My new favorite DirectTV program to watch as I traverse the country on Frontier Airlines is the World Poker Tour. It’s somewhat addictive to watch the drama unfold as a cast of characters work their opponents, bluffing with outrageous showmanship or mature guile. Not unlike the drama we are starting to see unfold as Microsoft squares up to Google with the proposed acquisition of Yahoo! – “And so it begins.”
Microsoft is one of those companies that you never really root for but would be foolish to bet against. Microsoft understands distribution better than anyone. They also understand how to leverage their distribution and create participation and partnerships. Google paradoxically is less participative and more utilitarian. You use their services. Microsoft’s moves are generally substantive and focused on revenue rather than traffic and audience. They are able to execute with a single point of focus, which is amazing for a company their size.
That is not to minimize Google’s tremendous growth. However, a lot of their recent announcements have been more about the company’s aspirations, than substance. This creates pressure on their core revenues, which the last reported earnings show are having to work a lot harder because Google has hired ahead of its growth. Microsoft has significant diversification across its lines. It also has more key opportunities in the larger convergence pie than just the media revenue element of the web – Xbox, Uverse, In-car mobile and .NET. This pie is substantially larger than just media revenue. For a good in depth analysis look at:
http://www.pwc.com/extweb/pwcpublications.nsf/docid/5AC172F2C9DED8F5852570210044EEA7.
What Microsoft understands is how to leverage the extensibility through its architecture. Our own Truadvertiser.xls is a very good example of how this works, with a seamless integration between the desktop and the delivery architecture that works beautifully. This will challenge the regulators looking at the deal, as Google has not been slow to point out. However, application extensibility is the same between the desktop as it is to the mobile device. Google has a great little mobile GPS product to the handset – are they leveraging their web presence in the same way? The Yahoo! deal will grease the skids of this distribution and give them parity in the media side of the space.
On the other hand, Google understands data like no one else in the space. They know the value of utilizing data to create relevance in advertising thereby creating the efficiencies. Their Achilles is the same as AOL’s was ten years ago – they are a walled garden. When the next killer app(s) comes along (and it will) the lack of diversification and partnerships could be crippling. At that point they’ll have to bluff really well to win a pot with 10 high!
- Martin
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