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Steve Jobs Was Right: Google IS Turning Into Microsoft

Wednesday, November 30, 2011 // by Saurabh // Labels: , , // No comments:





Last spring as Larry Page was preparing to retake the helm at Google, he asked Steve Jobs for advice.
Jobs told him to focus on fewer things and do them really well.
Jobs later recounted the conversation to his biographer Walter Isaacson.
Figure out what Google wants to be when it grows up. It's now all over the map. What are the five products you want to focus on? Get rid of the rest because they're dragging you down. They're turning you into Microsoft.
Page has taken some steps in the right direction, killing a bunch of also-ran products and experimental projects. He's also managed to slow the brain drain.
But Jobs had a good point. Just take a look through Google's product portfolio....


Search is like Windows: an 800-pound gorilla:




Both Google and Microsoft have one core business on which everything else was built.
Google Search and Microsoft's Windows desktop operating system both dominate their markets -- so much so that antitrust regulators are looking at them carefully. They are hugely profitable, generate immense cash flow, and contribute the lion's share (if not majority) of revenue and profits to their parent companies.
Both companies will do whatever it takes to protect these businesses, and will leverage them to enter new areas wherever possible.


Display advertising is like Office: piggybacking on success




Google's display business is being built on its dominance in search.
Right now, display advertising contributes about $3 billion in sales to Google's total, which will come close to $40 billion this year.
But in time it could become like Office: dominant (90%+ share), profitable (60%+ margins) and huge ($10 to $15 billion of revenue, out of nearly $70 billion in total sales).


Android is like Xbox: a surprise success in a brand new business area (but not a big money maker)


Android moved Google from a Web company into a completely new realm -- operating systems for consumer products. It faced a strong market leader in Apple. Google also subsidized it heavily, giving the operating system away in hopes of making it up on advertising later.
That's almost exactly what Microsoft did with the Xbox: entered a new market that was totally dominated by a competitor (Sony), losing money on each console with hopes of making it up on games and Xbox Live.
Both products are now market leaders. But neither of them contributes much revenue relative to the bigger businesses -- about $8 billion a year for Xbox, and maybe $1 billion a year for Android.


Google+ is like Bing: a reaction to a fearsome new competitor


Google sees Facebook as the thing that could replace it, a mortal threat to its dominance on the Web. So it built a competitor, Google+.
About eight years ago, Microsoft looked at Google the same way -- the Web was replacing the desktop PC, and Google was the most successful and profitable company on the Web. So Microsoft started working on its own search engine, which eventually became Bing.
Bing now has about 30% market share, if you include its deal to power Yahoo Search. Check back in a few years to see if Google+ has managed to pick up 30% share from Facebook.


Google Music is like Zune: a me-too attempt to compete with Apple




Sorry, Google, but you know it's true.
Google Music is absurdly late to the game -- it came out more than 8 years after Apple introduced iTunes, and more than a year after Google started talking about it. It has some potentially interesting sharing functions that are crippled by restrictions from the record labels (you can only share songs that you've bought, not songs you've uploaded to the service). Plus, it doesn't even have songs from one of the big four (soon to be three) record labels, Warner Music.
The Zune was Microsoft's similarly half-hearted attempt to beat the iPod. It went nowhere.


Google Apps is like SQL Server: a cheap alternative that nobody pays much attention to...yet


Google Apps dramatically undercuts the price of Microsoft's Office family of products but doesn't offer as many features. It has flown mostly under the radar for the last half decade, getting adoption in smaller companies and in pockets of large enterprises. Now, it's notching up some big companywide wins, although it's still insignificant on Google's balance sheet.
It's almost exactly the same strategy Microsoft pursued with SQL Server -- it started as a low-rent version of the big databases sold by Oracle and other companies, then evolved into a full fledged (although still cheaper) competitor. It's been around for more than 13 years and has sales of about $3 billion a year. This trick has worked with other Microsoft products also, like SharePoint.


Chrome is like Internet Explorer: a giveaway that pushes the company's agenda on the Web




This is an easy one. Both are Web browsers.  Both are free. Both earn the companies no money.
But both browsers guide users to other more profitable products -- IE makes sure that Windows users can surf the Web without having to download anything, while Chrome includes built-in Web search. They also help the companies influence Web standards.


Google TV is like WebTV: an attempt to make TV more like the Internet




Google TV is trying to reinvent television to include content from the Internet.
That's almost exactly what Microsoft tried to do when it bought WebTV in the mid 1990s. It failed, so Microsoft kept trying with other products like UltimateTV. They failed too, and Microsoft eventually turned its living room strategy to the much more successful Xbox.
Google may have a better chance now that there's more video content online, and it's got YouTube to help prime the pump. But overall, the history of interactive TV is not pretty. Google should take heed.


The Kansas City Fiber experiment is like Microsoft's huge cable investments in the 1990s


Google has rolled out a fiber optic network in Kansas City and is reportedly planning on delivering TV directly over the Internet to those homes. The Motorola deal could also play a part, as Motorola makes cable TV set top boxes.
Few remember now, but Microsoft once made a big play for the TV space as well. The company invested billions in cable companies in the late 1990s -- including Comcast ($1 billion) and AT&T ($5 billion) -- plus more in Japan and Europe. The hope was to get Microsoft software embedded in TV set top boxes. The effort did not work, and Microsoft ended up having to write down billions from those investments.


Google is buying companies like crazy, just like Microsoft used to do


Google is on an acquisition tear: this year it has bought more than 50 companies. A lot of those are small talent buys, but Google also makes big buys when it wants to get into new areas, like YouTube for online video, DoubleClick for display advertising, and Motorola for mobile phones.
Microsoft has almost the exact same kind of acquisition strategy: it buys small companies for talent, and bigger ones to move into new areas, like Great Plains and Navision for accounting software, aQuantive for online advertising, and TellMe for speech recognition


So maybe Steve Jobs was right. So what?


Jobs meant the Microsoft crack as an insult, but maybe it's not so bad.
Microsoft doesn't dominate the tech industry like it once did, its stock has been flat for a decade, and some chinks are starting to show in the company's core businesses. But it's still immensely profitable, garners $70 billion a year in sales, and is growing around 10% per year.







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