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.
Google/Sun (from CNET):
a partnership that could help shift personal computing out of Microsoft’s domain and into Google’s. (…) Sun has the open-source OpenOffice.org software suite and its close relative, StarOffice. It has Java software, which is well suited for network-friendly applications that run on any Java-enabled PC.
As for Google, its products have become daily resources for a vast number of computer users, and it offers a growing suite of software. In addition, it has the ambition of becoming the company that supplies network-based applications.
In recent years, the power of software provision shifted toward Microsoft and away from companies that distribute software, whether through stores or directly to customers, Sun President Jonathan Schwartz wrote. Now the shift has gone further, as the Internet has allowed companies “to bypass Microsoft’s legendary distribution power,” he wrote, specifically mentioning Google as an example.
Dell/Google (from BBC):
Dell computers will contain Google software including several personal computer applications, a Google toolbar and a co-branded homepage.
The agreement between the world’s largest personal computer company and Google, comes after the two firms announced in February that they were in talks about installing Google’s software on Dell computers. The talks came about after Yahoo pulled out of negotiations.
The deal could mark a major turning point for Google and mark a serious threat to rival Microsoft. Microsoft and Google have adopted different business models. Instead of selling software to make a profit, Google makes money by selling advertising to firms that want access to those who use its free products.
Microsoft has identified this sort of software as a key threat to its business, which relies on the healthy margins it earns from Windows and its Office productivity suite.
Microsoft has decided to invest heavily into search and play catch up with Google, but if Google continues to eat away at Microsoft’s Office business and mainly, consumer’s habits towards the use (or lack thereof) of Office, then it might find itself becoming the underdog despite its superior market value and cash hoard. Today MSFT is worth twice as much as Google, and while I am not sure if Google is overpriced, underpriced or priced right, the truth is that it’s not inconceivable to see Google one day being worth more than MSFT. Of course, a mere advertising slowdown and Google is dead in the water. Of course, that might not happen…
The problem for MSFT is that it is easier for Google to sway people away from Office than it is for MSFT to build up market share in search. After all, once computer devices are connected to the Web 24/7, surfers are closer to Google than to MSFT (for more on that, check out my post on Google’s browser-envy).
The last time the dynamics of the search engine industry changed fundamentally was when Google got featured by Yahoo! That set the stage for Google’s leadership position. These days, it is insanely hard for a search company to build market share. I say this as [oh-oh, shameless plug warning ahead] someone who has developed a search product, http://www.metamojo.com, but who has done so because:
a) I was always intrigued with vertical search,
b) it was a product I personally needed for my type of work and felt that others would too,
c) I felt that I needed a search component in the network I have built (and not because I felt like I needed to compete with MSN, Ask, Google or Yahoo!) and
d) I won’t lie, as much as I rather build a company and never sell it (unlike the Web 2.0. mentality, I suppose), I realize that it would be fairly easy to showcase any search product to one of those companies whose core competency is search, and whose mere survival relies on getting every edge possible and avoiding their competitors from getting any edge possible.
e) High tech companies are always on the lookout for people who can develop search products and market them.
But like I said, enough shameless promotion. Back to MSFT/Google:
What’s important with Google is that despite the perception many have of Google of being a go-in-alone kind of tech company, it has developed a three-pronged strategy (like most companies) revolving around R&D, M&A and strategic partnerships.
But when it comes to the latter, it seems to focus on out-of-favor companies that seem to be in need to a tonic. Fitting, I guess: after all, Google founders Larry Page and Sergey Brin inspired themselves by value investor Warren Buffett in their prospectus and their refusal / reluctance to split their stock, so it is only normal that they prefer to strike deals with out of favor companies and not give in too much (and thus “overpay”) to industry darlings and favorites who might strike deals on terms that are not beneficial to Google in the long term. Of course, in the absence of those details, I am just pontificating…
Surely things will get more, and not less, interesting over the next few months and years.
What do you think: in 2010, which company will be worth more:
- Yahoo! - today worth $40 billion, but perfectly positioned to benefit from the growth in online branded advertising
- Google - today worth $120 billion, but perfectly positioned to benefit from continnued growth in search
- MSFT - today worth $230 billion, but perfectly positioned to crush any competitor with its Windows OS and MSFT Office productivity system suite dominance (we’ll avoid the M word).
And… is there one old media company with enough new media pizzazz that you think can catapult itself to compete with young guns like Google and Yahoo!
Email me at ash @ mojosupreme . com (without the spaces) or leave comments.
And if you want an insight into Google’s strategy to become the MSFT of the 21st century, read what I wrote yesterday.
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