The Sad Tale of Palm and webOS – Part 1: Business and Marketing

Palm Pre Plus - App Image
Palm holds a soft spot in every gadget geek’s heart. I’ve been a fan since my first Palm device, the Palm III — perhaps the first device that showed me where things were headed and the potential of mobile computing. It was followed with a Sony Clie (a palm licensee), a Treo 600 and a few others. But Palm faced a problem in that the operating system was stagnating. While Windows Mobile, albeit less user friendly, was innovating at a solid clip and was the software powering some of the most compelling mobile devices of the mid-2000s, Palm was finding any way they could deliver rehashes of the same device running Palm OS 5. That version, which powered the Treo 600, 650, 700p, 755p and the Centro, a device that up until last year was still sold by the major US carriers, was introduced in 2002.

The company had many challenges ahead of it as BlackBerry hit the big time, securing not only the enterprise and SMB markets but also achieving success in the consumer space with the Curve and Pearl models, and Apple who released the iPhone in 2007 which spelled doom for last generation touch devices like the Treo.

In January 2009, Palm announced its answer to the competition and placed its future in the hands of its new webOS software. Early adopters and investors seemed impressed but unfortunately it failed. Palm was acquired by HP (HPQ) on April 28th, 2010. The failure is three fold: business and marketing, software, and lastly hardware. In this post, I’ll cover the business aspects of the situation.

Palm chose Sprint Nextel as their launch partner of the device in 2009. The exclusive launch partner. It made sense, somewhat. Sprint was still hemorrhaging customers because of its divided attention after the Nextel acquisition, lackluster customer service, and deficit of focus. Palm expected that it could divide marketing costs with Sprint, receive more prominent placement in stores and have the Palm Pre, the first webOS device, serve as the flagship device for Sprint’s rebranding campaign. Having announced the device five months before it would actually ship, the hype machine was in full force and many were hopeful for its resurgence. Palm was trading at $1.42 as of December 8th, 2008 on the NASDAQ and by the launch of the device, it was at $13.01 in early June.

The single carrier exclusivity strategy was ill-fated. It limited the audience of the Pre to just too few consumers. In the quarter leading up to the release of the device, Sprint reported that it had lost 1,250,000 postpaid customers, 531,000 from the Sprint CDMA side of the business. That meant that at launch time, Palm had an possible embedded sales base of just 25.3 million customers, because remember, even though Sprint had 49.3 million subscribers, only a little over half are on post-paid CDMA contracts. Sprint led the industry in the worst way possible with 2.25% postpaid subscriber churn. Sprint bet, and most likely made concessions for the exclusivity, to draw in and keep high-ARPU smartphone users who would want the Palm Pre.

Yet Palm, even riding the wave of pre-CES hype in 2009, didn’t have a magical and lust-worthy device like the iPhone which would lead to customers ditching their old wireless providers in droves. Apple didn’t have that problem; even though they were new to the phone business, they picked a huge carrier and had a built in audience that would pay an early termination fee just because Steve Jobs blinked in their general direction. Palm had no such luxury, and they blew it. It wasn’t until the following CES in January 2010 when Palm announced the device would land on its second US carrier, Verizon Wireless, which would prove to be too little too late as the momentum in the smartphone space had shifted to Android and BlackBerry for other carriers and to iPhone for AT&T.

Much of this analysis deals purely with the business aspects of the failure of a reinvented Palm, but a significant part of the dismal sales numbers had to do with the marketing of the launch device, the Pre. The ads were, to put it succinctly, creepy and perplexing.

This ad did little to show what the phone was capable of and instead gives us an alarmingly creepy woman that seems to be fond of prolonged pauses during her allegory about how jugglers can juggle many objects with ease. This wasn’t just one poorly focus-group tested ad, it was one in a series of about seven ads featuring the same themes. It took Palm until early March 2010 to produce a strong ad which displayed in an easy to internalize way just what the new operating system could do and its particular strengths like unobtrusive notifications and aggregation of personal information across cloud services.

And here’s the kicker, Palm had a case study in great and effective advertising for a phone from their chief competitor: Apple. If there is one thing that Apple had proven is that the can market anything and do it well. Their ads for the iPhone, for each successive iteration of the device, have shown exactly what it can do, how simple it is to operate, and who makes it. Even if you hate Apple, you couldn’t fault them for not communicating the what, why and how of their product.

As a quick aside: look at BlackBerry, another company which is struggling in the branding and advertising space. Back when it was chiefly a business brand, they didn’t have to do much advertising outside of print and online ads targeted at their core audience, IT managers, C-level executives and those who aspired to be them. Now, with their half-decade long foray into consumer devices achieving moderate success, they decided they needed to position themselves as a lifestyle brand. With the marketing tagline “BlackBerry: Love What You Do“, Research In Motion jumped the shark and almost made it to the moon. The 30-second spots featured break dancers, a punk band, and a poor cover of a beloved Beatles track as a means of selling an push email device that was still two generations behind Apple in terms of usable software.

Coming up next this week, how Palm failed with software and hardware and what the HP acquisition means.

Comments

One Comment so far. Leave a comment below.
  1. James Katt,

    Palm utterly failed in marketing.

    It had every advantage:
    1. At one time, it was the only alternative to the iPhone.
    2. It had hardware and software that were ostensibly better than the iPhone.
    3. It had its own built-in audience – consumers who bought Palm smartphones and PDAs.
    4. It had tons of developers for the original Palm PDAs with over 50,000 of software titles.

    But when it came time to go on stage to shine, Palm CHOKED. It choked big time.

    1. The one huge criticism of the iPhone was that it was exclusive to AT&T.

    Palm could have taken that ball and ran with it – covering EVERY Carrier with the only iPhone alternative that was better.

    2. Palm had the advantage of over 50,000 apps for the original Palm OS and tons of developers. This was when the iPhone did not have apps.

    Palm completely choked on this. It could have come out with an SDK for the Palm Web OS. That would have completely overrun Apple by a years headstart.

    BUT NO. Palm CHOKED. By today, the Palm Pre has 1500 apps to the iPhone’s 200,000+ apps. This was choking at its highest level.

    Palm had every opportunity to succeed. But it FAILED MISERABLY AND UNBELIEVABLY AND STUPENDOUSLY.

    Who to blame? Everyone at the top of Palm. Period.

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