The New Internets: Is Microsoft Already Ahead of Google? Who Needs Yahoo!?

Google has a clear lead over Microsoft when it comes to desktop based internet search and advertising. The big pond that Google is going after to expand its market is to aim for a bigger share of the advertising pie that includes print, radio and even television advertising.

Meanwhile, Microsoft is trying to catch up with Google in search and advertising. But that is not where they can out maneuver and beat Google. This may be the reason Microsoft is targeting ubiquitous computing - the new internets that are yet to be dominated.

My Car's Internet
Americans spend a significant amount of their lives in cars commuting and picking up kids from school. Microsoft, working with Ford, is far ahead in the connected-car game. Think of it as the Microsoft Operating System for Cars.

Source: msmobiles.com

The addition of Yahoo! to the basket of technologies and services Microsoft can offer, especially Yahoo! Go, can help Microsoft further gain leadership here. Yahoo! Maps activated by voice integrated with your car's GPS. The possibilities are endless.

My TV's Internet
After the car, we spend a significant portion of our lives vegetating in front of televisions. And even though the amount of time we spend on TV vs computers is declining - it is still significant.
Microsoft IPTV initiative, now re-branded as Microsoft Mediaroom, is a leader in this space. And Microsoft has done a tremendous job of building alliances around this. Taking a page from its Windows play book where the Dell, HP and IBM's of the world helped it become the leader, Microsoft is tieing up with partners be it global telcos like BT or regional leaders like Reliance in India.

Source: Microsoft Watch

My Game Box's Internet
So, we all know that after the initial hiccups and skepticism, XBox strategy is finally ready to pay dividends (Microsoft is expected to finally make a profit on XBox this year) - but even without the profits, it is hard to deny that XBox has captured a significant market share. Yahoo! has done well with its casual games and is a leader in the space. It would be interesting to see what synergies can be brought to bear through this alliance.

Source

Searching for Success
So, yes search and advertising is a huge market. And Google could become the first trillion dollar market cap company according to some. By the way, where is Henry Blodget now that the Google stock growth has, how shall we say it, slowed down. I guess Henry Blodget timed it perfectly again - pretty much making the most bullish claim at the height of Google valuation - that should have been a signal to the rest of us (see my and Barron's post on the Blodget call).

Henry Blodget Timed It Again Perfectly In October
Image Source: Yahoo! Finance

Coming back to search and advertising - even if Google continues to win and maintain marketshare in search and advertising, Microsoft can win big by focusing on the new internets.

Theoretical Framework: Blue Ocean?
Although there may not be any method to this madness (the $45 billion bid), I am drawn to the blue and red ocean analogy put forward in the book, Blue Ocean Strategy. Here is a summary from Wikipedia.

Blue Ocean Strategy

The metaphor of red and blue oceans describes the market universe. Red oceans are all the industries in existence today—the known market space. In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here companies try to outperform their rivals to grab a greater share of product or service demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities or niche, and cutthroat competition turns the red ocean bloody. Hence, the term red oceans.^[3]

Blue oceans, in contrast, denote all the industries not in existence today—the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Blue ocean is an analogy to describe the wider, deeper potential of market space that is not yet explored. ^[4]

The corner-stone of Blue Ocean Strategy is 'Value Innovation'. A blue ocean is created when a company achieves value innovation that creates value simultaneously for both the buyer and the company. The innovation (in product, service, or delivery) must raise and create value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current or future market. The authors critique Michael Porter's idea that successful business are either low-cost providers or niche-players. Instead, they propose finding value that crosses conventional market segmentation and offering value and lower cost.

Clearly, search and advertising is a red ocean with existing leaders and several startups getting funded by venture capitalists. Microsoft would do much better to use both its existing assets and Yahoo! properties - to go after the new internets.


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Eating Crow: Microsoft pursuing Yahoo! again

Will I have to eat crow on this one?

This has been long awaited by many industry watchers. Here is my Dec 2006 post where I ask the question and argue that its highly unlikely that Microsoft will acquire Yahoo!. Now, it appears that this deal may actually be taking place. Or is it?

The Yahoo? question: Will Microsoft buy them?

Yes, Yahoo! has gone from an exciting successful brand for consumers and employees to Yahoo?, a me-too player with more questions about its future than answers. And the question of Microsoft buying them keeps popping up.

..... (read full article)

What do you think?

Hooking up on the internet

I know what you are thinking. Why is Anshu talking about hooking up on a software blog? Is there yet another certified love finding service to challenge eHarmony? And how does this fit into the enterprise software or web2.0 world? Well, rest assured the world, at least the virtual one, is not about to come apart.

This blog post is about making real applications hook up (dictionary meaning: To assemble or wire) without writing code. Teqlo is a platform for end users to build mashups of web services. It is a bit hard to explain why an end user (non programmer) would want to build a mashup till you think of millions of users today that 'build' applications in Excel by writing formulas and connecting cells and spreadsheets. With the web acting as the source of much of the data (email, pictures, reports, maps), many users are performing tasks that require input from various web sites (technically, we services) and need to be combined in various task flows and computations.

The easiest example to think is of a sales person who wants to call various contacts in his Salesforce (or Siebel On-Demand) CRM contact list using Skype. He either has to cut and paste, or wait for a programmer to create a mashup. Teqlo would allow such users to build their own mashups.

Intercity Mashups using 4 letter APIs (R.O.A.D.)

I was recently invited to a preview demo of Teqlo before its launch by Jeff Nolan (Teqlo). He built a real mashup in less than 15 minutes live during the demo. The best way to picture this is by seeing the Teqlo movie put together by Rod Boothby (also from Teqlo). The tools are not yet pretty- its a small startup focusing on functionality and figuring out complex technical issues (micro-formats) and how to hide them from the average consumer. But they are functional and they are now allowing users to sign up for a beta.

Recently, Yahoo! launched Yahoo! Pipes - and its the closest in its mission to Yahoo! Pipes. However, there are some key differences. Yahoo! Pipes works on (RSS) feeds - essentially allowing you to filter and combine feeds. Teqlo, on the other hand, works with web services such as EBay, Amazon etc.

The value of Teqlo's platform will go up as more and more mashups (Teqlets) are built and shared by users. The challenge for them is to get enough users excited to build out an interesting set of mashups that can then be copied and enhanced by others. Although, the full details are not yet worked out- Jeff did share that Teqlo will look to create a market place of apps for users and share in the profits. It is also investing its own resources in building some apps to get to the critical mass. Salesforce's AppExchange is one model to emulate in this space although Salesforce is constrained by its CRM roots and most of the AppExchange apps are what I would call CRM bug fixes and enhancements. (Yes, you do not have to be a savvy reader to see my bias here.)

Both Yahoo! and Teqlo are focusing on the (extranet) web and not the enterprise. I personally think that the ability to connect enterprise applications with web based applications may be the most interesting place for application of such tools- the reason is that Google Maps+FlickR, or Salesforce+Skype problems are common enough that a developer can write code, post it and make some money (or a name) in the process. Where the end user is left high and dry is when she is trying to hook up the recruitment system (big HR) or enterprise CRM with Skype to call down the list of candidates. Jeff's response is that Teqlo is initially focusing on the extranet initially but he clearly sees value in enterprise mashups too- after all, he did work for SAP for many years and know this space wll.

I am curious to see how this plays out. After all, many end users are not even comfortable or adept at Excel spreadsheet apps. It is the business analyst with some techinical knowledge that builds out spreadsheet apps, reports and small apps (Oracle Application Express/HTML DB) in many companies. A new job function (Business Analyst 2.0) may emerge to meet these needs.

What do you think about mashup tools? Do you think this is too early? Have you ever felt the need to build such an app?

The Yahoo? question: Will Microsoft buy them?

Yes, Yahoo! has gone from an exciting successful brand for consumers and employees to Yahoo?, a me-too player with more questions about its future than answers. And the question of Microsoft buying them keeps popping up.

Here are the reasons Micrsoft is not likely to buy Yahoo!
-Microsoft acquistion strategy and history shows that they look for small teams with exciting new technology. Yahoo has neither of those qualities. It is an ageing gorilla.
-Microsoft does not buy market share. They didn't do it during the dot-com when they could have bought out several small dot-com companies with 'eyeballs'. In fact, Google belongs to this camp too except with their recent purchase of YouTube where they basically paid for marketshare.
-Microsoft likes to have majority of its core development done at Redmond and very few other development centers. Yahoo cannot be absorbed in this manner. Although this is not a very big issue.
-Microsoft thinks they can beat Yahoo. And give them enough time and enough releases, and they probably could.

So, what does it mean for Yahoo!? Well, they could be sought out by media giants (unlikely given the whole AOL fiasco), telecom giants (unlikely given their reluctance to spend billions on 'content' companies) or private equity (unlikely given that Yahoo is not yet a cash cow, although you could turn it into one by shutting down all properties except profit making ones like search, mail and then use Google's ad syndicate to generate revenue).


The truth is that Yahoo! is a good business showing steady growth and generating cash flow. If there were no Google, investors would be satisfied and happy. This is a situation where Yahoo! looks bad in comparison although it has done a fairly good job- look where the other portals like AOL, Excite, etc. have gone.

(As always, the opinions expressed here are entirely personal.)