I’ve known you for a little over 21 years now and I’ve only felt strongly enough to comment to you strongly and vocally three timesin those 21 years, our initial meeting regarding LAN Manager, with regards to the IBM OS/2 “divorce” and, more recently, about .Net and your Internet strategy positioning. This is the fourth, and perhaps most urgent, time. Those other three were done during a period of Microsoft ascendancy and domination. (I know you can’t say that word in front of the DOJ, but between us friends…) While a $4 billion profit in your most recent quarter isn’t shabby, we both know this is an incredibly sensitive time in the company’s, and the technology market’s, history.
Everyone’s asking “what’s up with Yahoo” and asking, again, what you should do about that. You’ve given me a good year’s worth of newspaper exposure in the ebb-and-flow of the whole thing but it’s time not only to get it done, it’s time to take a more expansive vision of what Microsoft needs to do. Much as it’s an important war to win, search advertising is the old battle. There are newer battles emerging and if you continue to lag in those as you have in search, your very relevance will be called into question.
So, what do I think you need to do?
- Buy Yahoo. Not just search but the whole thing. There are so many assets there that you will need to leverage that you’d be crazy not to take the whole thing. It’s not just search advertising. It’s display. It’s mobile. It’s cloud. It’s eyeballs. Yahoo has a lot of assets beyond search, which you need.
- Focus on monetizing video. Even while you still struggle with Zune, you’re once again fighting the last battle. Surely you remember the first video ever played on MTV. It was the Buggles’ “Video Killed the Radio Star.” Those who don’t learn from history are doomed to repeat it. Video is where the excitement is today (even while that’s not where the big money is…yet). The big studios are making progress here, Google is still feeling its way and Apple scares the studios. Hurry up on this one.
- An equity investment in Facebook does not a social media strategy make. I fervently believe that social networks will emerge some day (a few years away yet) as a dominant “advertising” platform. We trust the opinions of our friends and people like us more than we do brands and companies. Somewhere we’re going to figure out how to use social media to supplant “traditional” forms of advertising (and I include search advertising as traditional in this context). I’d tell you how I think that’s going to play out, but that one’s worth of a consulting engagement, not a blog post. I spent a good portion of the last year helping companies sort through their “Facebook for the enterprise” options. Why haven’t you made SharePoint the no-brainer solution? Instead, you’ve left it to a slew of smaller vendors…and increasingly Google. Social networking is both an infrastructure play and a “user interface” play. You’re behind in both.
- If you’re waiting for the inflection point at which time cloud computing becomes a compelling play, the economy has pushed us to that point. Don’t be so totally large enterprise-focused that you miss the fundamental change that’s already taking place in small-and-medium-sized businesses. Cloud computing economics are compelling. Yes, yes, I understand your software-plus-services play, and even embrace it but if you start from a Windows+Office mindset rather than a minimalist cloud infrastructure basis, you risk missing focusing on what the market really wants in the longer term. Yes, Azure was a good start. Developers are important and letting them leverage investments will be huge. But you risk losing relevance when you focus so much already on Windows 7 and let the Office group persist with their embarrassing (non-)approach to cloud computing. You talked in your earnings announcement about how global economic markets are resetting. That reset, with lower expectations, is a seminal moment for the adoption of cloud computing. It’s going to come even faster than you’re now thinking. This one of all you can’t afford to lose.
- Lastly, mobility. This one has to frustrate you. You had the right idea. You were early to market. And what did that earn you? The right to see Apple and then Google strong-arm the carriers in a way they couldn’t have without your “failure.” But now that they’ve done so, what are you going to do about it? I’ve been a Windows Mobile user on phones and PDAs for a long time now and I look with envy at the Apple application marketplace. Have you tried installing apps on one of your phones ever? If Steve Jobs were Microsoft CEO, he’d fire the entire team responsible for the Windows Mobile application installation procedure. Visibly and painfully. Simply, you need to fix the user experience, galvanize the application developer community, stand up to the carriers and get ahead of the curve, with mobile video and location-based services the two areas I’d focus on. Maybe go buy Qualcomm while you’re buying things.
I know this is a lot, in a bad economic climate. However, to fail at any of these puts Microsoft’s future relevance at risk. To fail at all of them, and a candid assessment would probably say that’s what’s going on…well, that should be a terrifying thought to you.
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