Making the World's Best Smartphone Doesn't Guarantee HTC Success

The HTC One has been heralded as the best smartphone on the market, but this alone is not enough to guarantee success.

In many respects February was a landmark month for Taiwanese smartphone marker HTC. It launched its flagship Android device for 2013 to critical acclaim and the same handset took home the best-in-show gong from Mobile World Congress at the end of the month.

However underneath all this pomp and hype was the sobering fact that HTC recorded its worst monthly revenue for over three years.

Therefore when Peter Chou took to the stage in London to launch the HTC One he would have known that the future of his company was inextricably linked to the success of this smartphone.

HTC decided to follow Apple and Samsung's lead with the launch of the One, holding high-profile press events in London and New York ahead of Mobile World Congress in Barcelona. The strategy seemed to work with the launch receiving widespread media coverage.

Adding to the positive start are flattering reviews of the Android handset published this week, with TechRadar's Gareth Beavis calling it "the best phone on the market full stop" and David Pierce at The Verge calling it "one of the best-designed smartphones" he's ever used.

To add my own opinion (I'm still in the middle of testing the One), it is a beautifuly designed phone which to my mind far surpassed the design of the Galaxy S3 and even the iPhone 5.

While the HTC One may be the best phone around today, it will not be going up against phones that are on the market at the moment. It will be going up against phones yet to be launched - namely the Samsung Galaxy S4 which is due to launch this week, and the iPhone 5S/6 which will launch sometime later this year.

Little doubt

There is little doubt the HTC One will stand up to whatever Samsung and Apple produce in 2013 purely in terms of hardware, but that is simply not enough to give it a fighting chance in the cut-throat world of high-end smartphones.

The challenge facing HTC is converting the positive early momentum into sales - something HTC has failed to do in the past, and all indications suggest it will face similar struggles this year.

The first problem is one of availability. It is all well and good being the first out of the gate with an announcement, but if you can't follow that up with a concrete date for when the phone will be available to buy, it leads to confusion among potential customers.

At the launch last month, HTC gave mid-March as the vague date for availability in the UK with pre-orders beginning immediately.

However reports this week from online retailers Expansys and Clove suggest HTC is facing supply problems and there will now be a delay in delivery to stores.

Message

Clove posted this message on its site: "The original launch date was due to be the 15th March. We have today been advised officially by HTC that the UK launch date has been put back to the 29th March."

Expansys goes further, claiming the HTC One won't be available until after the Easter weekend, pushing the release date into April. HTC's official line does little to reassure uncertain customers:

"We will start fulfilling pre-orders by the end of March in certain markets and will roll out product to more markets as we approach April."

What this means is that customers looking to buy a new smartphone will at that stage be able to compare the One to the Galaxy S4 - which may even go on sale before HTC manages to get stock in stores.

With analysts predicting the S4 to sell up to 10 million units in its first month alone, getting the supply chain problems ironed out is key. Samsung knows this better than most, with a manufacturing mistake involving unsatisfactory design of handset cases costing it some two million units of lost sales in just a month, after it launched the Galaxy S3 in May last year.

"There could be, again, a supply bottleneck due to tight supply of components... but I think any such disruption will be very brief, as Samsung is making a bigger bet on the S IV than on its predecessor with a backup plan to avoid such disruption," Greg Noh, an analyst at HMC Investment and Securities told Reuters.

Marketing

The second and potentially bigger challenge for HTC is marketing

Whatever you thought about the Galaxy S3 last year, the fact was if you were considering buying a new smartphone you were thinking about it, simply because of the amount of marketing Samsung put behind the new phone.

In comparison the HTC One X, which was as good if not better purely from a technical and design point of view, was forgotten about due to a complete lack of advertising push. The One is an excellent phone, but without advertising muscle it does not have enough unique features to sell itself.

The facts speak for themselves - Samsung and Apple outspent HTC in marketing their mobile phones last year by many orders of magnitude.

According to data published by the Wall Street Journal this week in 2012 HTC spent $46 million on mobile phone ads across TV, print, billboard and internet in the US. During the same period Samsung spent almost 10 times this amount ($401m) while Apple spent $333m just advertising the iPhone.

In fact HTC's spend of $46m in the US was around a third of what it spent in 2011. It is still unclear if HTC is going to reverse the decline in advertising spend this year, but even doubling or tripling its 2013 marketing budget is unlikely to make a major impact.

In the past months many people will have noticed that HTC is now one of the main sponsors of the Champions League and while it is a start, HTC will need to do a lot more.

Even Sony, which launched the Xperia Z at CES in January seems to be pushing its flagship smartphone harder than HTC, with print and TV ads proliferating in the UK at the moment.

To put the challenge facing the Taiwanese company in some context, as analyst Benedict Evans points out, Samsung's marketing budget for the Galaxy S4 alone could be more than HTC's entire revenue.