Google's high-speed battle with Microsoft

Bill Gates has indicated he is fed up with Google being seen as the ‘thought leader’ of the Internet Age. Steve Ballmer believes "We have the birthright to lead the pack. We've got more technology. We've got more experience."

Is that enough in the Microsoft vs. Google saga? After all, Google’s got “cool,” as in Fortune magazine’s best company to work for Googley cool. 

William H. Gates III, Co-Founder and Chairman, $268 billion market cap veteran Microsoft Corporation, shared the Davos World Economic Forum stage in January with Chad Hurley, Co-Founder and CEO, start-up $1.65 billion Google stock buy-out YouTube.

“The Impact of Web 2.0” was the theme, and Hurley, not Gates, had the opening honors. Gates patiently waited to be called upon and he eventually was, asked to weigh in number three, after Caterina Fake, Founder, Flickr. 

Hurley on Web 2.0: “it’s leveraging the power of the people, sharing videos with each other.” Fake on Web 2.0: “a return to the roots of the Web, when people were publishing pictures of their pets.”

When moderator Peter Schwartz, Chairman, Global Business Network, did get to “mature” Gates, the dialogue matured as well.

“Mr. Gates, You are one of the main architects of the software that all of this rides on, where is this taking us?”

Every year we move to more of a digital environment and we take away the older approaches…We will have communication systems using your Internet network with far richer, more flexible software-driven systems…The user interface gets more natural, finally speech, ink, vision, are coming in to complement the keyboard-mouse we’ve been using.

Gates was the elder business statesman, and still the richest man in the world, but the adoring World Economic Forum crowds clamored for Chad. 

WHY? 

In 1980, Gates set his mind to putting a computer on every desk in every home, and he did. In 2005, Hurley wanted to be able to share his “friends and family” videos on the Internet, with friends and family, and he did.

Is Hurley really the one with the more valuable business words of wisdom to “share,” rather than Gates? 

Steve Ballmer, Microsoft CEO, has some “business advice” for Hurley’s boss, Google CEO Eric Schmidt, and he “shared” it with fellow Stanford Graduate School of Business alumnus last week.

Microsoft is chronologically a more mature company than Google. Ballmer also views Microsoft as the more mature "entrepreneur."

Ballmer engaged the audience of Stanford students with colorful, pointed quips about the Microsoft Internet nemesis:

"

Google’s built one very good business…but they only have one thing that they do, everything else they do is sort of cute."

"I don’t really know that anyone has proven that a random collection of people doing their own thing actually creates value."

"Right now, Google is the part of the cycle where they are milking, its the fun part of business…you’ve got something good going, you follow your customers, you do all of the innovator dilemma stuff, you follow your customers, collecting money, la la la, its twenty percent, twenty percent, we don’t have to do anything new, we just have to do it twenty percent more next year."

(photo taken at the NRF Convention in January, 2007, see "Microsoft: Steve Ballmer sells to retail in NYC")

Despite Ballmer’s Google chiding, he nevertheless put forth a solid, although concise, mini entrepreneurship case study on “Growth Theory,” The four stages to business. 

1) Invent something, it may or may never take off,

2) Get something to critical mass,

3) Milk it like heck when it is at critical mass,

4) Create culture to start the loop again.

Entrepreneurship is about all four parts of the cycle, especially stages 1, 2 and 4, Ballmer emphasized: “Great companies wind up having to be all four."

Some companies can’t regenerate themselves, however, he underscored, pointing out in particular that Google is solidly in the “milking” stage.

Ballmer affectionately called Microsoft a “two-trick pony,” saying that's “rare in the history of business”: 

Desktop was a trick and Server was a trick. The third trick, we’re trying to do online, the fourth trick, we’re trying to do consumer electronics.

 

Entrepreneurship is about being able to do the second, and third, and fourth trick, in Ballmer’s business book.

 

Ballmer doubts Google has any successful non-search “tricks” looming, calling the Google diversification efforts “cute.” Microsoft does a lot of cute things too, Ballmer offered: “I’ll tell you about our robotics effort, but its not paying for me to come down to Stanford Business School.” 

Rather than “cute,” I would characterize the Google non-search development efforts as wishful, and wistful, thinking.

Google claims to be on track to “organize” not only ALL the world’s information, but ALL the world’s advertising, to boot. Despite Google CEO Eric Schmidt’s “fantasy” of being a one-stop advertising shop for the world’s marketers, and years of trying, Google remains very much a one-trick pony nevertheless, as Ballmer said. 

In Ballmer “Growth Theory” terms, Google has not been able to invent a second “something” that has “taken off” for a meaningful impact on the Google bottom line.

WHY NOT? 

Ballmer called the pace of Google’s staffing ambitions “insane” and juxtaposed it to the Microsoft steady, incremental approach:

Trying to double in a year…we’ve been digesting a certain percent growth over many years, what that has allowed us to do is to build up a base of capable people who can take on more capable people…

Just as Google privileges rapid personnel growth over rational team optimization, the company introduces new products and acquires new technology seemingly almost willy nilly, favoring non-stop apparent “innovation” rather than successful, long-term development. 

CEO Schmidt, in fact, proudly reported to Wall Street in his Q2 earnings call that “the new products are coming at a fast and furious rate.” In his Q3 call, he touted “the blizzard of new product launches.”

Google also reels in assets at a fevered pace, from high-profile, high cost acquisitions—dMarc Broadcasting, YouTube—to absorption of two-person, university entrepreneurial projects, such as Dodgeball.

As “everyone’s favorite garage band,” and a rich one at that, Google has an almost carte blanche to add any technology or any company to its Googley inventory.

The acquisition, however, is the easy part. The integration is the “Rub,” the Google "BackRub," that is.

(Google lore: By January of 1996, Larry and Sergey had begun collaboration on a search engine called BackRub, named for its unique ability to analyze the "back links" pointing to a given website.) 

Where do Dodgeball, YouTube and dMarc stand, from months to years out of the Google gate?

Dodgeball: Google seems to be dodging it,
YouTube: $1 billion copyright infringement business model risk,
dMarc Broadcasting: No product launch, founders bailed.

What is Google doing wrong?

"Slow down, you move to fast, you've got to make the (acquisitions) last," in the revised "Feelin' Groovy" words of Simon and Garfunkel.

What can Google do to make its growth strategy fit better into a long term Googley development "groove"?

Google ought to focus on seeking to realize targeted fruits of what it has already set in motion, rather than aiming to continue driving a growth “blizzard.”

Not only do blizzards blind, they leave much financial damage in their wake.

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