These “add-ins” allow Outlook users to schedule an Uber ride prior to a meeting, for example, or send PayPal money through an email, or easily share information to and from Evernote. Most of the features will be incorporated into Outlook 2013 and Outlook Web for Office 365, with more partnerships likely to come. This announcement suggests a shift towards a platform strategy, whereby Microsoft acts as an intermediary connecting third parties with Outlook users.
Many successful platforms today have experienced this product-to-platform transition. Apple’s iPod started as a music-playing device, until it developed the iTunes music store and App Store to connect content providers and app develops to iPod users. Similarly, Google started with a search engine and then introduced search advertising to connect advertisers to users. So what can Microsoft do to ensure that Outlook’s transition is successful?
Re-brand Outlook. Outlook’s transformation reinforces CEO Satya Nadella’s goal to “reinvent productivity.” With third party integrations, Outlook can center its brand not on a product that sends and receives email, but on an ecosystem of services that enhances productivity overall. Microsoft must selectively choose new partners to align with such an identity and build its ecosystem around this core idea. And it should rebrand Outlook to emphasize its evolving benefits.
Outlook may be able to reinvent its business model as well. Because Microsoft now serves two groups—users and third parties—it does not necessarily need to monetize Outlook by charging users. It could eventually turn to third parties to collect a commission fee each time a service is used. Indeed, this is exactly how many other successful platforms (e.g., app stores) have generated revenue. While a product-based strategy might have worked for Outlook on PC in the past, it may take a more platform-based model to be profitable in the future.
Grow mobile. Outlook’s market share still lags behind the default mobile email clients on iPhone, iPad, and Android. While Outlook is available for free on mobile, so are all of its competitors. This will make it hard for Microsoft to convince users to download the Outlook mobile app from the app store. Drawing users away from these convenient default options requires an entirely different email experience, which third parties could help provide. The more value these third parties offer on mobile, the greater the appeal of Outlook’s app and the more users it can attract.
Of course, mobile devices’ smaller screens make it harder to interface with third party services within email and without a strong value proposition, people may opt to use the corresponding standalone apps instead. Third party integrations must be so seamless and flawless that users prefer to adopt them in their Outlook app workflow. For example, Uber could ping users just before an event listed in their calendars to offer them a ride.
Test the waters. If Outlook builds enough momentum with third parties, we can expect Apple and Google to follow suit. Many third parties will be interested in working with Apple or Google, as they have a greater number of email users. The good news for Microsoft is that it has a first-mover advantage, and can evaluate its platform partnerships to decide which third parties should be acquired, which should be exclusively available on Outlook, and which should be more tightly integrated. Microsoft can use this information to learn about user engagement with third parties before its competitors can and evolve Outlook accordingly.
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