Microsoft: No Chance to Challenge Google

Note: this is a re-written version of the Microsoft vs Apple: Monopolist vs Innovator (part 3).

Around 10 years ago, in order to dominate the Internet browser market, Microsoft fought hard and virtually killed Netscape. This is an old and well-known story. MSFT abused its monopoly power in the Operating System market to achieve its goal, for which, it almost paid the price with its own existence - just narrowly escaped the fate to be broken up. The reasons that MSFT resorted to these 'extreme' measures were because it believed, first, Internet was the future, and second, Netscape browser had the potential to grow into an Operating System. In other words, MSFT viewed Netscape as a real strategic threat to its core business. Now ten years later, when we revisit the history, we see things that nobody could imagine in the old days. Yes, Internet turned out to be the future and presented immense business opportunities across all industries. And as MSFT expected, it maintained the monopoly control over the software used to surf the internet, but almost pitifully, its achievements never went beyond. The sweetest fruit from the Internet tree was reaped by a company called Google, which started from developing the search engine, something that Microsoft never paid attention until it was too late. From this search engine company comes the threat that MSFT fears the most - a competition OS. This time, it is a lot more real than that from Netscape. Google has the capability, the wealth and more troubling, the vision to build something to compete with Windows.

MSFT's distress and pressure are not something hidden behind the scene. Several months ago, MSFT offered to buy Yahoo for around $40 billion, my opinion, a mutual-destructive move, somewhat out of desperation. Yahoo was well on its track to become a mediocre and forgettable company, while MSFT's involvement may only speed up the process. So I was glad that MSFT backed out, notably, with the help of the stupidity of Yahoo's management (here the stupidity is defined by their IQs as a group of businessmen).

Here comes the key question that this post tries to answer. When the Internet was a wide open space, MSFT couldn't establish itself as anything significant, and now with Google looming huge, having the power to match MSFT toe to toe, what chance does MSFT stand in the Internet/search market? My answer is, none.

First, innovation is the only key that MSFT could use to break into Google's territory, unfortunately, its innovation potential has been exhausted by its internal and external pressure.

In my previous post, Microsoft vs Apple: Monopolist vs Innovator, we discussed why Apple is a company more creative than Microsoft. In summary, it is extremely demanding to develop and maintain Windows OS, which may be the most complex software in human history. This creates the internal pressure on MSFT. Externally, the brain power of its 1 billion users bears unlimited possibilities, posing all sorts of challenges to the software company, such as virus, piracy, hacking, etc. Unfortunately, I don't see any reasons MSFT could avoid addressing any one of these. This environment put MSFT under constant pressure, shaped its culture and gradually turned MSFT into a solid implementer, rather than an innovator.

On the other hand, Google, also as a monopolist, faces much less pressure than MSFT. After all, its product, the search engine, is only an applications sitting on its own servers. Even for the most malicious and capable hacker, there is not much to manipulate from Google's almost blank home page. This is a lot more forgiving operating environment, resulting in an innovation-friendly atmosphere. Actually Google's innovation capability matches well with Apple. For example, AdSense is purely a genius idea; and from GMail, you can easily detect the underlying innovation pattern, very similar to the impression you get from playing with an iPod - relentlessly focusing on the user experience.

If I rank the innovation power of Google as 10, Microsoft is 3. While in the Internet market, pretty much it is all about innovation.

Second, even as a business behemoth, Google cautiously maintains its image as a technology company, but Microsoft is perceived to be a lot more business/profit oriented. While Search is always a technical term, never a marketing term.

I don't think it is exaggerating to say that MSFT won the battle against Netscape, but at the same time completely ruined its image as a technology company. Since then, MSFT grew bigger and stronger, widely perceived to be a business juggernaut or an almighty empire. On the other hand, we saw Google spent billions of dollars to develop many normal as well as 'geeky' applications, then offered them to the public for FREE. Pretty much this is what an enthusiastic dude in the open source community would do.

Somewhat Google became a symbol of the spirit of internet technology, being open, equal and winning by technology superiority. It is even more applauded as it continues upholding the spirit after diving deep into the profit driven business world. As a result, Google created a vast fan base - another similarity with Apple - there are people that simply love Google, instead of toward Microsoft - a have-to choice.

I won't say that Google's intention to maintain itself as a technology company is not genuine, while obviously there is business strategy behind it. By offering all sorts of free applications, it is building itself into a platform for 'everything', thus growing the users' dependencies and personal attachments - another similarity with Apple, and not surprisingly, significantly increased the entry threshold for the competitors.

Talking about search, MSFT feels too clumsy, similar as Yahoo feels too shallow, but Google feels just right, simple, straightforward and a technology savvy. From this perspective, MSFT is doomed.

Third, MSFT has some basic issues to fix.

GMail is original, Yahoo Mail is solid, Hotmail is like a piece of junk. I know it maybe too biased to say this, but that is my true experience. For the past 10 years, I maintained my accounts with both Yahoo and Hotmail, but for the latter, there is always something that don't feel right, something that gets me easily annoyed. Microsoft would like to compete in the Internet field, while in this field, nothing is more basic than an email application. If they couldn't even get this one right, where is the hope?

Another one, we all understand what Google is, what Amazon is, and what eBay is, but does anybody really understand what the heck Windows Live is?

For Google, or Amazon, or eBay, it developed its understanding of the Internet, held onto it and finally found the key and opened the door to the wealth. But MSFT, after struggling for more than 10 years, still an outsider. It simply hasn't figured out the Internet. Maybe the best explanation is that they never had the right people in the right position.

In summary, maybe MSFT doesn't stand much chance against Google in the Internet/search market, but even before considering challenging Google, they have some basic and internal issues to address.

I see a re-organization a must.

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