Internet Strategy (3/3): MS/Y!/Google
We’ve gone over the three major internet business models as well as the three major methods of monetization on the internet today. Interestingly enough, I feel that the Microsoft, Yahoo, and Google battle over internet supremacy is a perfect illustration of the multiple approaches I described about the internet. In fact, it surprises me that the three companies continue to try so hard to compete over the same sphere when each would likely be much stronger pursuing business ventures within their own competencies. (I say this more about Microsoft and Yahoo than about Google, which has done an admirable job building an unassailable search franchise.)
Google
It’s clear that Google has found a sort of magic formula for profiting from the internet. The company built its name on its industry changing search service and has built a franchise around it that has proved very difficult to penetrate. Despite whatever Ask.com is saying about its “algorithm,” the truth is that Google’s search algorithms remain best in class, providing more relevant search results and quicker access to information you want and need.
Naturally, Google found that these algorithms can do more than just bring people to what they want on the internet. They can, in fact, work the other way around – bringing content to the right people. And, so spurred Google’s ad network which has reach into almost every website on the internet being the favorite monetization route for all sorts of internet publishers from amateur bloggers to professional publishers. In fact, this is the key value driver for the company. Google’s success is not measured in how many users it draws to GMail or how many people use Docs and Spreadsheets. While it is launching these little services and investing in user attracting websites like YouTube and Orkut. Don’t confuse this as the motive force behind Google’s business.
Google’s value lies in its reach as the search engine of choice for users on the internet. And, as its ad empire has grown, it also lies in its ability to serve ads on virtually any kind of website you can think of. While the increasing popularity of YouTube and Google’s internal services like Google Finance and iGoogle Homepages allows Google the ability to increase its ad revenues by not having to share with publishers, the real gems of Google’s recent pushes for growth are the acquisition of the Feedburner network and, hopefully, DoubleClick. Giving Google increased leverage in attracting high-value advertisers.
Yahoo!
Yahoo may once have been thought of as the king of search, but truth is it was started as a web directory and really the first ever truly popular “Web Portal.” While it has spent hard on improving its advertising business and trying to compete in search with Google, Yahoo really doesn’t need to spend so hard in these areas. The company spent wisely and has put together probably the most valuable internet real estate portfolio online. This includes Web 1.0 hot spots like GeoCities, Broadcast.com, Launch Media, and HotJobs and the acquisition of new Web 2.0 favorites like Upcoming.com, Del.icio.us, Bix.com and OMG!. In addition to this, home grown services like Yahoo! Finance, Yahoo! Mail, and Yahoo! Games remain immensely popular.
Why Yahoo! has never seemed to understand the power of its user base is beyond me. It acquired GeoCities and quietly absorbed it into its web hosting service rather than exploit the vast network that GeoCities had created. Yahoo music has been remade over and over despite the fact that some combination of Broadcast.com, Launch, and Yahoo! music were the first truly popular music and video streaming websites online. While the new site seems to have a lot of potential, outside of congruent branding (not a Yahoo! forte) it remains seemingly outside the network of those who use Yahoo! as a homepage and web portal. Users need to actively seek such Yahoo! services rather than access them all quickly and easily.
Yahoo! could find itself wildly successful if it found a way to tie together its service and content offerings. Furthermore, a tighter web community which draws users to crosslink through its various offerings would boost page views and turn Yahoo! into a media provider to be reckoned with. The type of delivery network that might rival broadcast TV corporations. It needs to view itself as a media provider and act accordingly. What it can’t do is fall into the trap of fighting Google for search dominance.
Microsoft
Microsoft moved late in the internet arena and again seems to be trying to emulate Google’s success by pushing its MSN/Live! Search and building its ad services network organically and through acquisitions like that of ValueClick.
Like Yahoo!, I believe that this is not the best course of action for Microsoft. While I understand that the company wishes to take search and content market share away from both Yahoo! and Google through the development of the MSN portal and the MSN content network both of which pale in comparison to Yahoo’s given that most the content is provided through third party partners rather than internally for example – Fox Sports, MSNBC, and Career Builder.
Microsoft made its name in software. Microsoft’s new goal ought to be to develop internet delivery of its software. This is territory that Google and Yahoo and many new start ups have been attempting (Google Docs/Zimbra/Zoho). Microsoft, however, has the brand strength and core competencies to create true cross-over internet software and expand its current software and file type franchises. How will they monetize this? It’s hard to say. Will consumers be willing to pay for access? Is a one-time fee acceptable for something like perpetual access to a specific version of Office Live? It’s hard to say, but if anyone can make it work its the company which, for now, seems to have a stranglehold on productivity and enterprise software. This is where Microsoft ought to focus its internet strategies.
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