The cost of marketing Microsoft's Windows 10 as 'free'

Microsoft has released its latest operating system, Windows 10, with a curious lack of fanfare.

Microsoft: the latest ad campaign for Windows 10
Microsoft: the latest ad campaign for Windows 10

There’s no major product launch and no big store events. Instead, the biggest revolution is that Microsoft is offering to quietly upgrade existing Windows 7 and Windows 8 users for free. 

Compare this to 1995, when the launch of Windows 95 merited a $3m rights deal with the Rolling Stones.

Microsoft used the band’s song, ‘Start Me Up’, to highlight the possibilities offered by the simple Start menu – a staple of Windows that Microsoft catastrophically ditched with the release of Windows 8.  Despite being 20 years old, the ad uses tropes of excitement and possibility that many tech firms still use in their marketing today.  

By contrast, Microsoft's new ad for Windows 10 doesn't actually show a PC until the final seconds of the ad.

Buying Windows 95 would have cost you $209.95 out of the box, and $109.95 if upgrading. So why is Microsoft handing out its new software for free?

Mobile is beating PC

There are several reasons behind this strategy, the most important being recapturing ground in mobile.

Microsoft has been caught unawares by the consumer boom in mobile. Its dedicated mobile operating system, Windows Phone, has barely dented the competition. According to February figures from IDC, Windows Phone’s market share sits under 3%.

Analyst Benedict Evans wrote: "Microsoft today, I think, is a case study in knowing when you should indeed give up, and what you should do after that.

"[Mobile] is replacing the PC as the dominant computing platform. Smartphones sell in much larger numbers, have a much larger user base and are already close to taking a larger share of internet use than the PC in leading markets."

He added: "PCs aren't going away any time soon, any more than faxes or mainframes did, but they are the past, not the future." 

Problematically, this may become the case in Microsoft’s key enterprise market too.

Persuading developers to Windows

By marketing Windows 10 as free, Microsoft is hoping to attract developers to build ‘universal apps’ that work across mobile, tablet and PC. Eventually, Windows 10 will cover wearables and other devices, like the HoloLens headset.

The lure for developers is that building a single app will work on multiple devices, though as Evans notes, there may not be much appetite for this.

He said: "The apps that people want on smartphones are not being written for desktop Windows anyway. Uber doesn't have a desktop Windows app, and neither does Instacart, Pinterest or Instagram."

By offering Windows 10 for free, Microsoft also runs the risk of denting its own margins. But the company is taking the long-term view that many, many more people now own computing devices than in the days of Windows 95.

Even if Microsoft has a slim share of smartphones now, there may be other ways to reach those consumers, and other ways to make revenue. 

That’s one reason the firm made its big money-maker, Office, available for free on Android and iOS last year. The gamble is whether consumers remain loyal to Office on devices other than desktop.

Microsoft also needs to shore up its reputation after the debacle of its last major operating system release.

Windows 8 saw Microsoft ditch the beloved Start menu, and switch the usual desktop layout for a touchscreen-friendly ‘tiles’ system. After a user backlash, Microsoft tweaked these features in Windows 8.1, but the reputational damage was already done.

Evans believes Microsoft needs to admit defeat on Windows, and rebuild its core business elsewhere. In some ways, the company already has. Windows 10 will be the last major release, the company said, with future updates coming to users via the internet. 

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