Google dominating Microsoft? Gimme a Break!
Maybe it’s because I live in northern California rather than Seattle, but I can’t seem to open a local newspaper or magazine without seeing the faces of Sergey Brin and Larry Page, the baby-faced billionaire founders of Google. I give them, and Google, all the credit in the world. Apparently the market does too, valuing the company at, more or less, a remarkable $300 a share (Brin and Page aren’t into splitting stocks). But where I draw the line is when I read that Google is kicking Microsoft’s butt. Writers love to use sports and jock lingo to describe the business world, but reality is much more complicated than that.
So let’s put things in a perspective that I’m pretty sure that Brin and Page would subscribe to. First of all, Google doesn’t dominate Microsoft. Nobody dominates Microsoft. Google dominates search. Google concentrates on excellence in every conceivable permutation of one thing: search. Everything else (e-mail, photo software) is a loss-leader to build the entre and customer loyalty for the search brand. The upshot? Google is not competing with Microsoft, though I think Microsoft is competing with Google. Microsoft is frantically following the lead of Google, be it in video file search, local area search, desktop search, search designed for cellphones, scholarly journal search, etc.
What does Microsoft dominate? Well, sometimes it’s hard to tell. Microsoft’s “one-stop-shopping” strategy has turned it into a steady, dividend-issuing mature company that the Economist likens to a utility, “safe for widows and orphans.” Nothing wrong with that. There’s also nothing wrong with the fact that at nearly $40 billion, Microsoft is ten times the size of Google with a core quasi-monopoly product line called Windows and Office, all growing at 15% annually. We should all have such problems!
Yet low-priced or zero-priced competitors like Linux, Firefox, SimDesk and even Yahoo! continue to chip away at Microsoft’s core, and the company doesn’t seem to have fresh alternatives. Its huge R & D budget is indiscriminately applied to numerous directions, because the company is into just about everything digital: servers, videogames, media, photography, browsers, operating systems, e-mail, blogging, whatever—but really, what keeps Microsoft strong are the only two suites which the company does dominate big-time-- the basic Windows and Office products. So there’s your answer as to what Microsoft dominates.
At the end of the day, Google has the momentum and Microsoft is a follower in search. But that doesn’t mean that Google is kicking Microsoft’s butt. Microsoft is so much larger and is in so many sectors that Google couldn’t, and shouldn’t compete in. Even though Google has an unbelievable $81 billion market cap, Microsoft’s is even more astronomical—nearly $300 billion—which means the market still projects solid earnings growth from Redmond, Washington.
Even so, Google gets the headlines. I can understand why. For explosive product innovation and for real growth (in 2005 relative to 2004, profits soared 500%, revenues doubled, and stock hit an astronomical 300) you don’t need to go much further than Google, which seems to offer a new direction in search, and in digital advertising technology, every two months. And the fact that over 100 Microsoft scientists and managers have left for Google has got to sting Bill Gates.
So you see, things aren't as simple as they are on a playground. Let’s give Google its due. It’s a great company. It’s annoying the hell out of Microsoft. But kicking Microsoft’s butt? I hardly think so.
So let’s put things in a perspective that I’m pretty sure that Brin and Page would subscribe to. First of all, Google doesn’t dominate Microsoft. Nobody dominates Microsoft. Google dominates search. Google concentrates on excellence in every conceivable permutation of one thing: search. Everything else (e-mail, photo software) is a loss-leader to build the entre and customer loyalty for the search brand. The upshot? Google is not competing with Microsoft, though I think Microsoft is competing with Google. Microsoft is frantically following the lead of Google, be it in video file search, local area search, desktop search, search designed for cellphones, scholarly journal search, etc.
What does Microsoft dominate? Well, sometimes it’s hard to tell. Microsoft’s “one-stop-shopping” strategy has turned it into a steady, dividend-issuing mature company that the Economist likens to a utility, “safe for widows and orphans.” Nothing wrong with that. There’s also nothing wrong with the fact that at nearly $40 billion, Microsoft is ten times the size of Google with a core quasi-monopoly product line called Windows and Office, all growing at 15% annually. We should all have such problems!
Yet low-priced or zero-priced competitors like Linux, Firefox, SimDesk and even Yahoo! continue to chip away at Microsoft’s core, and the company doesn’t seem to have fresh alternatives. Its huge R & D budget is indiscriminately applied to numerous directions, because the company is into just about everything digital: servers, videogames, media, photography, browsers, operating systems, e-mail, blogging, whatever—but really, what keeps Microsoft strong are the only two suites which the company does dominate big-time-- the basic Windows and Office products. So there’s your answer as to what Microsoft dominates.
At the end of the day, Google has the momentum and Microsoft is a follower in search. But that doesn’t mean that Google is kicking Microsoft’s butt. Microsoft is so much larger and is in so many sectors that Google couldn’t, and shouldn’t compete in. Even though Google has an unbelievable $81 billion market cap, Microsoft’s is even more astronomical—nearly $300 billion—which means the market still projects solid earnings growth from Redmond, Washington.
Even so, Google gets the headlines. I can understand why. For explosive product innovation and for real growth (in 2005 relative to 2004, profits soared 500%, revenues doubled, and stock hit an astronomical 300) you don’t need to go much further than Google, which seems to offer a new direction in search, and in digital advertising technology, every two months. And the fact that over 100 Microsoft scientists and managers have left for Google has got to sting Bill Gates.
So you see, things aren't as simple as they are on a playground. Let’s give Google its due. It’s a great company. It’s annoying the hell out of Microsoft. But kicking Microsoft’s butt? I hardly think so.
posted by Oren Harari at 5:50 PM
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