Why Microsoft Fails to Win Online

21 Comments

windows-games-chessMicrosoft’s battle to conquer the web has a certain Moby-Dick-like quality. Me-too products, muddled branding strategy and constantly playing catchup with competitors has reduced the king of software to a punch line. The more they try, the further they get. In the third quarter of 2008, Microsoft’s (s msft) online revenues were $770 million, up 15 percent from Q3 2007. But the losses jumped 80 percent year-over-year to $480 million. Adam Lashinsky succinctly sums it up:

Microsoft is so busy playing defense against Google. Yet Microsoft hasn’t done a great job with that either. Even as it has spent money on data centers and marketing gimmicks like giving cash back to users of its search engine — the online equivalent of banks handing out toasters for opening accounts — Microsoft continues to lose share to Google.

Microsoft’s portion of U.S. search queries was 8.5% in September, according to comScore, down from 10.4% in January 2007. During the same period, Google’s share rose from 53% to 63%. And Facebook, MySpace, Google’s YouTube, and other, newer sites have reduced MSN to also-ran status in terms of web popularity.

That at least five high-ranking Microsoft executives have a piece of the online portfolio illustrates another part of the company’s predicament. Microsoft doesn’t speak with one voice when it talks about the Internet. (via Fortune)

Perhaps that explains why it was willing to make a deal with that bureaucratic quagmire called Yahoo (s YHOO). Regardless, do you have any advice for Microsoft as it tries to win on the web?

Photo courtesy of Microsoft Corp.

21 Comments

Shadowlayer

Yeah I have an advice: QUIT, give up and stick to what you know: selling bloated, overpriced and unreliable software to dumbasses and governments.

Rich Tehrani

Google is cool and hip and the company has made few mistakes. Microsoft is too old to be cool and hip. As some of the commenters above point out, MSFT has some great services but suffers from a branding issue.

The further challenge for the company is it is in so many markets it is tough to communicate effectively about what the company stands for and/or does.

The recent MSFT/Seinfeld ads were a chance for MSFT to tell the world why they should be the center of your tech and info world. They didn’t get this message across. We left wondering what the hell was going on.

Microsoft owns so much of our lives between their dominance in phones, video games and operating systems across our homes and enterprises. Again, they need enhanced focus on the brand and outward marketing in key areas.

Google is the toughest competitor in the world to have but no company stays on top forever.

Jack

Yes, buy Yahoo (much cheaper now more than ever), then Facebook (right now Facebook should easily sell for 2 billion, rumors are investors want an exit since the network is burning cash and can’t monetize for peanuts). Then you are fine..simple really!

Leo

@Om

Interesting observations. In my opinion, Microsoft has built or is building compelling online integrated experiences for each of the items you listed. e.g. The Xbox Live/ Netflix integration has been truly amazing. The recent Zune Pass update. The hosted Exchange offering. Mesh usage growing as a result of Silverlight stealthily making its way onto HP/ Lenovo laptops, Verizon phones and soon being bundled as part of the Java runtime downloads. Just some of the many reasons why I think Microsoft and their leadership do get the web and do believe they can do things differently.

The only reason I think they have a chance is that they’re delivering integrated experiences – very slowly, but still showing potential to be part of a very connected lifestyle. From a single contact list, to events, to social life streams – pieces of a larger puzzle are beginning to fall into place. As I said earlier, it may not be the easiest / simplest approach that companies like Google / Apple get credit for, but it is an approach that is tailored to all audience groups.

Om Malik

@Leo

Actually I do give them credit for their cloud computing efforts, xbox, mesh, photosynth and even microsoft exchange. i give them a lot of credit for their efforts on voip/unified communications and also on their sharepoint vision. they do a lot of things right — web they don’t.

Leo

You must give MSFT credit for trying. Xbox, Zune, Mesh, Photosynth, Live Profile, Azure, Search / Kumo are all solid examples of MSFT paving new approaches to markets traditionally dominated by other vendors. Clearly, there are different audiences that companies cater to – but when one vendor is trying to offer a product that appeals to all segments there is bound to be traction, obstacles and a whole host of other issues. Despite all this, they’re still hacking away – trying new ideas, scrapping old ones, generating buzz …

If anything, a glance at the latest Comscore report at http://www.marketwatch.com/news/story/comScore-Releases-October-2008-US/story.aspx?guid=%7BFE165F0B-907D-4869-BDC9-379F061AEB6E%7D shows there’s still change happening and MSFT is on the right path.

ronald

Most people think what I mention is pie in the sky, so let’s ask somebody in the trenches.
@OM
Om would you be willing to submit articles, product reviews to my company. If we in return give you a share, determent by some VODOO logic, of the click through done on another side. If somebody read your article then read some other reviews checked prices whatever and then clicked you get a share, in the background we keep track of it and generate some better click through for the product. I mean come on , ever tried to compare a product on Best buy lately? A Hyndai would look like a Lexus(I’m a Lexus driver).
Second question would you reduce links, so people will go through our system and not Google or whatever uses links and just click through.

If you pay enough people and companies to reduce links, how does Google make Money.

Rick

MS has lost it. It’s so apparent in their legacy products Vista and Office which I use every day as a heavy user. I believe they don’t have the quality talent necessary to compete. MS is either spinning or losing on every front.

The web the most obvious loser for MS. In fact, why don’t they call it Live Disaster!

Niraj

I think Lee Drake really nailed it with his second point: Fire whomever is doing their marketing – get someone who has a clue.

They’ve been doing some truly innovative work (Photosynth), device simplification (Live Mesh), and have had better features than competitors in some of their products (Live Maps). But either because they’re so new at it or because they’re not doing enough to publicize it, people aren’t finding out and jumping on these things.

niraj (the other niraj :) is right that they need to move on from search where they have been dumping lots of money and resources and not making a lot of headway. Of course, dealings with yahoo could change that very quickly too.

ronald

Well let’s define what Leaders do and what Managers do.

Leaders set a Goal and use data/information to archive the goal.
Managers use data/information to set a Goal and archive it.

Microsoft is a managed company without a leader, so they do all these user groups to collect more data. As they collect more data the more they become confused.

To fight Google one has to know what information is and how humans process it, and understand how Google’s work relates to that. Meaning how does Google use links, map reduce and big table in relation to what they call Information. The easiest way to break that model is to eliminate/reduce links.
Links are created by humans to put data into context (here, bigger set of data), automate it so people don’t create links anymore. There goes Google’s business model and just call it elimination of link spam for obvious reasons.
Oh and btw, user groups won’t tell you how to do that.

Lee Drake

Microsoft needs to do just a few things to enhance their web presence. It’s fairly simple really and it comes down to:

1) Truly fostering an open source community, rather than viewing them as competitors. Already open-source projects such as DotNetNuke become catalysts and draws to push people into a Microsoft Centric world. Significantly lower the price of server software when it’s being used for web hosting (even more than it already is), to make it a “no brainer” purchase.

2) Fire whomever is doing their marketing – get someone who has a clue. Live and Live maps actually provides more relevant and useful info than GooG maps does, but no one knows about it. It’s easier to work with and program than GooG, and the licensing restrictions are not nearly as draconian for mash-up sites. But NO ONE KNOWS!

3) ReWrite IE from the ground up. When Google can release an open source based browser that works better, fails less and provides faster rendering than the existing product then you need to look at a new path. It worked for Server 2008 which is a far better product than any past Microsoft release – give the browser the same treatment.

Ted Murphy

Microsoft’s big problem on the ‘net is monetization — they do not have a business model that they believe in, and as a result they are incapable of sustaining their focus. Microsoft has always need several (as in at least 7) versions to get it right, so lack of persistence is a killer for them. As proof of my statement, try the Microsoft adCenter product. It simply does not work.

Microsoft should focus on what makes them money — their OS and Office products. There are two easy opptys there.

First, on the OS, they should offer Windows 7 as an upgrade. New machines would still pay, but if you had an installed Microsoft machine (and your hardware was adequate), Windows 7 should be as easy to install as a service pack. Use bittorrent as the download protocol — it will be more efficient for large intranets. This would drive a huge upgrade cycle in their software ecosystem.

Second, on Office, their new features allowing embedding and collaboration of office apps is a big deal. Guide the user base into intelligent usage of these new features, and there will be tremendous uptake.

Finally, if Microsoft were capable, they could easily build their search product into a profitable area. They just don’t seem capable. I blame Ballmer — he just doesn’t see the numbers, and he’s simply not a believer. If I were Microsoft, I would buy Yahoo, monetize the non-search elements, then spin off the combined companies into a new search focused company.

Brent Yager

They (along with the US automakers) think diversification means rebranding the same thing so you have two of them…incorrect…same thing different package. Apple has one OS, one email, etc. Google has one email, one search, etc. Microsoft has who knows how many versions of their OS, Hotmail and Windows Live Mail, etc. GM has Chevy, Cadillac, etc. Same things, slightly different packaging. One product = one voice and less resources needed or more resources used for one focused product.

Just my $0.02!

dragos

It’s because internet is not and will never be in their DNA. It is a different game now, the non-online legacy has a way bigger inertia and they simply are not capable of reinventing things in this new ecosystem – be that coming up with new innovative products or reinventing the rules of any game they want to play.

egc

Fire Ballmer, his immediate reports, and theirs. Replace them with people who have genuine technical acumen. Tell them to hire programmers who know how to build something bigger and better than a buggy bloated widget.

niraj

Also : I do not view success in mobile or cloud dependent on success in search. GOOG has a complementary model and hopes to generate money on mobile via advertising.

That model might not work for MSFT. By calling it LOST on search – I really mean lost on the advertising model.

Everything in the Computing business cannot be add supported.

niraj

IMHO : MSFT should call the war of search as LOST and move to the next battlefront – like mobile , or cloud. They cannot repeat IE versus Netscape here because GOOG as loads of cash and is really a peer to MSFT and not some underdog.

wrapmail

Something for Microsoft to consider?:

There’s an “online strategy” that everyone, including Microsoft, seem to ignore and that is using the exiting external emails we all send everyday to brand the senders company. The only method that existed until fairly recently was using a stationery for Outlook. A new company has developed a method of adding an interactive letterhead that is server based so the user does not have to install anything but just keep sending emails the way they do today. That companmy, WrapMail, has a solution that routes all the external emails through a WrapServer where emails are wrapped in the corporate branding so when they arrive they promote the company and link back to various parts of the corporate website. The system includes a very advanced back-office with a WrapMaker (to create varios wraps), a report generator (to track clicks and the best part is that all images and links are embedded in the email itself so these emails arrive without any red x’s and message to “right-click to download images”.
We send these emails anyway, why not use them to brand our respective companies?

Obviously Microsoft, with all it’s corporate clients and hotmail user base could, in a relationship with WrapMail, make this a huge differentiator in it’s competition with Google.

Alan Wilensky

I just bought my very own bank from the Office of Thrift Supervision !! It was a bargain, and they gave me all of their left over toasters.

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