Vista outlook: Some clouds, sunny by '09, say analysts

Microsoft is spending big bucks on saturation advertising to push the operating system

If your reaction to all of this week's hype swirling around the launch of Windows Vista is less "Wow!" and more "Whoa! Enough already!" then 2007 could be a long year.

Microsoft plans to go all out this year, spending US$500 million in 20 countries to market Vista, according to Advertising Age. (A Microsoft spokesman refused to confirm that figure.)

In just the next several months, Microsoft plans to place advertising in various forms of media totaling 6.6 billion impressions -- or enough ads, in theory, to hit every single person on the planet today. "I am sure we will be inundated by Vista ads, especially on the Web," said Chris Swenson, a software market analyst at The NPD Group.

The company's media-saturation strategy may seem like overkill, but according to a Forrester Research survey, as late as December, more than 60 percent of consumers had not even heard of Vista.

Microsoft isn't apparently looking to convince consumers that Vista is fun, as it did with the XBox, or sexy, as it has tried to do with its Zune music player -- or even simply fresh, as it did 12 years ago with Windows 95. "In hindsight, Windows 95 was flaky, but there was so much pent-up demand and Windows 95 was such a big improvement [over Windows 3.1] that it really was a paradigm shift," said Gartner analyst Michael Silver. "Today, you're more likely to see that sort of excitement over a cell phone."

How will buyers get Vista?

While Microsoft is placing high hopes on selling downloaded copies of Vista and Office 2007 through its Windows Marketplace site, much of its marketing spend will benefit PC partners such as Hewlett-Packard or Dell. According to Microsoft's own figures, about 80 percent of consumers will get Vista preinstalled when they buy new PCs. The rest are expected to buy Vista to upgrade or install themselves.

And while online sales and downloads continue to grow as a distribution model, the majority of Vista's sales will continue to be through brick-and-mortar stores, according to Forrester analyst J.P. Gownder. That's because those environments tend to show off Vista's features to better effect than an online demo.

"Consumers have to see Aero to desire Vista," he wrote in a report released Monday, referring to Vista's glossy new user interface.

Vista's biggest foe: XP

Despite Microsoft's claim that Vista supports 30,000 devices, many components such as video cards, input devices or printers that work fine on XP don't work on Vista, according to Silver. He suggested that updated software drivers for many of those older components might not be coming anytime soon.

Moreover, he noted that many of Vista's consumer features "are just catching up to Apple OS X." And he said that a true killer application for Vista -- as Excel was for Windows 3.1 or Internet Explorer was for earlier versions of Windows -- has yet to emerge. Vista and Office 2007 "is not a 'better together' story," Silver said. "Office 2007 will run on XP fine."

Silver also agreed with other analysts that -- despite the trendiness of Ubuntu Linux, the competence of Novell Inc.'s SUSE Linux Enterprise Desktop or the resurgence of the Macintosh platform -- Vista's main competition is its own predecessor, Windows XP. Microsoft "has millions of people on XP that are happy with their computing experience," Swenson said. "They need to do everything possible to incent consumers to upgrade."

That includes talking up both Vista's flashier features like the Aero interface as well as touting under-the-hood improvements, such as improved security, without "badmouthing" XP, said Swenson.

How successful will Microsoft be? Early indications based on launch-week sales are so far mixed. Microsoft's traditional late-night launch of new Windows operating systems failed to draw a stampede of buyers this time around, according to most reports around the country.

At the same time, sales of Vista to businesses during December were just 3.7 percent less than XP's first month sales, said NPD's Swenson. "Given that Microsoft has spent little on advertising and promotion yet, I think it's done well," he said. "I am fully confident that once Microsoft's advertising and marketing machine kicks in, you will see Vista sales either match or eclipse XP levels."

Success in the long run

Silver predicted that only 12 percent of computers in use worldwide by year's end will be running Vista, even though nearly three-quarters of consumer PCs will ship this year with the new operating system. But he also predicted that consumer usage of Vista will eclipse Windows XP by 2009, when Vista will be running on 55 percent of nonbusiness PCs worldwide. In the U.S., Forrester said it also expects Vista to overtake XP in 2009.

Missing the 2006 holiday shopping season was seen as a lost opportunity for Vista. But Forrester's Ted Schadler argued that Vista uptake will run six months faster than XP, which took four years to become the dominant consumer operating system -- mainly because its January launch lets it benefit from two additional selling seasons: graduation and back-to-school.

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