A specter is haunting Redmond, Washington.
In the 19th century, you had Standard Oil. By 1890, Standard Oil controlled 88% of the refined oil flows in the United States. In 1904 when the lawsuit began it controlled 91% of production and 85% of final sales. In 1911 the company was broken up into several smaller companies.
In the 20th century, you had Microsoft. Microsoft currently has around 90 percent share of the client operating system market with Windows (but this will fall to 58 percent by 2007).
It might fall even more than that. One reason, of course, could be Google’s entry in the market. Of course, the market in question is not that of operating systems but rather, web browsers.
Let’s make one thing clear: Google realized long ago that MSFT and not Yahoo! was its biggest “risk factor,” and that it should not get defensive about search, but rather, it should go on the offensive and hit MSFT’s core. MSFT’s core of course, is not its Internet Explorer (IE) browser, but rather, its Windows Operating System (OS) and Microsoft Office Suite of Productivity Systems. The odd thing is that consumers do not see the OS per se, they know MSFT Office more than anything else. In other words, consumers do not play with the OS, they play with the MSFT Office productivity program suite. But because the OS is there, then MSFT can bundle its Office Suite, as well as its browser and capture market share, revenues and profits seamlessly.
The OS and Office Suite were so important that MSFT leveraged them to “Netscape” Netscape Navigator and make IE the market share leader in browsers.
Problem: Google realized that it could not beat MSFT directly because MSFT’s operating system was sitting on every PC. And because the OS is there, then by nature so would MSFT’s Office as well as its IE browser.
The first thing that pops up when a PC starts is the MSFT brand. Only once people logged on would they come across the Google brand, and even then, this would be after they see MSN.com, MSN search, Hotmail email etc.
Obviously, this was not a level playing field.
Today Google has one edge: its global market share of search, which flirts with 50%. That’s enormous. People use the Web first to send emails, then to search. That is why Google needed Gmail.
But Google knew that hubris aside, MSFT’s $30 billion war chest could pose a risk to its search market share, so it decided to get on the offensive and hit one of MSFT’s pillars: Office. Let’s pause for one second: Google, while a technology company, is a consumer brand. MSFT, while a technology company, is also a consumer brand but it gets its mojo by virtue of being a business brand. What I mean is that it is by virtue of integrating its OS into other business’ products (laptops, PC, PDAs etc) that MSFT became MSFT. If we were to ask what came first: the OS or the Office, the answer is clear: the OS.
But for Google to survive long term and not become an asterix in the history of business, it needs to attack MSFT and not sit back. It has chosen, by the looks of their R&D / product development (click here for more) and acquisitions (click here for more), to use its own brand equity amongst consumers and attack MSFT’s Office suite. To do that, it has decided to not develop or acquire one but bypass it through a browser.
This way, Google could compete with Internet Explorer (which has seen its market share erode to Mozilla’s Firefox, Opera and Safari… and, I suppose, Navigator) and start to eat away at MSFT’s stranglehold on people’s computing habits.
Let’s back up a bit: this week Google CEO’s Eric Schmidt stated that Google “was not interested in developing a browser,” notice he said develop, as in from scratch, in-house. Don’t be surprised if by the end of the year, Google acquires a small company that has developed a browser that Google fancies.
Why is a browser necessary for Google? And why should it acquire and not develop one in-house?
Read on.
These days, with the Internet being rigid and robust in terms of uptime and speed, people can technically do everything online. In fact, the mere notion of being handcuffed to one workstation/laptop/PC/etc. has become almost outdated. I have some files on my old PC in my home office, I do plenty on my laptop at both home and work, but I already realize that the future will be more about me logging into a system which will seamlessly retrieve all of my files, documents, etc. no matter where and on what device I am logging in from; be it a hotel, my office, my home, an airport, etc.
After all, if Google’s mission is to “organize the world’s information and make it universally accessible and useful,” you’d think that they would also have on their To Do list the objective of making yours or mine information readily available. Say you are sitting in a restaurant talking to someone about a project, instead of saying: “I’ll email you the report when I get back to the office,” you would suddenly be able to, with your cell phone or PDA, log in, attach and email the report to anyone even if on said PDA or cell you cannot really open, view and change the file (for screen size purposes, for example).
But even then, go back to Google’s acquisitions and you will see that Google is positioning itself for just that: a world where the world’s information will be increasingly accessed from mobile, handheld devices and not PCs or laptops. Of course, that is at least a full decade away, if not more.
(Google might also want to operate in a world where you turn a device on and the info is there, as opposed to today’s reality where you turn on your laptop and the info you are looking for takes 1-5 minutes to retreive, but that’s a separate discussion)
People will continue accessing the bulk of the ”stuff” they access from PCs, laptops for years to come much the same way that cars still roll on pavement and do not fly, even in 2006.
But long term, it’s inevitable that we want information anywhere and ASAP.
Google has already decided that their answer to MSFT Office needs to be online because that will make it a better - or dare we say it - more relevant suite of productivity systems. It’s also decided that because it is an online company, of course.
Already, MSFT has become a bit irrelevant because it has been slow to put its Suite online. If I had to estimate, the frequency of times I’ve opened Word to “Create a New File” has gone down every year since I began working in IT and new media. Am I alone? Probably not. The reason is simple, there are more and more alternatives for one. And second, I’d rather not have some things on a Word document because its retrieval might be harder than numerous alternatives.
MSFT needs to migrate their services online, and they have begun doing so, but they seem hellbent on doing so to capitalize on advertising, without realizing that they need to do so for mere survival, and not for added monetization. Advertising revenues might come as a result of this migration, but it should not be the raison d’etre of the migration.
Google knows this and understood it early on. Recently it acquired Writely, a free web word processor which lets you share and collaborate your work online. That’s obviously positioning it against Microsoft Word.
When you look at any of Google’s acquisition in a vaccum, you often ask “why?” But when they line up one next to another, you see that Google wants people to essentially bypass MSFT Office altogether. Of course, Google needs to do a lot more, in terms of Excel, Powerpoint, Outlook, Access, FrontPage, etc. but slowly but surely, it is lining up its own version of everything MSFT offers.
Google’s Gmail, despite all of its shortcomings, already offers a good alternative to Outlook. If only the darn thing would not be down every once in a while… but then again, Outlook is always “down” until you connect to the Web to download your email, so all factors being equal, I have set up our entire office on Gmail to provide a better communications environment.
Obviously, in the absense of a web portal, all of these offerings create a haphazard mix of products and services that are nowhere near close being a threat to MSFT. That is, unless Google offers a browser that integrates its search box, Gmail, Google maps, Google earth, Picasa image management, Google News, Trends, Google Calendar etc. etc.
With 50% of the global search market share in its backpocket, Google can easily convince a lot of people to try the browser. Before you know it, suddenly, Google becomes the proverbial windows to the World Wide Web. It does not need an OS, it does not need a suite of productivity systems like Office.
If you doubt Google’s ability to penetrate MSFT’s shield, just think of how many people have downloaded Google’s toolbar. I have. So downloading a browser is really just a marginal obstacle to overcome. Google has such a strong brand equity amongst consumers online that getting them to swap IE for Google’s browser will be relatively simple.
As you can see, if Google wanted to develop its own browser, good or bad, it could almost instantly cut IE’s market share in half.
So imagine how quickly it could strike MSFT’s fortress by acquiring a company that already has an expertise (and market share) in the browser space…
In this context, it is not impossible for Google to become as big of a monopoly as Standard Oil or MSFT were (do I need to insert “allegedly” before MSFT?) in the 19th and 20th century respectively. After all, if people go to the Web to email, search, check the news, weather, etc., all within Google’s browser, you can imagine that its stranglehold on Web traffic (measured by Google Analytics, of course) would be considerable and enough to make Messers Gates and Rockefeller blush.
Indeed, a specter is haunting Redmond, and it emanates from Mountain View, California.
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June 4th, 2006 at 11:18 am
[…] If you needed more proof of what I wrote about yesterday, about how Google is taking on MSFT by getting consumers to get over their habit of working with MSFT’s Office productivity system suite, Google’s two partnerships with Sun Microsystems and Dell say it all. […]
June 7th, 2006 at 11:04 am
[…] But, as we first wrote here about Google’s plan to change consumers’ behavior and make them avoid MSFT’s Office altogether and become as dominating as MSFT was in the late 20th Century (especially once, not if, they launch/acquire a browser, read about that here), Google will in the mid and long term cause MSFT some considerable headaches. […]
June 7th, 2006 at 4:53 pm
[…] Taken from here. All to say, I have thus far not cared much about the Google bandwagon, it’s a great company and all, but increasingly, I do feel that the company is on its way to not only becoming but cementing its place as the 21st century’s answer to IBM, GE, MSFT, etc. June 07th 2006 Posted to Uncategorized […]
July 27th, 2006 at 5:06 pm
[…] Before we move ahead, it is important to note that while searching is the second most common function online after email, many sites are not found via search engines, via a link in an email, via a link on a site, but rather, through type in traffic (this is why default search engines in a browser and operating system are so important, but that’s a separate issue, one I examined here). […]
July 28th, 2006 at 4:55 pm
[…] Google’s increasing difficulty to surpass investors’ expectations - read. Yahoo’s Google Envy - read. Google shouldn’t attacking Microsoft’s monopolistic ways - read. How Google could compete in online audience measurement through its search data and Google Analytics - read. eBay blocklisting Google checkout smacks of hypocricy - read. Should Google buy Facebook? - read. Google/Yahoo! merger/acquisition more likely than MSFT/Yahoo acquisition - read. Adobe partners with Google in an anti-MSFT move - read. Does Google dominance scare News Corp.’s FIM from launching search engine? - read. Google’s incoming PR nightmare - closer than it might appear - read. Will Google be the 21st century’s version of MSFT-esque monopoly? - read. […]
October 10th, 2006 at 1:58 pm
[…] The same could technically happen to YouTube’s competitors? How do they expect to compete in the marketplace with a YouTube/Google competitor? Some time ago I wrote that Google was well on its way to becoming the 21st century’s version of a monopoly. I did not say that in a bad way, rather, I pointed out that search’s position and Google’s leadership position in search make Google far more important than MSFT or anyone else in this century. […]
October 22nd, 2006 at 10:34 pm
[…] What’s more, Google currently makes 99.9% of its revenues from paid search. So this all assumes that paid search continues to grow. Of course, paid search is growing, as are other areas of online advertising. Just this past month, Morgan Stanley’s Mary Meeker came out and boasted that the US online ad market would be a $32 billion one by 2010, upping eMarketer’s $25 billion estimate. Mind you, both eMarketer and Mary Meeker have a lot to gain by pumping these numbers, that’s how the system works. And admittedly, I am certainly not drinking the Google koolaid and implying that Google will be making $32 billion in revenues by 2010 or that it will be worth more than Microsoft in 2010, I am trying to show that numbers can be played with. When I’m not writing on this site, I’m busy building a company where interested parties ask me to define the market we’re going after, formulate a valuation for our company and what not, I do it as a fun exercise but am the first one to show how laughable such models are… just as crazy as RBC’s Jordan Rohan to come out and say that MySpace could be worth $15 billion in a few years. The problem is that he’s paid to come up with such models, I’m not. Point is: if Myspace and its social sexual predators can be worth $15 billion, heck, why can’t Google be worth more than MSFT? I’ve argued that Google is well on its way to become the Standard Oil or MSFT-esque monopoly of the 21st Century. […]
November 14th, 2006 at 11:47 am
[…] But, when you’re also a writer of a website that questions what Wikipedia should be worth as a for-profit, if Google can overtake MSFT in market cap, whether Google overpaid for News Corp.’s search business or if it’s the 21st century version of Standard Oil or Microsoft, you can’t help but ask the question: […]
September 10th, 2008 at 8:50 am
[…] Now we hear that the Department of Justice is looking at pursuing Google - something we suggested all the way back in 2006 in Google is the 21st Century’s Answer to Microsoft and Standard Oil. […]
January 1st, 2009 at 11:49 am
[…] cutting in growth areas, MSFT is either throwing in the towel or contenting itself to move from the monopoly category to the utility […]
April 5th, 2009 at 9:01 am
[…] 2006, I wrote an article called Google is the 21st century’s version of Standard Oil and Microsoft, the next generation monopoly. In search and in video, Google and its video unit YouTube […]
August 13th, 2009 at 9:35 pm
[…] Google is 21st Century’s Monopoly - Will Google Surpass MSFT’s Value by 2010? - Will Google Become World’s First Trillion […]