Tuesday, July 14, 2009

Google Kills Microsoft; Microsoft Kills Google

"News sellers" have been quick to pick a champion, Google or Microsoft, in the latest battle of the Titans. If you do a Google News Search for "Kill", the top article is from PC world. Before you get to articles about killings in Afghanistan and the killings of parents of 9 adopted kids in Florida, the story is that Microsoft will "Kill" Google because Microsoft will allow corporations to store their own Office Online Documents. What do you think, is this response from Microsoft so powerful that it will "Kill Google"?

I hope you are not easily taken-in by "news sellers". NBC Nightly News just lead off with a long story about an airplane that developed a hole in the fuselage during its flight. No one was hurt but the public apparently drools at even the thought of a horrible accident. We can't get enough bad news! And airlines stocks are set up for what will be an amazing growth and profit run.

When Henry Ford kept making the Model T long past its prime, he gave General Motors an opening. Smart men such as Charles Kettering exploited Henry's mistake. Henry was slow to add electric starters, colors and financing. Still, General Motors did not "Kill Ford". Indeed, the recent news has been the bankruptcy of GM while Ford has made it through this crisis without being bailed out by taxpayer subsidy. Besides, it is Google innovation after innovation that is running rings around Microsoft.
No, Microsoft is not going to Kill Google or vise versa, however the battle is joined. Until recently, Microsoft has had a virtual PC Operating System and Browser monopoly. The monopoly is unraveling. Microsoft's browser market share has fallen from 90% to 65% in recent months. Apple and Foxfire were taking share before Google Chrome entered the picture.

Microsoft was never able to reach monopoly status in the mobile market, so it may not be amazing that Google's Android OS is making inroads. On the other hand, the announcement that Google Chrome will become an OS for the PC was a dueling slap to Microsoft's face. It required a response. The Microsoft response in regard to its Office suite is nothing more than an acknowledgement that Google's threat is real.


Let the battle rage, the consumer will be the big winner. Over the past twenty-five years, I purchased many copies of Microsoft Office. I never learned how to use most of the advanced features. I never needed half of what I bought but I had no real choice. Once Google came along, I became a great fan because Google works at making useful stuff instead of making complex expensive stuff.

Five years ago, would you have guessed that Microsoft would offer an online version of its Office suite free of charge? No way! But the economic maxim, under appreciated by many is that pure competition leads to zero profits. The corollary to this maxim is that when competition is strong, the consumer wins.

The battle between Google and Microsoft is great news. It is not something to be feared but something to be enjoyed. Owners of shares need not despair. The competition will be fierce because the market is growing so fast, but both companies will ultimately make huge profits once a Mexican standoff is reached. For now, the shift from desktop to mobile computing will be such a major deal that both companies will trade short term earnings increases for long term market share. All the while, both companies will seek ways to take share from fast growth companies such as Facebook.

Google has shown that it's advertising business model is powerful enough to support "free software". Microsoft is gradually being forced to give up some of its $60 Billion in software revenues each year to become a factor in the advertising arena. Google makes only a third as much as Microsoft, but it is growing much faster.

Google Voice, Google Wave and Google Books all represent paradigm shifts. One day you will laugh about the time you once wasted playing phone tag and sorting through spam. Children born today will have a hard time appreciating life before the Wave. Millions of "meetings" will move from conference rooms to Waves. Yes, others have produced products with some of the same features but the Wave will be adopted by the masses and thus it will be available to serve.

If you have not applied for your free Google Voice number, you should do so promptly. You should also sign-up to be notified when Google Wave is public and you should input the ISBN numbers of all your books to your Google Library. On the other hand, the wisdom of jumping on the current crop of hand held devices is an open and individual question.

Kindle just lowered the price of the II by $60 to $299. Borders offers 100 free books when you buy a Sony reader in the USA, however, Borders UK offers 1,000 free books when you buy a reader in the UK (I can't remember the brand). One thousand good books for $300 is a good deal, with a free reader attached.

China has just done Kindle one better. While I like "cell phone delivery" as offered by Kindle, the $200 knockoff in China has a sim card, which means any cell phone service provider can sell the service. Pretty soon, AT&T and Verizon readers will be available. Once the Google Books settlement goes through, millions of free or low cost books will be up for grabs. Hopefully, Google will exert its influence to push the sim card idea. Since Readers might provide good service for 10 years, it would be a shame to have ones book service tied to AT&T or Verizon. The Kindle implementation is not bad. Amazon pays the freight, at who knows what wholsale rate. It is not a problem to have cell service through AT&T and books delivered synced between a Kindle and an iPhone. The primary benefit of the sim card would be to make the best device available across multiple vendors. The exclusivity of iPhone with AT&T is not in the best interest of the customer.

The story in regard to cell phone hand sets is even more complex. The current offerings, iPhone, Pre and G2 represent powerful improvements over previous models. However, many other models will be out before the holiday selling season. Chances are that prices will be lower by Halloween. Still, most of the price of the phone is built into the price of the service. AT&T has milked the iPhone for a high monthly rate; it might be worth waiting for a better deal but the sacrifice is using the old clunker for the next several months. Perhaps the best compromise is to at least wait until Verizon offers more advanced models. The suggestion has nothing to do with which carrier you are on but everything to do with waiting for competition to drive prices down.
Oh! Driving down price is where we started. Time for: The End.


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