Microsoft vs Google in the Search Wars

Stop the clocks, blogging has recommenced 🙂

Couple of cheat posts coming up, starting with this one, which are really reproductions of comments I’ve left on other posts but with added juice.

Henry Blodget posted the following article on Silicon Valley Insider: It’s time for Microsoft to face the reality about Search and the Internet

It’s a great article and worth a read. Here’s the comment I left there:

I think people make a good point in highlighting that competition in search is a good thing for us as consumers. Just not sure it’s a good thing for Microsoft

Comparing with the likes of SQL and Exchange is comparing apples with pairs*, I always tell people to never underestimate just how hard MS will work to develop the winning product. But past successes have always been about bringing in a lower cost product with good enough features to compete against an expensive market leader (the business intelligence and systems management markets being two of the latest focus areas gaining ground in the enterprise software market).

Competing against ‘free’, a product used by one audience and paid for by another, is a completely different challenge and one that MS has yet to succeed in. Time will tell. But I doubt it will come from competing like for like. Google didn’t knock Alta Vista off the top by copying their business model. To take over a market means to do something different that weakens the incumbent players. Adding to the challenge is that ‘free’ or ‘freemium’ models have yet themselves to stand the test of time. Somebody somewhere always has to pay, one way or another. Making money from sales of a product or service still have far more long term potential than making money from people paying for the attention you’ve managed to capture.

And that all said, I still wouldn’t underestimate MS, Google isn’t the only one who can create ‘waves’** under cover

I suspect the ol’ Google vs Microsoft debate will rumble on for a few years yet. Steve Ballmer and quite a few influentials within Microsoft would like a big slice of the advertising market that is a fair bit bigger than the software market. But I’m still not confident that’s the right goal.

The argument goes that people are becoming used to not paying for online services. Yet Flickr has done quite well getting people on to premium accounts. Virtual worlds and multi-player online games like World of Warcraft also seem to find plenty of paying customers (I’m one of them, and a girl too – take note, Xbox team. I’m in that market that Nintendo noticed whilst considered a has-been at no.3 in the console market a few years ago). I’m also in that apparent small minority who pays for their music online. Amazon has done quite well just selling stuff that you go looking for rather than have thrown at you in a glitzy banner, eBay isn’t doing so bad either. None of them dependent on advertising revenue. The last two examples have both made money from closing the distance from customer to seller without advertising interrupting the process.

And who wants to be an advertising company anyway? Google succeeded ‘cos they managed to make the ads as unobtrusive as possible and came up with a great revenue concept (auction the search words) to get companies competing for what little ad space there is. Most people seem to dislike ads unless it is for the exact company they are looking for (I do a search for Hilton Hotels, I want the damn official web site, not a million travel web sites) or something completely original (that ends up in the ‘top 100 ads’ TV chart). Even worse are the fake web sites that get into search results only to present you with a page of even more ads than the search engine dared to show you.

Advertising is not a loved market. Microsoft is not a loved company. I don’t know if that’s the synergy they see but it’s not a great start. Without doing the research, I’m guessing the margins in advertising are not as healthy as software. And Google may be raking the cash in from ads but is pouring a fair chunk back out again, not least running the hardware to support YouTube.

What is right is the desire to create a new market. Monopolies (natural or otherwise) and market domination rarely last for very long… unless funded by government but let’s not go there today. Microsoft needs to keep testing new waters and best do it whilst there’s oodles of cash in the bank than start when it’s running out. And call me biased because I used to work there, but I still hope all this Google chatter is smoke and mirrors whilst they work on something worth paying for.

* Oh dear, didn’t notice I’d used pair instead of pear when posting the original comment, and you can’t go back and edit them. Oops.

** Google cleverly making waves (Techcrunch)

Delicious tags: Microsoft Google Business