I have been postponing the writing of this post for a long time. It’s about Kin – phone that Microsoft made to Verizon. Phone that was launched in summer 2010. Phone that was cancelled soon after launch.

Let’s first take the initial reaction from Tomi Ahonen:

Microsoft has just announced that they will stop the roll-out of Kin phones, cancelling their European launches and terminate the project. They will supply Kin phones to their US carriers but the staff has already been assigned to the Phone 7 smartphone operating system project.
It is less than 6 weeks from when the two Kin phones were launched in the USA. We have heard rumors that their initial sales were lousy, but how bad does it have to be, that the world’s biggest software company pulls the plug on its inaugral smartphone handsets in only 6 weeks? This is a huge disaster for Microsoft and at the very least signals major problems in professional management. And to me, this news does not smell right. There has to be more to the story.

all signs pointed to a rosy reception of the Kin. But it obviously wasn’t. The rumors said the sales of Kin were dismal. Which brings me to the first problem. Its pricing. If the target was youth, what was that dumb pricing strategy that Microsoft and its US carriers offered? That was going to hurt sales badly. But if it was just price – that should have been an easy ‘fix’. In fact we have already heard that Kin prices are being cut in the USA.
So – problem number 1. How incompetent were the managers of the Kin project to launch it with clearly faulty pricing? But Microsoft, why not try to fix this? It could not come down to only price, else the Kin phones would still be alive.

No, this does not smell right. I hope at some point we’ll learn what happened. Maybe one day some retired Microsoft manager will write a kiss-and-tell book haha
–Tomi Ahonen, July 2010 [1]

For this we actually have a comment from our friendly commenter CD-Host from this very blog:

There is no need for a “kiss and tell book” about what happened. Verizon, t-mobile, Microsoft and x-danger guys all spoke rather openly about what happened. This was a PR disaster and no one wanted to compound it by lying or obfuscating the truth. Microsoft PR strategy was to be very detailed because by being detailed they could reassure people that the problem was specific to Sidekick. Moreover by being detailed they could give a very credible example of the dangers of cloud computing, at a time when they were getting coverage in both the technical and mainstream press. They made lemonade out of lemons.” [2]

But for the question “what is Kin?” we have more thorough story from CD-Host too:

Feb 2008: Microsoft buys up Danger (sold hiptop called in USA T-Mobile Sidekick). The goal is to partner with Verizon to create a teen based offering. Verizon is going to include an inexpensive dataplan with the phone, as part of getting the whole family on Verizon. Danger is a server heavy system and their servers aren’t using Microsoft technology. Microsoft’s server division (well aware of the problems that hotmail had created by using non Microsoft server technology) demands that the Danger infrastructure must be shifted to MS technology. This means the Kin is not released on Verizon until after the shift is completed.

Oct 2008: The Microsoft data conversion project went badly. Microsoft ended up crashing their servers and corrupting their backups. They had to do a complex restore which took almost a month. This becomes one of the largest (in terms of customer effected) cloud disasters in history. It damaged Microsoft’s and T-Mobile’s reputation for cloud services, on the other hand it damages the reputation of cloud services which is good for Microsoft. T-Mobile goes into a death spiral.

April 2010: The Kin ships when the conversion to Microsoft tech is complete (about 18 months late). Kin is behind technically; by mid 2010 standards it is very mediocre (although it would have been a very good system for Christmas 2008). By this point Verizon is has shifted to working with Google / Android and doesn’t offer any special pricing on data plans so Kin is rightly seen by consumers as a rip off.” [3]

I think a clarification need to be made here between subsidy and what was planned for Kin.
A subsidy on a phone is essentially a loan made by a carrier to their customers. They help pay for the phone and the customer repays them as part of their monthly bill. The purpose of pushing towards more expensive phones is to increase the customer experience and thus increase their usage.

What Verizon was talking about doing with Kin was a loss leader, when a vendor takes an actual loss selling a good below cost, so as to sell other highly profitable products. In this case Verizon wanted to lock families with teenagers in, getting the highly profitable business from the adults and dumb phones for grandparents and small children in exchange for losing money on the teen market.
As an aside iPhone gets both. About $300 in subsidy and $120-180 in loss leader, since iPhone customers have traditionally been the least price sensitive American consumers.

Tomi makes this point that the pricing problem was easy for Microsoft to solve. No it wasn’t. How was Microsoft going to make Verizon take a loss leader on Kin?” [2]

That should sum it up. Next let’s try how the story evolves when we have known Microsoft antagonist working on it. We have heard the July 2010 “there has to be more to it” view of Tomi Ahonen. At that point he was pretty much clueless on what were the problems of Kin, as well as the story of Sidekick data loss.
It is okay. One can not have all the information. So if we give him two years to read all the public data about Kin, Danger acquisition, Sidekick cloud infrastructure and so forth, he probably tells us the same story we just read – the one that can be combined from all the public sources. Right?

Well… No.

The carriers promised to launch the Kin youth phones, Microsoft’s first phones ever (two years ago). Then they didn’t like Microsoft’s arrogant bullying tactics, and after they took the marketing launch campaigns, and the phones hit the stores, they stopped supporting them. Microsoft pulled the Kin phone from the market – in six weeks. The shortest life of any phone ever created. Yes, the carriers have this power.
–Tomi Ahonen, May 2012 [4]

Wait, what? I thought the device was 18 months late, outdated and therefore failed? In 2009-2010 Verizon ended up spending billions of dollars on Android so that they could have something to offer as a response to iPhone. How come Tomi does not mention how totally Kin would have fit to that strategy in 2008, how the delays until 2010 invalidated it and – especially – how financially insane it would have been for Verizon to somehow wait until the launch just to kill the product? Does he understand that Microsoft spent less money on Danger acquisition and following product development that Verizon lost when they couldn’t do family-level lock-in of cost insensitive customers with their trendy youth phone? No?

I have faith in Tomi’s ability to absorb information. Let’s give him one more year. I’m sure he’ll get it right by then.

Microsoft Kin phones did not die because the phones were bad. They did not die because the consumer tastes had changed. The Kin phones died because of one reason only – the carrier support vanished. Mobile operators were completely disgusted by Microsoft’s move into handsets and killed the support. Note – the carriers were this clever about it – they didn’t warn Microsoft beforehand. They WANTED Microsoft to waste its money on designing and manufacturing a phone that they won’t let be sold. They tricked Microsoft into wasting all that money…
–Tomi Ahonen, September 2013 [5]

Okay, that is starting to sound like lunatic conspiracy theory. But – unfortunately – it is one of Tomi’s favorite arguments on “why Microsoft will fail in mobile”.

And that’s sad. Really.

REFERENCES:

[1] http://communities-dominate.blogs.com/brands/2010/07/doesnt-smell-right-microsoft-kills-the-kin.html

[2] https://dominiescommunicate.wordpress.com/2012/11/02/i-think-the-touch-of-tomi-ahonen-is-slipping/comment-page-1/#comment-1248

[3] https://dominiescommunicate.wordpress.com/2012/11/02/i-think-the-touch-of-tomi-ahonen-is-slipping/comment-page-1/#comment-1237

[4] http://communities-dominate.blogs.com/brands/2012/05/understanding-ott-why-carriers-dislike-bbm-hate-imessage-and-fear-skype.html

[5] http://communities-dominate.blogs.com/brands/2013/09/the-full-story-of-nokia-and-microsoft-how-we-got-here-and-why-microsoft-will-fail-with-nokia-handset.html

Advertisements