If you’ve ever played Microsoft’s (MSFT) series of Halo video games, then you’re familiar with Cortana. The character, an artificial intelligence construct, is always in the background, providing players with tactical information needed to progress in the game. Cortana learns and adapts to circumstances and is eager to share her knowledge.
Given the long history of the character, her background and the number of players familiar with her (more than 50 million copies of games in the Halo series have been sold), it’s not surprising that Microsoft would choose Cortana as the codename for its forthcoming Windows Phone intelligent personal assistant.
Windows Phone 8 can handle voice commands, but the functionality is rudimentary in comparison to Apple’s (AAPL) Siri and Google’s (GOOG) Google Now. The excitement about intelligent personal assistants peaked soon after Siri made its 2011 debut on the iPhone, experienced another boost when Google Now launched in 2012 and has been quietly simmering since then. Both companies have been incrementally improving their software, but from a consumer perspective, the feature is something that’s now taken for granted.
That makes its absence very conspicuous on Windows Phone 8. If Microsoft wants to grow the market share of its smartphone operating system, it needs to address the shortcoming.
There’s another big reason why an intelligent personal assistant is important to Microsoft, and that’s search ad revenue. Microsoft owns Bing, the search engine that competes directly with Google. A built-in intelligent personal assistant means being able to control which search engine and mapping services are used to generate results.
Google Now — which is used by many Android smartphones (which, in turn, make up the majority of smartphones being sold) — uses Google Search. Many iPhone users have downloaded it as well, combining Now’s notifications with Siri’s voice commands. The app is a big reason why nearly 23% of Google’s U.S. revenues will be coming from mobile ads this year.
Microsoft can’t stop owners of Windows PCs from setting Google Search as their default. Nor can it stop them from manually using Google’s search engine in Internet Explorer on their Windows smartphones (Google has declined to make native apps available for the platform to date), essentially bleeding Bing of search revenue. Once Cortana is in place, however, it will naturally be joined at the hip with Bing, directing some of that mobile ad revenue from Google’s coffers to Microsoft’s.
But the company has even bigger plans for Cortana.
Rather than keep the feature exclusively on Windows smartphones, Microsoft is reportedly also planning to extend Cortana’s reach to its desktop operating system and the Xbox One video game console.
According to ZDNet, Cortana will be the cloud-based, voice-activated intelligent assistant that provides answers to user questions, learning and adapting as it goes, eventually anticipating their requests. It would also seamlessly tie together information from Microsoft’s multiple services, which would mean that Xbox One owners might see gaming-related data included in a response if they were to ask Cortana a question on their Windows-powered smartphone. An appointment booked using Cortana on a Windows phone could generate a reminder flashed on the Xbox.
Microsoft CEO Steve Ballmer has been talking up a Windows voice-enabled personal assistant for several years now. And recent technical advances in Bing’s search capabilities and improvements in Windows Phone voice recognition technology allow Microsoft to put all the pieces together and come up with an end product to rival Siri or Google Now.
In fact, having watched Siri and Now develop and having Bing power the current iteration of Siri, Microsoft has undoubtedly learned a lot about what works and what doesn’t. If it applies those lessons, Cortana could be launched as a feature that’s a generation ahead of its competitors instead of playing catch-up.
Microsoft no doubt wants Cortana to land with fanfare — and the disadvantage to being last is that everyone will compare it to existing services — which is why it hasn’t rushed the feature out. However, Cortana references have been showing up regularly in Windows build screenshots. The Verge has it pegged for a possible Windows Phone 8.1 release in early 2014.
To date, owners of Microsoft Windows 8 phones — and let’s face it, that means Nokia (NOK) Lumia smartphones — have been forced to download a third-party apps like Speaktoit Assistant or Indigo to get Siri-like features. Having a Windows Phone voice-enabled personal assistant will eliminate one of the key shortcomings of the platform and could help it continue to claw its way to greater marketshare.
Having Cortana as a cross-device service will up the value proposition for consumers shopping for PCs and video game consoles too. And if Cortana is a success, that troublesome Bing division could go from being a perennial source of red ink to being a profit center.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.