? Through the best cameras on the smartphone market. Nokia’s pureview camera technology is without precedence — and could spell the end of the point-and-shoot digital camera.
Pureview technology gives Nokia’s high end phones an optical image stabilizer, equipped with Carl Zeiss lenses, with impeccable performance in low light situations. But the coup de grace is the 41-megapixel camera in the Lumia 1020. No other smartphone maker comes close to nearing this incredible spec, and it’s doubtful anyone else will try.
Many camera aficionados like to say that 41mx is a meaningless spec, but this is absolutely needed in a cameraphone. As shown with Samsung’s Galaxy S Zoom, trying to zoom with a smartphone can only be done with tremendous compromises. However, with a 41mx camera, it’s just a matter of cropping to zoom.
The effect is stunning detail that’s unable to be found elsewhere.
Last year, Apple discovered that it’s impossible to conjure up quality mapping software in one year. Mapping requires more than messing around with code. It requires someone to appear on site to do the physical mapping.
This takes years of research and development. In this matter, it appears Google stands alone.
Except it doesn’t. In 2007, Nokia acquired Navteq — a company that provides the underlying automotive navigation systems for the vast majority of car manufacturers, including Garmin, Lowrance, and NDrive. Navteq has been developing software maps since 1985.
Nokia recognized that mapping technology is an essential for smartphone services. Every smartphone is equipped with GPS, and customers expect their smartphones to give them directions if they’re lost.
But maps by themselves only scratch the surface. As the much ballyhooed Google Glass demonstrates, augmented reality is the way of the future, and companies that have invested in mapping infrastructure already have a head start.
Here again, Nokia understands the potential of augmented reality.
Windows Phone users who’ve downloaded and installed Nokia’s JobLens (for instance) have seen the vast potential. JobLens users are able to point their cameras in a specific direction, and see overlays of employment opportunities gauged by distance. The utility is clear: augmented reality can change the way we work, play, and live.
The (real) low end
Camera technology and mapping infrastructure are Nokia’s strong technological differentiators. It’s what separates it from the HTCs, LGs, and Sonys of the world. Yet, Nokia’s differentiator is building quality phones for the low end.
This is where other manufacturer’s cannot compete.
As much hoopla as the rumoured iPhone 5C has caused as Apple’s first possible “budget” smartphone, most analysts agree it is unlikely its outright price will be less than $300. At this price, the iPhone 5C isn’t much of a budget phone.
While there’s already several sub-$300 Android handsets on the market, it comes at a heavy price. Android’s “budget” handsets are notorious for performance lags, shoddy build quality, and numerous hardware compromises. Unless you have a smartphone with the hardware performance of a Samsung Galaxy Note II or a HTC One, Android is often an unusable mess.
Below $300, Nokia has a broad selection of handsets on the market, including the Lumia 720, Lumia 625, and Lumia 520. For less than $300, the Lumia 720 gives users a premium smartphone experience — which explains why the phone has become a hit in places like Thailand and Vietnam. (Sadly, the Lumia 720 is not available in North America.)
But Nokia’s runaway success has been the Lumia 520.
Last July alone, it is estimated Nokia sold 2 million Lumia 520s. According the Kantar, the Lumia 520 now accounts for 27% of all Windows Phone 8 models in existence. The Lumia 521 variant sold by T-Mobile accounts for an additional 2% — which means the 52x series is nearly 30% of all Windows Phones active. Keep in mind the Lumia 520 has only been available on the market for two months!
What is driving Lumia 520 sales? In short, great performance at a budget price. For less than $100, consumers can buy a durable phone with a decent 4” display that has many of the camera and mapping features of high end Nokia models. So while the Lumia 1020 and its ilk are the sexy phones — and do a decent job of getting Nokia’s name in the press — it is the inexpensive sub-$300 phones that are driving sales.
To survive in the smartphone market, a company needs obvious differentiation. Nokia’s core differentiations are its PureView camera technology, mapping infrastructure, and high quality budget phones.
Now that Microsoft plans to buy Nokia, I predict these three qualities will drive Microsoft as the #3 global smartphone vendor.