Will Microsoft learn its lesson from Kin?

By now you’ve probably heard that Kin, the phone from Microsoft you almost certainly don’t own, is being discontinued and the Kin team is being incorporated into the Windows Phone 7 team. Sadly, I’m not sure they or most others are walking away with the critical lesson here.

I think we can all agree Kin was never going to be a runaway success. The capabilities of the phone were intentionally limited. The service pricing was at smartphone levels for a phone that wasn’t a smartphone. Even the low upfront pricing could be matched by deals on yesterday’s smartphones. The best one could hope is to find a niche and dig in. Of course, a niche in a multi-billion dollar market can still be highly profitable… unless you squander your budget on a massive off-target marketing campaign.

Think of phones as movies. There are big budget blockbusters, like iPhone, and there are also small budget films aimed at smaller audiences, like Kin. These smaller films can’t afford big ad campaigns, nor should they. Films like these thrive on word-of-mouth and targeted advertising. That’s the type of campaign Microsoft should have pursued. They should have gone entirely viral, signed up some prominent social networkers, put their advertising money toward subsidizing giveaways to people who would use Kin as their social hub, etc. Instead, they dropped a ton of cash on a television, Internet, print and radio blitz that reached far beyond their target yet didn’t really connect with it. Not only was that the wrong type of campaign, but it looks horrifying on a balance sheet. Low sales can be stomached. Low sales unmoved by a massive ad campaign is a deal killer.

So now Microsoft is dropping Kin and moving its resources to Windows Phone 7. But will they bring with them the lessons from Kin or will they just repeat the same mistakes?