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Transcript of Microsoft Search
Microsoft executives weigh alternatives for improving position in the market for Internet searches and related advertising
“ Your worst enemy is always a man of your own trade. ”
— Spanish Proverb
How has Microsoft responded to competitive threats and opportunities in the past? What patterns do you see? What is your assessment?
A) How large is Microsoft's competitive disadvantage in Internet search and search-related advertising in 2008?
B) If the industry remains on its current trajectory, how will Microsoft's disadvantage evolve over time?
A) In 2008, Microsoft is at a significant disadvantage in search and related advertising. In fact, there is a 55.2% gap in market share between Microsoft and Google. The trend appears to be favorable for Google and unfavorable for everyone else. Google received 7.7 billion searches in
November 2008 while Microsoft received 1.0 billion.
Why is Microsoft pursuing the market for search and search-related advertising?
The Internet Tidal Wave
"I have gone through several stages of increasing my views of the Internets importance. Now I assign the Internet the highest level of importance. In this memo I want to make clear that our focus on the Internet is crucial to every part of our business" -Bill gates
Chasing Google's Taillights
-Since 2003 Microsoft made great strides in technology and marketing but were still behind Google and Yahoo
-Toughest competitive threat Microsoft has faced
-Interest in search and search related advertising increased in late 2000s
-Predictions that software industry would move to "cloud computing"
-Under this model, PCs would become devices to reach software/files/processing power that resided on central servers (aka in "The Cloud" of the network)
1. Application Software
Word perfect and Lotus 1-2-3.
2. Internet Browsers
-Netscape v Others
Microsoft has responded in 4 ways:
-Microsoft licensed Java
-Developed a better version of Java
-Open-source software- Linux
Microsoft is a dominant player in the market; they achieve large number of users and create a network effect that makes them successful.
What integrated strategic option should Microsoft's executives - especially Satya Nadella, Jay Girotto, and Gary Flake - pursue?
Where does Microsoft still lead?
"It remains king in desktop productivity applications with Office and desktop/server operating systems with Windows
...but king of the fading realm of client-server computing."
What are Microsoft's Disadvantages?
Harvey Lubin wrote:
"They have started to compete on too many fronts, against too many competitors.They want to beat Apple at computer hardware, and mobile services. They want to beat Google at Web search.They want to beat IBM at servers. They want to beat Sony & Nintendo at gaming. By trying to do everything, they end up doing none of them very well."
1) Improve user experience: work on an industry leading algorithm and simplify the user interface. Develop ways to improve query response time.
2) Business Model: The PC "era" is quickly coming to an end. Intensify efforts in cloud computing, including search, applications, etc.
3) Ecosystem of the industry: Continue to pursue relationship with Yahoo.
Microsoft has been able to create and leverage networks successfully in other ventures, but they are NOT the major player in search. The chart below shows Google’s dominance in queries, which creates a revenue per search that is unrivaled in the industry.
B) If the industry remains on it current trajectory, Google’s search network will continue to grow in size and value. They will be able to pair an increased number of queries with an even larger price per click, realizing tremendous revenues relative to the competition. Microsoft may find themselves in a position where their search is devalued to the point that it is no longer a worthwhile venture.
1) Cloud computing vs the traditional PC model
2) Search business is floundering while Google is capturing more and more market share