Preston Gralla

Microsoft drops a bomb on Android: Windows Phone and Windows RT may be free

December 11, 2013 9:33 AM EST

Microsoft is taking dead aim at Android, considering giving away Windows Phone and Windows RT for free to device makers in the hope of getting big market share. Will the ploy work, or is it a sign of desperation?

The Verge reports that Microsoft is considering taking a page from Google's playbook by giving away Windows Phone and RT to device makers in the hopes that it can gain revenue via advertising and Microsoft services such as SkyDrive. The idea is that a variety of Microsoft services would be the default on the devices, such as Bing for search and SkyDrive for storage. And the devices would include other Microsoft services, such as Skype.

The free model has certainly worked for Google. The most recent figures from IDC show Android with a whopping 81% smartphone market share, compared to 12.9% for iOS and only 3.6% for Windows Phone.

Would the move work? Very likely, yes, at least for Windows Phone, and it would solve Microsoft's Nokia problem. It's unlikely that Windows Phone can succeed if it's dependent on a single phone manufacturer, and at the moment that's the problem that Microsoft faces. As of November, 90% of all Windows Phone devices in use were made by Nokia, according to the most recent AdDuplex numbers. Given that Microsoft is buying Nokia, that number will likely increase. Without the support of other device makers, it will be difficult for Windows Phone to make serious inroads into the market.

IDC's most recent report notes that Windows Phone growth is thorougly dependent on Nokia, and that without support from other vendors, it will be hard for the platform to succeed. The report notes that Windows Phone's recent growth is:

"...a result primarily driven by the support of Nokia. By itself, Nokia accounted for 93.2% of all the Windows Phone-powered smartphones shipped during the quarter, marking a new milestone in the company's short history on the Microsoft platform. Participation from other vendors, meanwhile, still seemed a mixed bag with more vendors participating from a year ago, but volumes still far behind Nokia's own."

That's why giving away Windows Phone for free to device makers will work. Without having to pay licensing fees, more device makers will sign on, and probably target the low-end and medium-end of the market, which is where the greatest growth is.

Can advertising and services make up for any lost revenue from Windows Phone licenses? Without a doubt, the answer is yes. With Nokia becoming a part of Microsoft, it no longer will pay licensing revenue, and that's 90% or more of all Windows Phones shipped. So Windows Phone licensing revenue is about to go away anyway. Giving Windows Phone away for free will increase Microsoft's market share and start to bring in serious ad revenue, and possibly services revenue as well.

As for giving away Windows RT for free, I'm not sure how much of a difference that will make. I'm not convinced that RT can survive as a platform, so this might be a last-ditch effort to save it. But when it comes to Windows Phone, the move is clearly a winner.