Does Google even want to win against Microsoft?
Waiting for Google to crush Microsoft to powder? You might be waiting a long time, as The Wall Street Journal's Holman W. Jenkins, Jr. suggests in a compelling but surprising argument.
(Credit:
Radical Marketing Blog)
Maybe Google and Microsoft don't really want to beat each other up.
Sure, Google has Google Apps to wave in front of Microsoft's face when it gets too serious with Bing, and Microsoft keeps pressing on its online-ad business to keep Google from thinking too hard about Chrome OS. But is Jenkins right?
Do these two rivals really want to upset their cozy corners of dominance in order to take on profit margin-busting forays into their competitors' markets?
Jenkins writes:
Microsoft and Google...have the power to damage each other, and are better off if they don't. They spend a lot of money on deterrence....Even more than the Cold War superpowers, they have every incentive quietly to agree to be deterred without investing quite so much on an arms race....
Their little secret is that neither Google nor Microsoft really have an interest in challenging each other's core franchises, if it means risk to their own. Their posturing is primarily defensive--fear of loss is greater than hope of gain.
And both companies by now have a well-earned reputation for being willing to invest large sums simply to threaten the profits of companies that potentially threaten theirs.
This doesn't mean that the two aren't actually trying to hurt each other. They are. This isn't the World Wrestling Federation, with simulated attacks meant to impress the crowd but not damage the fighters.
But I think Jenkins is right: every move either takes against the other is almost certainly meant to warn more than draw serious blood.
The real opportunities for both companies are not in carving up past markets, but in discovering and profiting from new ones. I can't see Google, for example, wasting much time trying to displace Microsoft Office, because there simply isn't much of an advertising market there, and it's unlikely that Google is going to more efficiently reap what Microsoft has sowed.
Instead, Google is investing in dramatically redefining collaboration and e-mail with Wave, which promises to put Google, not Microsoft, in control of the future "office productivity" market.
Yes, it's exciting to watch the two take swipes at each other. But I wonder, along with Jenkins, if we're seeing feints rather than kidney punches.
Follow me on Twitter @mjasay.
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay. 
Outside of Windows and Office, there are no other notable profitable products.
These 2 products are also in decline.
It's not so easy to leave Windows or Microsoft Office, because so many people and businesses have already invested so much money and IT brain power into making them work for their individual needs.
So, does Microsoft want to destroy Google completely? Maybe not, but they surely want to make their search business more profitable... and they've got the time and money to make a diligent attempt at it.
Actually, Microsoft Office is continuing to make inroads in business even further than it is today hence why they dropped the ball a bit in the consumer market.
While Office and Windows are its marketshare you do not see the whole picture because like most within the CNET Blogsphere you are clouded by the consumer solutions:
SharePoint, Dynamics, Communication Server, Exchange, Forefront, BizTalk, and even Xbox are pulling profits. Are they diversified enough from a products perspective? Yes and those respective markets are generating revenue. Google's revenue stream is based on ad revenue which is based on search adoption... in my mind, something that is easy to take down. If you push into Search and steal revenue from search fast enough it effects Google's bottom line. On the other hand, Google digging into Microsoft's cash crop is going to take more then a lot of vision - it's going to take a solid roadmap, solid support infrastructure, and options outside the cloud.
Let's just look at some facts:
Revenues:
MSFT - $60B
Google - $20B
Net Income:
MSFT - $17B
Google - $4B
R&D investment (pre net income of course)
MSFT - $6B
Google - $2B
Google's growth is impressive - they've grown roughly $5B in revenue per year over the last 5 years.
Microsoft growth is equally impressive - they've grown almost $10B a year over the last three years... (tomorrow we'll find out how Microsoft faired for the year.)
In the long haul folks MSFT and GOOG are hear to stay for a while. I like to see them do battle though... if my money was on a company I wouldn't bet against Microsoft. Why? Because they are a very aggressive, battleworn company who loves the underdog role. See them come into the Enterprise space... see them get laughed at.... see them conquire the Enterprise space. See them enter Consumer market... see them laughed at and riddled with bullets from the competition - see them stand and walk through the competition.
Yes I know... they are a monopoly and they're evil... they are capitalists! They try to make money by neutralizing the competition! They don't play fair! They're dirty! That's why my money doesn't bet against Microsoft... they know how to compete... they may be on a down slide in the hot social community blogsphere lately... but to be honest, they keep selling billions of dollars worth of software.
Still, Microsoft still strands to make many billions more from people who know no better. It usually takes 10 years for people to realise change.
Google dominates search. Microsoft software. Personally I think MS is the more likely candidate to shrink and get bought out.
When one side or the other gets desperate, bad things are prone to happen. Microsoft is (currently) losing marketshare - albeit slowly, but losing it nonetheless. It is definitely losing browser share, and thus complete control over the web if it slips too much further. Even though both factors are more attributable to Apple, Linux, and Firefox (sorta respectively), A Microsoft that gets desperate for income may become one that will decide to cut loose with some metaphorical nukes in order to get what it needs to survive. Think, as a parallel, "Russia with a growing oil shortage crisis", and you get the idea.
I'm thinking that the whole Bing thing is not so much a feint against Google, but rather a try at keeping Microsoft's coffers full.
I think most people would. And that's why Google is so vulnerable and desperately trying to branch out into other markets. It's easy to switch to a better search engine. It's much more difficult to leave Windows or Office, particularly if you're a business.
Ah, but Apple has already done that, and shot up from 3% to 10% of marketshare in less than five years (from the introduction of the Intel-based Mac to now). In spite of a crap economy and a higher initial cost to buy a Mac, they're still growing in sales and income - while OEMs that Microsoft relies on for its very existence are losing sales.
Long story short - don't count either player as being in a stable, assured environment. Both have their worries and problems. ;)
"It's much more difficult to leave Windows or Office, particularly if you're a business."
Businesses move to and from things very slowly... the same businesses that use GMail, Google Apps, Google Docs, and suchlike (or did you think it was only a search engine?)
Why wouldn't everyone migrate to an OS that has the same kinds of issues that it tries to flog the competition for? It's marketing, campaigning, and it's about protecting and growing their marketshare - that's all Apple cares about - that's all Microsoft cares about. Each will do and say anything they possibly can to get you as a customer.
You may count Microsoft and it's partner community out but you do not realize they represent a marketshare magnitudes larger. Customers forget - once they see something is being changed and moved for the better they jump right back on board. Like Bing - I hope Microsoft slams the consumers with the value/vision of Windows 7. I remember when Apple was a pretty strong competitor to Microsoft (quite some time ago... people were just as die hard as they are today...) but when people have less and are focused on spending less does it make sense to buy something that does the same thing for more? No - people will eventually go right back to PC. As we all know 60-70% run VMfusion or Bootcamp with Windows XP / Vista / 7 already.
Not very many businesses are using Gmail my friend... if you are talking about mom and pop shops, government organizations, and consumers - yeah... I see a lot using Gmail I guess (sortah - Hotmail is still the most popular online mail service.) Some use GoogleDocs... some use it extensively but they represent a tiny marketshare. When you are talking with Enterprises and the rest of the users - they all use Office... why? Excel and Outlook... integration with MOSS, OCS, Exchange... one single on-premise solution with the ability to go into the cloud (and in a way that's not subjected to an ad-search engine.)
Understand the laws of business - something free can be changed. Something paid for is an investment with dependencies. Applications, user support, etc.. How many times have you got something for free and thought nothing of it? Google told you their stuff was free but you didn't realize you are paying with the invasion of your personal privacy
Sad, people are so open to give away their privacy to use some free something.
They're both commodities at this point. The rest is immaterial (and increaseingly ephemeral nowadays, especially in business).
"So if a computer comes out tomorrow with an OS that had a longer lifespan, let you still run all of your old Windows programs, while at the same time easing you into a nice, new, powerful, and relatively virus-free environment... you wouldn't switch?"... "Ah, but Apple has already done that".
Oh, I didn't know Mac can run old Windows programs natively... If you have a Mac and you need to run Windows applications, what do you need? A license of Windows.
Another quote:
"Businesses move to and from things very slowly... the same businesses that use GMail, Google Apps, Google Docs, and suchlike (or did you think it was only a search engine?)"
Oh, yes, GMail, Google Apps, Google Docs are now standard in Fortune 500 companies... These are all great news... You wish.
Also, most Mac users still use the Mac version of Microsoft Office if they're not running parallels (in which case they would use the Windows version).
So the more Mac sells, the more income for Microsoft's Office division and Windows as well.
Don't underestimate brand. Google is a powerful brand. So long as they don't drop the ball, when people think of the Internet, it will be Google that comes to mind.
Most? None that I know. Where's your data? Let's see a link.
My point is simple and non-partisan - no company is safe in the long-term. Not even Microsoft... or Google, or Apple, or anyone.
The onus is on Microsoft to change its business model to meet the future... but I'm not sure if it can.
I don't see how the analogy you used makes any sense. Microsoft and Google are completely different when it comes to making money. Are you saying that all hardware/software makers deserve their money, while everyone who makes their money from the internet just got lucky?
Google became the leading search engine because it excels at what it does: search. It had fast search times and a simplistic home page, and people liked that. But it wasn't just a coincidence that people just happened to like Google. They do stuff like research to find out that that is what people want. So believe it or not, they actually worked to get where they are.
Google is not an Enterprise player today although they are trying... they have a lonnng way to go but they have large aspirations (despirations if you ask me.) Any company that is 80-90% invested in one key money maker is bound to reach its ceiling. They must expand and the way to expand is keeping more people on the net and holding onto more of the content (key ad area) and possibly reducing the weak points (no control of the actual platform their solution runs on.)
Microsoft is in a different position. It was some of that Ad revenue $$$ - it's right up Microsoft's profit strategy. Microsoft lovvvesss profit... they sell mice and Xbox hardware yes... but man if they sniff money to be made slightly connected to their reality of desktop/server infrastructure solution they will go after it like a bum on a sammich. Of course there are also working to expand their already large foot print but their strategy is to keep people grounded in the world of applications and services versus Google's services first in the cloud strategy.
CLASH of the titans, the sultan of the internet versus the King of the platform... wee hoo! FIGHT! At the end of the day they will coexist... Google knows this, Microsoft knows this...
While you may not think it takes tech to do that, it does or the lucky ones would have done it first and Google (being late to the game) would have come up short and failed.
"Google's goal is to commodify (reduce the marginal profit to zero) of everything that they don't make money on. The hardware is pretty much commodified already. Plenty of competitors and the profit margins are razor thin. Next levels are the OS and the applications. These are not yet commodified due to Microsoft's aggressively maintained monopoly. Contrary to common knowledge, Microsoft's real monopoly is in the Office file formats. From that, they've levered a monopoly into basic individual productivity applications and then (with Apple's cooperation) the operating system. They are also a serious player in second-generation collaboration tools (extensions to basic email).
In order to reduce Microsoft's war chest and eliminate their competitiveness, Google seeks to lower the profit margin on everything Microsoft currently produces at a profit (Windows and Office). So they produce a cheaper operating system, cheaper productivity applications, and cheaper collaboration tools (ideally free to the typical user). Google doesn't need to make money (though breaking even would be nice), Google just needs to apply pressure to Microsoft to cut their revenues/profits and the strategic goals are being met.
Writing apps that run on Windows? Doesn't help Google very much (though SketchUp and Picasa and a few other things are native apps).
Writing protocols that run on any machine? Helps Google a lot.
Writing web applications that use those protocols and run on any machine? Helps Google a lot.
Look at the bigger picture. Google is acting extremely rationally here.
As for whether Wave is innovative or not, I don't think you've tried it and are speaking without informing yourself. Wave is to email as email is to snail mail (single addressee, no broadcast, etc.). Wave tackles the problem of a widely CC:'d email with an attached Word or Excel document (two threads of changes: one in the email thread, one in the document) (multiple obsolete copies of the document available) (possible confusion and delay as people are added to the thread and have to re-read the history duplicated in most of the recent emails). Wave creates a "place" for this discussion/collaborative authoring to happen and then let's everyone bring whatever they want to help out. Wave is not email++ (which is what Outlook and Gmail are)."
Hence the need to own and control your own data. Hence the migration to open data file standards. This monopoly won't remain long. Too many folks lose too much data to propriatary formats to not be pushing for a change.
When you look at things, you have to look at it a little deeper. People tend to be lazy, they just grab the most accessible ones as their own. I know you wouldn't agree. Think about this, how do you develop your view about Jon & Kate? How much of them is truth? You don't know, and nobody knows. The truth is every source of news present their view of the truth on purpose or not.
Talking about google, my example may not be the best one. I will give you another one. Considering techology, how much difference it has to Yahoo, AOL? Do you consider Yahoo a technology company? In all the three, what technology do they have? You may say, they have datacenters, they have search. Datacenter is mostly a way to use other people's technology, I wouldn't even count that. Search, if that's the only one, is too thin to be considered technology. Yes, it needs some sort algorithm, and fast way to index websites. I don't again count that as technology. By that, I don't mean it is easy to do. Of course, they have some tricks that make index faster. But technology got be something a lot more than that. Search needs some technology, but not yet in the current ones.
My point is in order for company to stand over time, you have to have a strong tech advantage over others. The Coke tricks don't work here. You see how Yahoo and AOL falls, right?
google's only advantage was its results come fast. At the time it was much faster than others like Yahoo. People were shocked, how can it be so fast. Now everybody is there. What things google does better right now? Very limited. As a matter of fact, Bing is doing many things clearly better. Yes, I am in favor of Microsoft as I said, but i am stating the fact. I am not sure how you can argue with that.
Microsoft actually sells products. They are slowly moving into content distribution; Apple's current territory with iTunes. I'd say watch what they do with Xbox LIVE, Zune Marketplace, and Windows Mobile for selling content and using your Windows 7 PC as a hub for it all.
- by nttwrs July 24, 2009 11:45 AM PDT
- I've only read through half the comments, but I continually see people say that Google is well positioned for the future (compared to Microsoft) by, essentially, being more focused on the cloud. While I tend to agree with this, I sometimes wonder if 1) they're too ahead of their time, and 2) they're too focused on the cloud in general.
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(33 Comments)The way I see it, until high-speed bandwidth is as reliable AND accessible as old-school landlines, cloud computing will never become the norm - and by "norm" I mean the way more than 60-70% of families, schools, corporations, etc., work. I live in one of the highest populated areas in the country (Dallas/Ft Worth), and have a 20 down / 5 up internet connection (thank you Verizon Fios!) that's extremely reliable. But it still goes down occasionally. And even at that incredible speed, products like Google Docs or Zoho docs still don't work as smoothly as MS Office on my desktop, and sometimes have to play catchup with my keystrokes.
So, all in all, I think Google is extremely pioneering and visionary, but I think they might be ahead of their time.