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Microsoft is going all out to sell its new Windows Phone 7 smart phones and Kinect accessory for the Xbox. Rather than going the typical Ballmer commercial route, it's instead spending a cool $1B USD on promotions.  (Source: YouTube/Microsoft)

Windows Phone 7 will launch in early November in the U.S.  (Source: Jessica Rinaldi/ Reuters)
By breaking the bank, the electronics giant hopes to lure in new customers

Microsoft Steve Ballmer is putting his money where his mouth is, so to speak.  In an effort to promote his company's upcoming Windows Phone 7 platform and the $149 USD Kinect hardware extension for the Xbox 360, he is pledging a cool $1B USD in advertising money.

The Redmond software giant has plenty of cash on hand, as showcased by its Yahoo bid in 2008 which involved close to $23B USD in cash equivalents.  The cash comes chiefly from Microsoft's enormously profitable and successful Windows operating system.

Outside the personal computer OS world, Microsoft has struggled to establish itself as a market leader, though.

In the smartphone market, its Windows Mobile market share has languished, being gobbled up by more nimble competitors Apple (iPhone) and Google (Android).  Microsoft tried to revitalize its phone efforts with the launch Kin -- a series of beginner smart phones.  That launch proved a flop, as the phones were pulled off the market only weeks after their introduction.

Last week, Microsoft officially unveiled the finished hardware and software for its new Windows Phone 7 platform.  Despite lacking features like copy, cut, and paste, third party multi-tasking, and hot-swappable microSD memory Microsoft is hoping that customers love its streamlined interface and diverse hardware lineup, consisting of 9 initial launch models from notable names like Samsung and Dell.

Microsoft Xbox 360 has been more successful thus far than Microsoft's phone efforts.  Nonetheless, it trails Nintendo's Wii in number of console units sold worldwide, despite launching earlier than the Wii.  Microsoft hopes its Kinect motion controller, which rivals the Wii's popular built in motion-controller and Sony PlayStation 3's Move accessory will be the extra boost its console needs to overcome its Japanese foe and seize the market's top spot.

Kinect, previously dubbed "Project Natal" will receive half of the advertising money -- rough $500M USD.  The company plans to air ads on Nickelodeon and Disney's websites; the popular ABC "Dancing with the Stars" reality TV show and Fox’s "Glee"; and Time Inc.’s magazines
People and InStyle.

It also plans a Times Square Event, a YouTube page takeover, a Kellogg's cereal promotion, a Pepsi promotion, and a Burger King promotion in support of Kinect and Windows Phone 7.

It has already begun to air a series of new Windows Phone 7 ads, which emphasize the OS's focus on letting you perform tasks quickly and "get back to life".

Microsoft's past advertising efforts have come with mixed results.  Some like the Jerry Seinfeld-Bill Gates commercials were met with confusion or apathy, while others like the "Lauren" 
Laptop Hunters commercial were received much more enthusiastically.

The company vitally needs these new projects to succeed, though, so it seems reasonable for it to invest such a large sum in trying to promote them.  The ultimate question, though, is whether that massive initial investment will pay off in terms of market share, and, in turn, revenue.



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Er...
By quiksilvr on 10/18/2010 2:00:55 PM , Rating: 5
Wouldn't it be cheaper to simply GIVE AWAY Kinects to the first million customers that ask for it? That would really give it a strong staple into the market and wouldn't even hit $100 million (the Kinect doesn't cost them $149 to make).




RE: Er...
By geddarkstorm on 10/18/2010 2:05:46 PM , Rating: 2
Shhh, what is this logic you speak of?

On a side note, that picture at the top right of the article makes me wonder if Ballmer has always been an angry bald guy.


RE: Er...
By zaaf on 10/18/2010 2:17:44 PM , Rating: 3
He kinda looks like Peter Boyle, no?

Back to the article, I'm not sure why it's so vital that the Kinect succeed. I think that the 360 has succeeded to support itself. This is a nice addition to the platform but I don't see it as 'vital'.


RE: Er...
By Mitch101 on 10/18/2010 3:36:25 PM , Rating: 3
I cant say this enough I had an EyeToy for the PS2 and it was and still is incredibly fun. Kinect is the next generation of that.

Obivously not everything translates to Kinect but those written with it in mind can be quite fun. More fun than forgetting to hit the button on a Wii when you go through the motions.

Youtube for eyetoy and see some of the things people posted.


RE: Er...
By nikon133 on 10/18/2010 5:13:49 PM , Rating: 2
Both Sony and MS need something for casual gamers (or non-gamers at all).

I recently got Playstation Move and can't get my wife of it. Maybe it's the shape, who knows... ;) I'm hoping it is just a phase but she is already googling for new Move-supported games. She used to game a little bit on PC time ago, but never touched consoles - according to her, Sony controller with 2 analogue sticks is too confusing for her.

Jokes aside, I'm actually happy for her - getting physical in video games is great stress relief, even if it reduces my game-time a bit :)

Coincidently (or not), my colleague's girlfriend is also occupying his PS3 since he got Move. She never-ever played any video games before.

I think that modern controller, cramped with 12 buttons, 2 analogue sticks, D-pad, motion sensors and pressure sensitive keys is a bit overwhelming for everyone but "trained professionals" ;) and as such kills fun factor. Something that complicated simply cannot be fun... right?

So I'm expecting Kinect will have exactly the same effect among 360 owners and their (non-gaming) families and mates. Even more, considering that Kinect has no buttons at all! (Move still is a button-infested gadget, even if it seems to successfully shift attention from buttons to movements).


RE: Er...
By MGSsancho on 10/18/2010 2:22:49 PM , Rating: 2
Might even be tax deductible depending who they give freebies too.


RE: Er...
By XZerg on 10/18/2010 2:29:39 PM , Rating: 3
That would only be fine if that's all they were trying to sell. The reasons for the massive advertisements here are:
1. Competition - showing they too have motion sensor controller, not just Sony/Nintendo
2. Advertise for the game companies - show off their game and how it is with Kinect
3. Educate people of such a product exists for XBox and maybe induce the feeling of WANT IT in them
4. Giving away free doesn't mean that all people will know what Kinect is and what can be done with it. With advertisement you will get more people educated of what it is. Also just imagine the fiasco/negative publicity it would be if start bitching about not receiving the free Kinect in time or not receiving at all.

So yeah better spend $$$ advertise, which could include giving away some at advertising campaigns (or conventions), than giving them away free for no real reason other than first xxxxxx get it.


RE: Er...
By sviola on 10/18/2010 2:29:42 PM , Rating: 2
But they would still need to advertise in order to sell other units they don't give away, and I don't think that giving away 1 million would get them enough "word of mouth" to sell a couple more million. Plus, they may recoup the investment through software sales somewhat fast if the product is successful.

As for WP7, the marketing investment should be recouped even faster if it succeeds, as they will probably be getting more streams of revenue due to it:

WP7 itself + Zune passes + songs + WP7 App + Games + Xbox Live games + Dev Tools + Server tools and services for enterprises + cloud services and tools for media providers.

They have huge possibilities with their ecosystem with it. So they should advert it really well...


RE: Er...
By phatboye on 10/18/2010 2:48:33 PM , Rating: 3
or better yet, so MS can stretch their dollar, subsidize the cost of the MS Kinect like they do with their XB360 console and sell the damn thing for $49.99 which is a more affordable price than $149. Not only would that spur sales and increase the adoption rate of it but it would encourage developers to start creating games that utilize it.


RE: Er...
By lothar98 on 10/18/2010 3:46:19 PM , Rating: 2
That would make way too much sense since it would very likely also increase their software attach rate while providing excellent word of mouth advertising since I imagine this being more of a "social gaming" platform like the wii


RE: Er...
By cmdrdredd on 10/18/10, Rating: 0
RE: Er...
By sleepeeg3 on 10/18/2010 4:30:31 PM , Rating: 2
Giving away free costs you double. First the cost of the hardware and second for the loss of the customers who would have purchased one.


RE: Er...
By MindParadox on 10/18/2010 5:16:48 PM , Rating: 2
quote:
Giving away free costs you double. First the cost of the hardware and second for the loss of the customers who would have purchased one.


not necessarily, because if i get one free and love it, im likely to go out and tell people, some of whom will buy it based on my experience with it, some of them will love it, tell others, and viola, you have alot of new sales

as it is, i will probably own kinect, but at 149, i will never talk it up as some great thing because it cost me too darn much money up front


"Well, there may be a reason why they call them 'Mac' trucks! Windows machines will not be trucks." -- Microsoft CEO Steve Ballmer














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