Microsoft’s Irrational Obsession with Google (Part I)

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If one day Microsoft goes belly up, I suspect it will have a lot to do with the company’s irrational obsession with Google. It’s true that Microsoft had lost plenty of talent to Google. According to the Google Story book (Delacorte Press), Microsoft CEO Steve Ballmer had once said: “I’m going to fucking kill Google”. But in this pursuit of deadly competition and revenge, Microsoft has lost sight of the market and its own strengths. Here is a synopsis of what I think Microsoft is doing wrong.

(1) The pursuit of Google is vastly different from a few years back when Microsoft beat Netscape with its dominance in the operating system market. At that time, the Internet was just starting to happen, and with the small number of users, Netscape had not taken a strong hold of the mass market. Today’s situation is very different. The Internet has become ubiquitous, and Google has much more muscle than Netscape did in the old days.

(2) Yes, the search market is important, and Google’s success has demonstrated the power of search marketing. But search engine is what has already happened. Even though Google has not been around for that long, by Internet age, it is getting old. With the fast pace of innovation in today’s environment, rather than pursuing something that has already reached a mature stage, it makes much more sense to create and invest in what’s to come.

(3) There is no dispute that online advertising has been growing very fast (see “Online Statistics” section in the right panel for recent ad revenue statistics). Microsoft Wanted to get a piece of the pie, hence its offer to buy Yahoo. Yahoo rejected the bid earlier this week. While this may be perceived by some as bad news for Microsoft, it is really good news, because the merger would not have made sense any ways. Microsoft has never been a strong content provider. Its fundamental business is not in the area of “eyeball” business but rather about affecting people’s way of computing. Going after the advertising market is not what Microsoft does best and will be more like a waste of its resources rather than help.So what should Microsoft do instead? Coming up in Part II, I will offer my analysis of the opportunities that lie ahead for Microsoft.

Leveraging Online Media and Online Marketing

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The “Leveraging Online Media and Online Marketing” conference sponsored by the Marketing Science Institute just ended. The two-day conference brought together researchers from major universities and practitioners from MSI membership companies to discuss the emerging issues of online marketing. I summarize below three overarching sentiments that I observed from the conference:

(1) Facing lower switching barriers and declining consumer loyalty, companies are investing heavily into engaging their customers in the online channel. Different techniques were discussed, such as creating an environment for consumer-to-consumer interaction, incorporating consumer-generated content, and using multimedia contents such as video. Many of the ideas build on the increasing importance of social networking on the Internet, including some early exploration into the newest form of social networking in virtual worlds. No matter what form is used, however, the key is still to provide real value to consumers, whether that value comes from the firm or from other consumers.

(2) With the vast amount of brand-related commentaries and reviews online, companies are also watching closely what consumers are saying about their products and services. Specialized internal teams have been formed to plow through this valuable market information. For some companies, this information has powerful influences on their product mix and customer service decisions. With regard to negative comments and publicity, participants disagreed on how they should be handled. While some dismissed them as a natural part of life/business, others think they should be addressed more formally. Company blog seems to be the common approach, although other traditional PR channels are also mentioned.

(3) A major concern with many marketers is a lack of clear metrics for measuring online marketing, especially as it relates to social networking. This difficulty can be attributed to two sources: not understanding the true effect of some techniques (e.g., what is the value of positive or negative word-of-mouth); and an inability to track sales and conversion to the appropriate source (e.g., did this consumer buy because of that banner ad or because of a consumer-posted recipe). It is clear from the conference discussion that simple traffic building measures such as hits and visitors are not enough, as they do not necessarily lead to the critical step of conversion. But it is less clear what the right metric system should be. Without proper measurement, it becomes difficult to determine the right allocation of budget into different channels and campaigns.

Podcast from my MBA Internet Marketing Class

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My MBA class is jointly creating a podcast on Internet marketing this semester. The first episode has been posted, which discusses the issue of online branding and the use of tools such as virtual worlds in branding efforts. The homepage for the podcast is at http://emarketing.podcast.com. To subscribe to the podcast, please use http://emarketing.mypodcast.com/rss.xml, or visit itpc://emarketing.mypodcast.com/rss.xml from iTunes store.

This podcast will be updated at weekly intervals. We welcome you to join our discussion on the newest developments in the online marketing field, and please tell us what you think.