Microsoft Live? Big Whoop

After finally catching up on the Microsoft Live hoopla, I agree with Fred Wilson: no big deal.  If there's anything truly new or revolutionary there, it isn't obvious, and after reading all the breathless "Microsoft Goes to War With Google!" headlines, I once again found myself embarrassed for being a part-time member of the media.

I've argued here and in Cherry Hill Research reports that Microsoft and Google are essentially in two different businesses and that, unless one or the other company goes insane, they'll stay that way.  Microsoft is in the enterprise software business (platforms and aps paid for by companies) and Google is in the consumer web business (paid for by advertising).  Yes, for the last decade, Microsoft has been trying to extend its dominance to the web business and, all in, it's done a commendable job.  But it is still running a distant third to Google and Yahoo! in the web business and nothing in Office or Windows Live is going to change that.

Microsoft is strong in communications products--email, IM, and, one expects, eventually VOIP--and the Live brand might (emphasis on might) help with that.  Google, meanwhile, is weak in comms, and is showing no signs of getting its act together there.  Right now, however, comms products are ancillary free services, not revenue generators, and Google is doing a bang-up job of showing just how much money a company can make without them (and with only a tiny search window). 

Microsoft, meanwhile, is showing just how little money a major web brand can make while owning the PC desktop, the browser, major IM and email platforms, and just about every other asset one could ever imagine.  Why?  Because owning the PC desktop and browser, at least, are largely irrelevant from a web profit point of view.  It's owning the hearts and minds (and habits) of web search and content users that's critical.

Windows Live seems to me to be largely a rebranded and retooled MSN with some cool new functionality.  Perhaps someone can explain why--as a few in the media have suggested--this is going to suddenly entice Google, Yahoo!, and other users to abandon their current portal habits and flock to Live.com.  And while we're at it, perhaps someone can explain why small business users would prefer having Microsoft advertisements on their free Office Live web sites (or, worse, in their productivity and/or communications software) instead of paying a relatively small fee to own and control them completely.

Comments

[Bruce Hamm]

What you are missing here is that this is the beginning of the whole of Microsoft (not just MSN) embracing the importance of advertising as a major revenue stream at the company. That kind of momentous shift - in organization, talent and capital - which really doesn't seem to have been present to date, presents only significant competition for both Yahoo and Google. Unlike eBay, there are not network effects and lock-in at work with Google's advertisers. Marketers and the SEMs that represent them will shift spend quickly and at will when there is better value for those dollars.

Henry, what would be interesting to hear you talk through is the steps Microsoft could take to successfully take on Google, unless you believe it's a done deal.

[Henry Blodget]

Thanks Bruce. One great thing about these forums is the ability to throw ideas out and get smart feedback immediately. The point about advertising is a good one, as is the question about what Microsoft CAN do about Google. I'll put some thoughts into a post...

[Faulkner Lawrence]

Do you think there is any chance the Microsoft could purchase Yahoo!? THere has been plenty of collaboration between the 2 lately, they have a commone target in Google, and it would propoel them in the search business.

[Jack]

> Do you think there is any chance the Microsoft could purchase Yahoo!?

Would the US gov allow that? Microsoft could easily spend tens of billions of dollars buying companies rather than giving it away to shareholders....

Of course, net companies look somewhat overpriced ;-)

[Dimitar Vesselinov]

"Microsoft is in the enterprise software business..."
Really? There are almost 20 million blogs on MSN Spaces! Yes, no money, but a lot of eyeballs you could make a profit on...

Meeting Steve Ballmer in Munich...
http://www.loiclemeur.com/english/2005/10/meeting_steve_b.html