Recently I wrote an article which suggested that, when it comes to competitive threats from the area of search engines, Microsoft might be wiser to focus on Yahoo! than Google. Of course, a few comments from one writer aren’t going to change the direction of a major software company (much as some of my esteemed colleagues might wish otherwise). That article did elicit a number of comments from readers, though, which inspired me to take a closer look.
Even if one remains convinced that the greater threat to Microsoft comes from Yahoo!, not Google, it’s instructive to consider why Microsoft thinks Google is the larger threat. One of my readers pointed to the fact that Google can raise lots of capital fairly quickly, and knows what to do with it. That can be very frightening for an established player like Microsoft. To quote my anonymous reader:
“Because of Google’s ability to raise capital, Google can operate at whatever it finds to be its optimal capital structure meaning Google essentially calls the shots with lenders. What all that means is that Google can generate money at basically any time to increase R&D, hire more Microsoft employees,…Microsoft’s concerned because Google’s one of the few companies that not only has the know-how to be a big market player, but the means to do so as well.”
That’s far from the only reason Microsoft fears Google – and it isn’t even the scariest, necessarily. A number of news-related websites have quoted from a late October 2005 memo sent by Ray Ozzie, Microsoft’s CTO, titled “The Internet Services Disruption.” One even published the entire nine-page memo in full. Few reporters seem to have done more than skim the document, and fewer still analyzed the whole thing.
In a way, that’s understandable; it’s a long memo, after all, and the contents are hardly shocking. Microsoft does a serious reevaluation of itself regularly, or, to quote Ozzie, “we’ve needed to reflect upon our core strategy and direction just about every five years.” So the company was due, given that the last one happened in 2000. The memo is worth reading because (among other reasons) it answers the question that the headline of this article poses.
So, what does Microsoft see in Google? To put it bluntly, the future. And, to the degree that Microsoft’s own offerings don’t fit into that image of the future, the software giant has reason to fear the search engine.
Sometimes Microsoft is a little slow to see changes in the landscape. Those of us who make our living watching and reporting these things had a “Well duh!” moment when we looked at how Ozzie described the way the world has changed in 2005. “Computing and communications technologies have dramatically and progressively improved to enable the viability of a services-based model. The ubiquity of broadband and wireless networking has changed the nature of how people interact, and they’re increasingly drawn toward the simplicity of services and service-enabled software that ‘just works’. Businesses are increasingly considering what services-based economics of scale might do to help them reduce infrastructure costs or deploy solutions as-needed and on subscription basis.”
In short, people are looking at technology to help keep them connected; they want it to simply work, and to simplify their lives; and if they can get what they need in the form of a service rather than having to pay for software, so much the better. Not having the most up-to-date software – or software that you don’t need coming bundled with software you do need – becomes one less thing to worry about.
What makes me think Microsoft is really looking hard at Google, however, is when Ozzie talks about a new business model: “Most challenging and promising to our business, though, is that a new business model has emerged in the form of advertising-supported services and software…No one yet knows what kind of software and in which markets this model will be embraced, and there is tremendous revenue potential in those where it ultimately is.” Google’s entire business model is based on search services supported by advertising. At last count, the company made 99 percent of its revenue from advertising. Nothing could be more obvious from this statement that Microsoft is staring right at the way search engines make money in general, and the way Google makes money in particular.
Ozzie also seems to understand that the desktop itself has become less important, and one’s connection to the Internet matters much more. “Computing has become linked to the communications network; when a PC is purchased, it’s assumed that the PC will have high-speed internet connectivity. At work, at home, in a hotel, at school or in a coffee shop, the networked laptop has become our `virtual office’ where we file our information and interact with others.” And what really matters in this Internet-connected environment? A number of things, but it’s where Ozzie believes Microsoft has fallen short that is most instructive: “We knew search would be important, but through Google’s focus they’ve gained a tremendously strong position.” No doubt that’s a position that Microsoft strongly covets.
Ozzie mentions Google again when he speaks of “a set of very strong and determined competitors” focused on Internet services and service-enabled software. “Google is obviously the most visible here, although given the hype level it is difficult to ascertain which of their myriad initiatives are simply adjuncts intended to drive scale for their advertising business, or which might ultimately grow to substantively challenge our offerings.” Both Yahoo! and Apple are mentioned in passing as much lesser threats.
So what makes up this new world? Ozzie mentions weblogs and wikis going mainstream and moving into the enterprise, as well as a number of companies that have built their business around community sharing and tagging. He also mentions VoIP, which Yahoo! looks set to get into soon. Most interesting is the fact that “Many startups treat the `raw’ Internet as their platform.” Search engines are the classic company to do this, of course, but Ozzie also described “interesting mash-ups” that “range from combining maps with apartment listings, to others that place RSS feeds on top of systems and data not originally intended for remixing.” Google Maps has proven to be very popular for these kinds of mash-ups.
But Ozzie narrows things down to “three key tenets that are driving fundamental shifts in the landscape – all of which are related in some way to services.” These are: the power of the advertising-supported economic model; the effectiveness of a new delivery and adoption model; and the demand for compelling, integrated user interfaces that “just work.” While Google’s name is not explicitly mentioned when Ozzie talks about these points, it might as well be all over them.
I already mentioned Google’s place in the advertising-supported economic model. Let’s look at the second element. What is the new delivery and adoption model? It’s a lot more do-it-yourself: users learn about products through blogs, searches (including keyword-based advertising), online product marketing and word-of-mouth. Plus, “It’s now expected that anything discovered can be sampled and experienced through self-service exploration and download.” To me, this sounds a lot like the lengthy beta periods that Google’s products go through.
One point about this second element that may signal a major change with Microsoft is Ozzie’s observation that “Products must now embrace a `discover, learn, try, buy, recommend’ cycle – sometimes with one of those phases being free, another ad-supported, and yet another being subscription-based.” That’s not something that Google has been doing, but I could easily picture a company such as Yahoo! adopting this model for some of their services. The alternative browser Opera had a similar model for a while. If Microsoft does go this route, it could mean a new advertising venue for ambitious SEOs.
The third element – compelling, integrated user interfaces that “just work” – is something that both Google and Yahoo! have been giving their customers for some time now. Both search engine companies offer a variety of services that include blogs, e-mail, customizable home pages, photo sharing, IM, and more others than I can remember off the top of my head. It is not difficult to switch between any of them as long as you are logged in.
The idea of seamless experiences is a big one for Microsoft, going forward. And Google is already there, or heading in that direction. Ozzie describes seven “seamless” experiences. Certain of these stand out in my mind, such as the one for a seamless marketplace: “Enabling you to research, find, buy and sell whatever you want through a seamlessly integrated purchase, billing & payment & points, advertising & lead generation & sales management system designed to satisfy the needs of both buyers and sellers.” Google and eBay already offer important elements of that experience – and if and when Google Wallet ever goes live, the search engine will get even closer to this ideal.
Two other “seamless” visions stand out to me as being Google-inspired. One is seamless communications, which Ozzie describes as “Communications and notifications – from voice to typing to shared screen; from PC to service-based agent to phone. Maintaining continuous co-presence with intimate friends and family; improving coordination amongst individuals who need to work together by reducing latency and adding clarity through shared context.” This vision did not originate with Google, but the search engine came up with some interesting ways to apply it, such as the way Gmail is “sorted.”
Another vision of Microsoft’s that makes me think of Google is seamless entertainment. Ozzie says that this means “Enabling you to create, store, organize, present, consume and interact with media of all kinds; accessing, caching, and viewing it anywhere you like regardless of where the media resides. Gaming experiences that bring two or two million people together across PCs, devices and the web.” Remember that Google’s stated mission is to organize all the world’s information and make it universally useful and accessible. If Microsoft’s description of seamless entertainment doesn’t fit in perfectly with Google’s mission, I can’t imagine what would.
What does this mean for SEOs? Well, you may need to start optimizing your sites for more than just search engines. What if someone wants to use your website on a mobile phone, for instance? Or your site might become a source of information for something within someone else’s program. How about a business accounting program that lets you order supplies for the company from within the program – and connects to your site to do the ordering online? You might need to consider advertising within online services that fill functions that would, in the past, have been handled with desktop software. SEOs have faced changes regularly before; these next ones could be big enough to redefine the field.