Given all the pixels spilled over Microsoft and Google, the answer is obvious. Except to me. Try this on for size:
- Microsoft sells software
- Google sells advertising
If you can figure out how selling advertising competes with selling software, you are smarter than me.
They aren't competitors - for revenue. They do compete for a lot of other things, like really smart engineers and scientists, media attention, stock appreciation - expect none from either, they are fully valued - and innovative technologies.
It's just like Hollywood For about a decade, every movie Tom Hanks made did very well at the box office. Ditto with Tom Cruise. Lately, both have faltered. Hollywood is looking for the next Tom Hanks and the next Tom Cruise. Brad Pitt? Matt Damon? Mark Wahlberg? Clive Owen?
Microsoft was the fair-haired boy of high-tech for a decade after its IPO. Gates was hailed as a conquering hero. The steady stream of billionaires and centi-millionaires excited admiration and envy. Their every move was dissected for signs of genius and/or Machiavellian calculation. Then as their stock price stagnated in the late '90s and mega-wealthy execs jumped ship, the excitement ebbed.
Google is to Microsoft as Microsoft is to General Electric If Microsoft is Tom Hanks, Google is Brad Pitt: younger and sexier. They aren't competing for the same roles. And neither are Microsoft and Google. Both companies roles are set at the 90% level. Ballmer's continued sniping at Google is simple jealousy, not business necessity.
But what about Google's MS Office-killer? SaaS? Search? Web 2.0 (whatever that is)? Microsoft's best days are behind it. Its world-leading gross margins are under a relentless, long-term attack. The direct assaults are coming from free and open source software. The entry of two billion poor people into the industrial world has created a new market for ultra-low-cost computing. Those people will never pay Microsoft's prices. They will never buy into the Microsoft infrastructure. The free alternatives are good enough.
The biggest threat to Office is open document formats, not Google. Once the formats are there, and people start using them, the way will be open for free and low-cost alternatives. Microsoft will drop its price - again - and Office will remain dominant. Just not as profitable.
The indirect assaults are coming from smart phones, media players, game consoles - anything that takes people away from computers and Microsoft's desktop stronghold.
So who does Google compete with? Traditional advertising outlets, of course. (I sometimes wonder why they don't take Craigslist out and then get more aggressive about monetizing local "free" ads.) Database vendors: search is just another way to access data. Yahoo and MSN. Hey, Microsoft finally made the list!
The Storage Bits take As I've documented on my other blog StorageMojo Google's strong position in search owes a lot to its innovative infrastructure. Yet conflict sells more papers than innovation, so you will be reading about Microsoft vs Google for years to come.
Comments welcome, as always.