Microsoft and Disruption in Search

May 6, 2009

Ina Fried has written an interesting article called “Ballmer: We Need to Be More Disruptive in Search” here. Disruption and Microsoft are not two words I associate. Google and disruption, in my opinion, have the stickiness of peanut butter and jelly. Ms. Fried wrote and article that presented a number of statements made by Mr. Ballmer in a talk at Stanford University, home of the Gates center and the Paul Allen network facility. Oh, Stanford was the stomping ground for Messrs. Brin and Page. What I liked about Ms. Fried’s write up was her pulling out verbal bullets. I don’t want to cite the statements attributed to Mr. Ballmer in their entirety, but I want to highlight two remarks:

First, “Ballmer said Microsoft can’t afford to outspend Google in the search business or participate in each facet of the business.” The talk about Microsoft billions has accepted the reality of the cost and time barriers that Google has erected. Unable to spend to catch up or better yet, leapfrog Google, Microsoft’s statement appears to admit defeat. I got some pushback when I asserted last year at a conference in San Jose that Google had won in search. Well, now Mr. Ballmer seems to be reaching the same conclusion.

Second, this alleged statement: “We can experiment with new business models. We have less to lose than the market leader does.” The remark gave me pause. I am not sure that Microsoft has “less to lose”. Microsoft has multiple revenue streams but only a couple produce the cash surplus that keeps shareholders somewhat happy. Google has one revenue stream, advertising. Missteps for either company can have a very big downside. Microsoft is a $65 billion plus company. Google is a paltry $20 billion. In terms of financial downside, Microsoft seems to me to have more at risk. If Google makes headway in the enterprise and with Google Apps, Microsoft may face a Rubicon in the data world. Stopping or moving forward could be equally risky.

Check out the original.

Stephen Arnold, May 6, 2009


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