Microsoft’s real problem

I almost wrote a very long blog post telling Microsoft how it could get back into the search business. In response to all this stuff in the Wall Street Journal and on TechMeme about how Steve Ballmer is telling employees that he thinks he can guide Microsoft into the advertising business without buying Yahoo.

I got about halfway through that long post and I just deleted it. Why? Because they don’t care to listen. So why am I wasting my time talking at 1:30 a.m. to a few billionaires and a bunch of arrogant coders who think they built something of value when, in fact, they’ve just built second-rate Web sites (Windows Live Spaces anyone, sorry, it sucks even if there are 100 million of them) who don’t have a clue about how to get back into the search game and who are never going to have a clue?

I’m bored. Microsoft buying Yahoo is just going to be very boring for users for a long time. Why? Even if things go perfectly it’ll take six to 12 months to get approval by EU and DOJ. And they won’t go perfectly. Even after the deal is done it’ll be another six to 12 months before these two cultures get together in any significant way. So, that’s a year to two before we even see anything non-boring.

I find that Google listens a lot more than Yahoo or Microsoft does. Google has left billions of dollars on the table that it will go after over the next year, if they are as smart as I think they are.

Where are those billions? Well, let’s just look at one tiny little sliver of Google’s system that it’s left alone. Google Travel. That page sucks. Think about how you decide to take a trip. Does that page help? Not really. No video. No cool people telling you about interesting places. No personality. No branding. No interesting Web services.

And the big brand travel sites aren’t any better. Now, what about parenting? Other activities?

This is why Facebook is so interesting as a business. Facebook has some inherent advantages to creating market need that no one else is even attempting to do. Ask Jeff Pulver how he gets hundreds of people to show up to his breakfasts all over the world. He just opens up a Facebook page and writes what he’s doing.

Or, ask any winery how much of an impact this small little video show is having on their business. The red carpet rolled out on our little wine tasting trip told me everything I needed to know about its impact.

Funny, Microsoft just bought Farecast, which is one piece of what I’m thinking about, but will Microsoft do anything innovative with it? I think it’s distracted with this purchase. Too distracted to do anything soon enough to keep the newbies like Mahalo and the Googlers’ from figuring it out.

I just don’t see Microsoft and Yahoo making any serious moves into search or advertising that comes off of search, do you? Yet I see that Google is weak in other areas (and I told them such when I met with them the other day — they listened, and that listening behavior told me they know that they are going to see more growth in non-search areas if they execute well). It stuns me why Ballmer isn’t going after those areas (as bad as Google’s Travel page is, Microsoft’s is worse) instead of spending billions trying to buy Yahoo, who clearly doesn’t want to be purchased (Farecast, again, was an interesting purchase, but only if put inside a bigger strategy).

Unfortunately Ballmer is hamstrung by two things: 1. the returns that they need to see to have any real effect on the bottom line are so huge that it causes Ballmer to have blindness to small things and 2. they really don’t have that many people working there who really grok the Internet. Think about that for a second. If you really knew how to build a scalable web site, wouldn’t you be joining Facebook or FriendFeed right now instead of toiling inside Microsoft where they can’t even seem to execute on a purchase of Yahoo very well? Heck, just reading Mini Microsoft tells you that things aren’t being seen well from inside the walls. Yeah, there are those inside Microsoft who are happy with the way things are going, but I’m hearing more and more screams lately from inside the walls. I hope to learn more when I go to Seattle June 10-13 to visit Microsoft and learn more about the Internet strategy (which is becoming more interesting on several fronts like what Scott Guthrie, tools, Ray Ozzie, Mesh and infrastructure, and Dean Hachamovitch, IE, teams are doing).

I don’t see the Yahoo acquisition ending well for Microsoft but I’m losing my will to care anymore and I’m not the only one. THAT is Microsoft’s real problem.

Google: take the money off the table — build great niche search sites around topics like travel, wine, parenting, housing, automobiles, etc. You have a year to do it before Microsoft can even START to figure out where you’re weak.

Too bad that Ballmer didn’t have a vision for the Internet. Imagine if Microsoft started doing some really great niche sites with its $40+billions? Imagine that…

98 thoughts on “Microsoft’s real problem

  1. I know I’m a little late on this but there’s one thing I don’t understand – why is microsoft hell-bent on competing with google in the field of search? Shouldn’t they be working their butts off on building an OS that competes with Mac? Because, as I see it, if they don’t come out with an awesome OS with great software soon, Apple is going to take-over. I guess they have to choose between the search-market and the OS-market now, because it really doesn’t look like they can handle both…

  2. I know I’m a little late on this but there’s one thing I don’t understand – why is microsoft hell-bent on competing with google in the field of search? Shouldn’t they be working their butts off on building an OS that competes with Mac? Because, as I see it, if they don’t come out with an awesome OS with great software soon, Apple is going to take-over. I guess they have to choose between the search-market and the OS-market now, because it really doesn’t look like they can handle both…

  3. Regarding MS building a scalable web site. I think that MS knows how to build a web site that is almost bulletproof. Scalability isn’t really the question though.. they know how to build big, and fast, and unbreakable.

    I don’t think they have a clue how to do narrow, focused and viral though. Like you said.. look at live spaces. How is that more compelling than WP?

  4. Regarding MS building a scalable web site. I think that MS knows how to build a web site that is almost bulletproof. Scalability isn’t really the question though.. they know how to build big, and fast, and unbreakable.

    I don’t think they have a clue how to do narrow, focused and viral though. Like you said.. look at live spaces. How is that more compelling than WP?

  5. Niche web sites by definition have a niche market. MS is a multi-billion dollar company. So, the first question that should, and will be asked by the CEO, the Board of Directors and the shareholders is” “If we follow the advice of the random video blogger that was unable to make his company that focused entirely on video as success, how much money is on the table to get from niche web sites? How do we monetize them?”

    For example, how much profit is Facebook and Twitter taking in. How much profit is FriendFeed taking in.

    MS needs to focus on what is knows, which is not building niche web sites that appeal to a miniscule market. Look at the books and look where they make their money.

  6. Niche web sites by definition have a niche market. MS is a multi-billion dollar company. So, the first question that should, and will be asked by the CEO, the Board of Directors and the shareholders is” “If we follow the advice of the random video blogger that was unable to make his company that focused entirely on video as success, how much money is on the table to get from niche web sites? How do we monetize them?”

    For example, how much profit is Facebook and Twitter taking in. How much profit is FriendFeed taking in.

    MS needs to focus on what is knows, which is not building niche web sites that appeal to a miniscule market. Look at the books and look where they make their money.

  7. Haha, good one Metrox. Nobody I know uses IE 7…. everybody uses Firefox…. There are sad times ahead for Microsoft when this starts happening. They should be using their money to hold onto the those key individuals instead of trying to pull off deals like Yahoo.

    I personally hope Microsoft wake up and smell the coffee before it is too late.

  8. Haha, good one Metrox. Nobody I know uses IE 7…. everybody uses Firefox…. There are sad times ahead for Microsoft when this starts happening. They should be using their money to hold onto the those key individuals instead of trying to pull off deals like Yahoo.

    I personally hope Microsoft wake up and smell the coffee before it is too late.

  9. Robert, your leadership analysis is forgetting Craig Mundie. To my mind he’s fairly central and more future-oriented than anyone save Ozzie; that pair has a pretty savvy grasp on where MS will be in 5 years… (and where others will be falling short over that time, enough said).

  10. Robert, your leadership analysis is forgetting Craig Mundie. To my mind he’s fairly central and more future-oriented than anyone save Ozzie; that pair has a pretty savvy grasp on where MS will be in 5 years… (and where others will be falling short over that time, enough said).

  11. MS is built upon a foundation of arrogance (not necessarily a problem, most Wall Street companies are built on that foundation) BUT MS’s problem is that all the innovators have left leaving only those who value a paycheck & people good at creating tiny kingdoms (aka: bureaucrats) … there is nothing worse than arrogant bureaucrats. The end result are products like the Zune & Vista. Nothing really abolustely wrong with them but like the DMV, it meets the bare minimum requirement. Ms buying Yahoo is a disaster in the making because it will deplete MS’s cash reserve and the cash flow margin is drying up … what is going to happen? 50% of Yahoo’s visitors are people who loathe MS so it’s not like buying some middleware company where its customers are not about to spend 3 times to leave … gee, where will people find free email or the weather? People will leave in literally 5-seconds. And MS will drive aother 40% away by insisting people sign up for a LIve account before being able to read their Yahoo email … and a few months after all, the arrogant bureaucrats will proclaim that Yahoo is a stupid name and diluting LIVE so they will fold everything in LIVE or MSN or some other new name … so basically MS will have spent $45 billion to buy an additional 10% visitors who are unable to leave because they don’t know how. This should be the death knell for MS if they continue down this path. Ballmer knows his legacy right now is the sweaty guy who throws stuff and he wants to come off as the guy who took down Google … he’s desperate to prove his legacy … are MS shareholders willing to bet $45 billion he’s smart enough and smarter than the Google guys even though as head of MS since 2000, what has he accomplished other than being the biggest bureaucrat of all?

  12. MS is built upon a foundation of arrogance (not necessarily a problem, most Wall Street companies are built on that foundation) BUT MS’s problem is that all the innovators have left leaving only those who value a paycheck & people good at creating tiny kingdoms (aka: bureaucrats) … there is nothing worse than arrogant bureaucrats. The end result are products like the Zune & Vista. Nothing really abolustely wrong with them but like the DMV, it meets the bare minimum requirement. Ms buying Yahoo is a disaster in the making because it will deplete MS’s cash reserve and the cash flow margin is drying up … what is going to happen? 50% of Yahoo’s visitors are people who loathe MS so it’s not like buying some middleware company where its customers are not about to spend 3 times to leave … gee, where will people find free email or the weather? People will leave in literally 5-seconds. And MS will drive aother 40% away by insisting people sign up for a LIve account before being able to read their Yahoo email … and a few months after all, the arrogant bureaucrats will proclaim that Yahoo is a stupid name and diluting LIVE so they will fold everything in LIVE or MSN or some other new name … so basically MS will have spent $45 billion to buy an additional 10% visitors who are unable to leave because they don’t know how. This should be the death knell for MS if they continue down this path. Ballmer knows his legacy right now is the sweaty guy who throws stuff and he wants to come off as the guy who took down Google … he’s desperate to prove his legacy … are MS shareholders willing to bet $45 billion he’s smart enough and smarter than the Google guys even though as head of MS since 2000, what has he accomplished other than being the biggest bureaucrat of all?

  13. Robert: don’t be to frustrated. It is a more effective strategy for larger companies to way to innovative solutions to mature and become mainstream before they acquire them. The core competency of larger companies is to integrate and sell. It is not sexy but it is the only way to grow by 10-20% and keep the shareholders happy. There is only one company which does not obey by this rule, Apple. Even Google ended up acquiring YouTube and Double Click. Do you know of any other one?

  14. Robert: don’t be to frustrated. It is a more effective strategy for larger companies to way to innovative solutions to mature and become mainstream before they acquire them. The core competency of larger companies is to integrate and sell. It is not sexy but it is the only way to grow by 10-20% and keep the shareholders happy. There is only one company which does not obey by this rule, Apple. Even Google ended up acquiring YouTube and Double Click. Do you know of any other one?

  15. Microsoft is starting to follow the same paterns of mistakes large companies make…get into businesses they have no business getting into….I am sure most of you have noticed how the software’s Microsoft has put out in the last 10 years have started to dwindle in quality….stay focused is the name of the game…the market is simply to big to do all

    Gosh I love developing small companies!

    http://www.jbraggiotti.com

  16. Microsoft is starting to follow the same paterns of mistakes large companies make…get into businesses they have no business getting into….I am sure most of you have noticed how the software’s Microsoft has put out in the last 10 years have started to dwindle in quality….stay focused is the name of the game…the market is simply to big to do all

    Gosh I love developing small companies!

    http://www.jbraggiotti.com

  17. I’m bored with Google. I use Google search for searching, email and directions. I could care less about Google reader, Google travel, google phone, Google finance, Google checkout, Google TV, YouTube, and everything else. In fact now with my new GPS I care less and less about Google maps.
    I want a search engine that searchs quick and fast without a lot of links to other crap, especially paid for crap that doesn’t make sense with what I’m searching
    I want to be able to access my information on my home computer, my work computer (whether I boot into Linux or Vista), my smartphone, and to share information with my wife and her Mac. I want it to just work….

    I’m excited for Live Mesh…. Just wish I could get invited to see if it works like I want it to

  18. I’m bored with Google. I use Google search for searching, email and directions. I could care less about Google reader, Google travel, google phone, Google finance, Google checkout, Google TV, YouTube, and everything else. In fact now with my new GPS I care less and less about Google maps.
    I want a search engine that searchs quick and fast without a lot of links to other crap, especially paid for crap that doesn’t make sense with what I’m searching
    I want to be able to access my information on my home computer, my work computer (whether I boot into Linux or Vista), my smartphone, and to share information with my wife and her Mac. I want it to just work….

    I’m excited for Live Mesh…. Just wish I could get invited to see if it works like I want it to

  19. I wonder why Ballmer, Gates, Ozzie & co don’t take advice from a video blogger who bailed out of a failed startup (He was a VP, no less)

  20. I wonder why Ballmer, Gates, Ozzie & co don’t take advice from a video blogger who bailed out of a failed startup (He was a VP, no less)

  21. I did hear that Microsoft bought Farecast, which sucks because I really liked that site. But your post is spot on…SPOT ON. But you know the Microsoft culture, if it isn’t a $billion it’s not a real business. You’re totally right, and right to say that of course they’re not listening.

  22. I did hear that Microsoft bought Farecast, which sucks because I really liked that site. But your post is spot on…SPOT ON. But you know the Microsoft culture, if it isn’t a $billion it’s not a real business. You’re totally right, and right to say that of course they’re not listening.

  23. Yuvi: there isn’t one Microsoft. It’s impossible to say one person is running Microsoft. It’s more like a committee. But Ballmer is clearly in charge of the money and the buy Yahoo strategy, so if there’s one person now who is defining Microsoft I’d say it’s him. Ray is clearly building part of the Internet strategy. Scott Guthrie another part. Steven Sinofsky the Windows part. Dean Hachamovitch another part. And I’m forgetting the folks who lead the Office team and the other billion dollar businesses at Microsoft: Xbox, phones, SQL Server, etc.

    And even then, it’s 70,000 people. Our idea of business run by a few people is sorta outdated. I looked at the ideas coming in from the ranks right before I left. Very few Internet ideas.

  24. Yuvi: there isn’t one Microsoft. It’s impossible to say one person is running Microsoft. It’s more like a committee. But Ballmer is clearly in charge of the money and the buy Yahoo strategy, so if there’s one person now who is defining Microsoft I’d say it’s him. Ray is clearly building part of the Internet strategy. Scott Guthrie another part. Steven Sinofsky the Windows part. Dean Hachamovitch another part. And I’m forgetting the folks who lead the Office team and the other billion dollar businesses at Microsoft: Xbox, phones, SQL Server, etc.

    And even then, it’s 70,000 people. Our idea of business run by a few people is sorta outdated. I looked at the ideas coming in from the ranks right before I left. Very few Internet ideas.

  25. quirkyalone yeah, that’s why he’s trying to buy Yahoo. His search team isn’t very good and, even if you close one eye and squint and say that Microsoft’s relevancy is catching up to Google’s then there’s that problem of branding, isn’t that? Yahooo!!!

  26. quirkyalone yeah, that’s why he’s trying to buy Yahoo. His search team isn’t very good and, even if you close one eye and squint and say that Microsoft’s relevancy is catching up to Google’s then there’s that problem of branding, isn’t that? Yahooo!!!

  27. SearchEngines: you’re right. We shouldn’t listen to people who haven’t achieved anything.

    Sounds just like a Microsoft manager. Sigh.

    Christopher Coulter: like SearchEngines says. It’s a complex world and people who see things as black and white rarely succeed. Steve Jobs excepted.

  28. SearchEngines: you’re right. We shouldn’t listen to people who haven’t achieved anything.

    Sounds just like a Microsoft manager. Sigh.

    Christopher Coulter: like SearchEngines says. It’s a complex world and people who see things as black and white rarely succeed. Steve Jobs excepted.

  29. I think you found the real problem when you said, “I find that Google listens a lot more than Yahoo or Microsoft does.”

    Reacting to Google, et al, or building from Microsoft’s viewpoint delivers a solution looking for a problem. Ballmer, from recent comments, at least publicly, regarding XP, is espousing the corporate view.

    When you’re attempting to satisfy investors, rather than the user community, it’s a losing proposition.

  30. I think you found the real problem when you said, “I find that Google listens a lot more than Yahoo or Microsoft does.”

    Reacting to Google, et al, or building from Microsoft’s viewpoint delivers a solution looking for a problem. Ballmer, from recent comments, at least publicly, regarding XP, is espousing the corporate view.

    When you’re attempting to satisfy investors, rather than the user community, it’s a losing proposition.

  31. If you knew so much – wouldn’t YOU be the one achieving, instead of telling them how to run their business.

    It is easy to theoretically criticize when you are on the outside looking in – things are a lot more complex than that in the real world

  32. If you knew so much – wouldn’t YOU be the one achieving, instead of telling them how to run their business.

    It is easy to theoretically criticize when you are on the outside looking in – things are a lot more complex than that in the real world

  33. the natives are certainly restless about this deal

    I guess your “good for morale” contention is now moot? ;)

    Amazing how, every other post, gets invalidated every other day.

    Predicting that you will start cursing Twitter in 5-6 weeks or so.

  34. the natives are certainly restless about this deal

    I guess your “good for morale” contention is now moot? ;)

    Amazing how, every other post, gets invalidated every other day.

    Predicting that you will start cursing Twitter in 5-6 weeks or so.

  35. Microsoft just doesn’t get the web. Microsoft’s way of working is to invent problems first and then try and solve them. Recent examples: The ‘new’ Windows Live Hotmail. I am yet to see anything as bad as that. Even more recent: Live Mesh.

    Grand vision will not take them anywhere. They have to do the small things right first.

  36. Microsoft just doesn’t get the web. Microsoft’s way of working is to invent problems first and then try and solve them. Recent examples: The ‘new’ Windows Live Hotmail. I am yet to see anything as bad as that. Even more recent: Live Mesh.

    Grand vision will not take them anywhere. They have to do the small things right first.

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