Microsoft Reboots Battered Surface With Razorfish

After Taking $900 Million Write-Down, Is There Any Saving Its Troubled Tablet?

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Microsoft is taking another run at Surface, this time with a new digital agency.

Despite an ambitious marketing plan, the tech giant has had a rough time breaking into the crowded tablet market. Last month, Microsoft announced a $900 million write-off on excess Surface inventory, surpassing the brand's total revenue of $853 million since its October 2012 launch. It also slashed the price of its Surface Pro by $100, just one month after trimming up to 30% off the cheaper Surface RT.

Now Microsoft has tapped Publicis Groupe's Razorfish to handle digital consumer marketing for both Surface and its Windows operating system as the brands move into holiday-planning mode. Razorfish already handled Microsoft's Xbox and Bing accounts and recently lost the Samsung business to Interpublic Group of Cos.' R/GA, the incumbent on both the Windows and Surface brands.

The shift follows Microsoft's move last month to centralize its internal marketing and bundle its product offerings under a "One Microsoft" platform.

"The decision to switch digital online advertising agencies arose due to competitive conflicts with the previous agency," said a Microsoft spokesman. Microsoft would not elaborate on the conflict. But R/GA's new win from Samsung, which now competes with Microsoft in a number of categories, seems like an obvious suspect.

Razorfish has a tough job ahead. Surface didn't make it onto IDC's list of the top-five tablet players in the second quarter (see chart). Developers were reluctant to build apps for Windows 8, instead opting to focus on the more popular iOS and Android operating systems. The product launched without Facebook and Twitter apps, for example, although both have since started developing on the platform.

Yet Microsoft remains undeterred. In the last nine months, it has expanded Surface from eight to 30 markets and announced plans to sell the device in 17 additional markets. Nor has it toned down its gutsy ads -- the latest is an attack ad on Apple's iPad -- supported with $84 million in U.S. measured media last year, according to Kantar Media.

If all that can't save the tablet, what can? Possibly Xbox.

Microsoft has largely ignored its most-popular consumer product when marketing its Windows 8 ecosystem even though the gaming console might be the most compelling reason to buy a smartphone or tablet running Windows 8. But is it too late to make that connection? Forrester's Charles Golvin advises not to count Microsoft out.

"One thing Microsoft has as a core attribute to its company is stick-to-it-ness," he said. "Another thing they have is lots of money."

Contributing: Tim Peterson, John McDermott

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