Tips and Hints

MicroSoft vs. Google – Clash of the Titans

The next year is going to be quite interesting in the online ad space. We’ve watched some of MicroSoft’s top talent defect to Google, while Microsoft CEO Steve Ballmer exclaims I’m going to f–king kill Google. We’ve also watched Google announce all kinds of neat things but still end up deriving 99% of its revenues from contextual advertising.

Right now it looks like Google is killing Microsoft, and they certainly are the biggest threat MicroSoft ever faced. The underlying concept that Google is promoting — moving the applicaton (you could say even the operating system) off the local computer and on to the network and the Internet — will kill most of MicroSoft’s cash cows, including MS Word, Excel, Outlook and even Windows itself.

Before I add my commentary I just have to say how much the whole thing makes me laugh. I love it when Google promotes FireFox (a browser that competes with MicroSoft’s Internet Exploder) on their home page, and I have to chuckle picturing Steve Ballmer throwing his Intel-based laptop across his plush corner office just thinking about how much he hates Eric Schmidt and those bastards at Google.

Microsoft only has one playbook — they leverage their hold on the operating system to force the ubiquity of their product over everyone else’s. The case study would be Internet Explorer. Netscape grew out of NCSA Mosiac, the original web browser to become the default browser for the world wide web. In 1995 Microsoft came out with IE. In 1996 it began its rapid ascent toward capturing about 70% of the browser market. What was the catalyst? In 1996 it was included as part of the operating system. Remember Active Desktop? To this day, much of the Windows operating system is browser-based, and that browser is IE.

In 1996 it was difficult to remove IE and install something else. It has become easier, but it’s still a pain.

In case you’re wondering — what ever happened to NetScape? It was bought by AOL, and some of the principals went on to start … Firefox. Surprise surprise.

So along comes IE 7. Guess what the default search engine for their new release happens to be? Microsoft Live Search. Imagine that. From PC World: IE7, currently available as a beta, includes a box where users can enter search terms to conduct an Internet search. The box by default uses Microsoft’s own MSN search engine. But a drop-down menu allows users to find other search providers and set the search box to use other search engines, including Google. Here we go again.

On the surface, I don’t think this is a bad idea, as it fosters competition among search engines. We will eventually have three — MicroSoft, Yahoo, and Google. As a programmer and developer I like Yahoo the best — they have a great API and they’re a lot less proprietary and preachy than Google. Microsoft’s AdCenter aims to have a better targetting interface, but that remains to be seen.

Steve Ballmer also wrote in a memo to employees that further growth in AdCenter is the key to MicroSoft’s future.

Our goal is to create the Web’s largest advertising network, giving us an engine that will enable us to monetize our services and compete against Google.” [emphasis added]

Microsoft, like Google, also sees dollar signs in monetizing everything that doesn’t move. Like Google’s plan for placing ads in your calendar and your word processor, Microsoft is looking to use advertising to subsidize desktop software as well. Currently in testing is a product called Windows Live Mail Desktop, a free desktop e-mail reader. It’s meant to augment the Windows Live Web-based e-mail service, a revamp of Hotmail, that the company has spent the last two years developing.

Microsoft also bought up Massive, a company that serves up advertising to slots within video games.

So what do the Wall Street eggheads think?

Credit Suisse’s Maynard said that “MicroSoft is spending enough money to build a Google-sized business inside their company. We are not ready to say that it is too late for Microsoft to improve its prospects, but we find it very hard to believe that the growth of pure-plays like Google, and Yahoo will be impaired by desperate and reactive spending measures.”

That’s probably what they said when IE came out too.

So what does this mean for us? In the short run, hopefully more competition, and more places for us to place our ads, though I think it’s going to get ridiculous. Remember when CNN went on its TV news spree? There was CNN Airport (still around) and CNN Grocery Store (barely still around)? There was a TV with CNN on every time you turned around. I hope we don’t see the same with MicroSoft and Google.

With more competition, though, our costs should go down and hopefully we can get more targeted with our ads. At the very least this is going to be fun to watch. Stay tuned.

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