On the heels of yesterday’s Microsoft/Yahoo post, Michael Arrignton is at it again–this time saying that Microsoft’s future depends on advertising. Can’t disagreee more. Yes, Microsoft can earn a lot of money from advertising, but that’s not all that it’s going to be. It’s still going to want to be a publisher and partner focused business.
Don’t for a minute think that publishing and advertising haven’t been friends for a long, long time. Go talk with magazine folks (both online an offline), or the movie industry, or the TV industry, and so on if you think otherwise. The same will be true for the software world. It will probably take a different form, but it will be a close partner in most things that are done. (Music publishers are struggling with the production/advertising balance as is the software world.)
There is one important point that needs to be made in all of this Google vs Microsoft competition: Google’s mission–as I see it–is different than Microsoft’s. Google is about getting access to the information that I want. This might be a document, a description of a medicine, a definition of a word, a mathematical result, a video, and even an advertisement. It also has a related mission of providing tools that eases the access to the information I want or want to make available to others. For instance, here we see GMail and Google Docs, and Google analytics, and so on. Microsoft’s mission–as I see it–comes from the other side. They are about creating tools, products, and services that people and partners can use to do what they want. That’s their foremost mission. A related mission is to give people access to what they want.
The difference may seem subtle, but it’s huge. Microsoft’s mission is derived from years as a classic software development house where people often would make money selling products to people that would use them in the hopes of getting benefit. In the early days especially, people would often over buy and software would sit on the shelves. The publishing houses didn’t care–outside of the fact that they weren’t getting the needed feedback to stay competitive. But I’ve seen plenty of it over the years. In fact, I’d say for many software businesses if you take away these sales, quite a few of the businesses would have been much less than they became.
In the web world, where it’s standard to have free or low-cost versions that people can build up to incrementally, there will be less of this. This is where Microsoft is going to feel the pinch, if you ask me. It’s the effortlessness for people to get at what they want, to communicate more easily and powerfully, to share and consume without significant setup and management issues. Advertising is a money maker, yes. Microsoft will surely be in this game as most publishers do. But where Microsoft has the greatest challenge is not in the advertising, as many are focusing on, it’s the balance between getting people what they want versus focusing on giving them the tools to do what they want with.
The key to success will be to climb the abstraction ladder and to focus on improving communication. Call it a network or social network focus, if you will, but from what I see this is where Microsoft can continue to do well. It’s just got to get out of that confining in-the-box-think. It’s making progress, but I think with Yahoo, it’ll get there faster. Call me silly, but I see the value. Personally, I don’t think it’s the advertising that’s the key to the deal. Yes, there’s the immediate money part, but Microsoft can benefit from the network-oriented-think, which it hasn’t quite caught onto yet. The trick will be not to get everyone so upset though in the process that this value evaporates when and if any agreement is reached. Now that would be quite unfortunate–no matter how much advertising revenue pays for the deal.
Are there lots of other ways for Microsoft to get there, than acquire Yahoo? You bet. It’s just that institutionally it’ll take some dramatic shifts to do so and that’s extremely hard for a large established organization to do. Either way, what might we expect? A new Microsoft in 10 to 20 years or so? Yeah, that’s what I’m thinking. This is not a short term transition.