Google vs. Microsoft?

I ALWAYS read Hiawatha Bray in the Boston Globe, so today's column about the new tangle between Google and Microsoft, "Heavyweights Trading Punches in Digital Faceoff," caught my eye.

The two most powerful companies in digital technology are openly invading each other’s most lucrative markets: the office productivity software and computer operating systems Microsoft makes, and Internet search, which Google dominates.

Last week, Google declared an end to “beta,’’ or test status, for its online office software, Google Apps, as part of a new effort to sell the service to corporate users. Then the company said it’s building Chrome OS, a full-fledged operating system for personal computers that will compete with Microsoft Windows. It’s due next year.

Office software and operating systems happen to be Microsoft’s two core businesses, generating most of its $60 billion in revenue and $22 billion in profit in 2008. (snip)

Meanwhile, Microsoft has stepped up its efforts in Internet search. In June, Microsoft unveiled Bing, an upgrade of its Live Search service that has won strong reviews from analysts and consumers.

According to Hitwise, an Internet company that tracks website visits, Bing’s popularity grew steadily through June, even after the first buzz of publicity for the site began to fade. Still, Bing attracted just over 5 percent of US Internet searches, compared to Google’s 74 percent.

Danny Sullivan, editor in chief of consultant website Searchengineland.com in Newport Beach, Calif., said Microsoft is on the right track with Bing, despite Google’s immense lead. “I think it’s important that Microsoft has been challenging them,’’ he said. “They see that there’s a lot of money to be made there, and they feel they should get a slice of it.’’

But for once, I found that the last word really belongs to somebody else. While Hiawatha Bray does a nice job of looking at the two companies trading business punches, his analysis really doesn't go much of anywhere. And that's a bit unusual, actually. The New York Times contributor who wrote the excellent column here, Robert Cringely, takes a longer view.

This is all heady stuff and good for lots of press, but in the end none of this is likely to make a real difference for either company or, indeed, for consumers. It’s just noise — a form of mutually assured destruction intended to keep each company in check.

Microsoft makes most of its money from two products, Microsoft Windows and Microsoft Office. Nearly everything else it makes loses money, sometimes deliberately. Google makes most of its money from selling Internet ads next to search results. Nearly everything else it does loses money, too.

Neither company really cares because both make so much from their core products that it simply doesn’t matter. But companies, like people, strive and dream and in this case both dream, at least sometimes, of destroying the other. Only they can’t — or won’t — do it in the end, because it is against the interests of either company to do so.
The vast majority of Google searches are, of course, done on PCs running Microsoft Windows and Internet Explorer. It is not in Google’s real interest to displace these products, which have facilitated so much of its success. Chrome products are given away, so they bring in no revenue for Google, and they don’t even provide a better search or advertising experience for their users, the company admits. So why does Google even bother?

To keep Microsoft on its toes.

What Google’s chief executive, Eric Schmidt, has to fear more than anything else is that he’ll awake one day to learn that the Google search engine suddenly doesn’t work on any Windows computers: something happened overnight and what worked yesterday doesn’t work today. It would have to be an act of deliberate sabotage on Microsoft’s part and blatantly illegal, but that doesn’t mean it couldn’t happen. Microsoft would claim ignorance and innocence and take days, weeks or months to reverse the effect, during which time Google would have lost billions.

So Google Chrome and Chrome OS and Android are all intended to keep Microsoft on the defensive and less likely to push its own Big Red Button.

This makes even more sense given the recent advent of Microsoft’s Bing search technology, which performs precisely the same competitive control function against Google. Bing hasn’t a hope of toppling Google as the premier search engine and Microsoft knows it. To date, Bing’s success has actually been at the expense of Google’s competitors, not Google itself.

But thanks to Microsoft’s deep pockets and fierce screwball reputation, Bing has already accomplished its main purpose: reminding Google executives who they’re messing with.

It’s not as if these companies are gearing up to produce automobiles. The engineering teams for any of these products are, at most, 20 to 30 people — immaterial for Microsoft, which has 90,000 or so employees, and Google, which has 20,000. Nor are all of Google’s products even guaranteed to ship, being as they are in that semi-solid technical state called beta test and subject to cancellation on a whim.

Yes, Google would love to get a toehold in the netbook and smart-phone markets, especially at Microsoft’s expense. The Chrome OS and Android are both ideal for pushing Google’s net-centric view of computing. But the company worries far more about protecting its current cash cow — search — and says as much when it is unwilling to claim that Android and the Chrome OS will be better for Web-based applications than the platforms they are intended to supplant, which is nominally Windows. (snip)

Some company with a new idea and no legacy products to defend will eventually arise to clean Microsoft’s clock. Or maybe Microsoft’s market will simply disappear as PC’s are subsumed into cars and mobile phones, possibly leaving Windows behind in the process. Whatever happens, it won’t be Google’s doing because Google is too busy defending its own turf to seriously encroach on Microsoft’s.

And don’t forget Apple, which with the iPod and iPhone has shown an ability to revolutionize markets other companies saw as mature. Microsoft and Google have yet to do something like that.

I wish they would. I wish these companies had more guts, that either would make a true bet-the-company investment in changing the world, but they won’t. Google engineers are allowed to spend 20 percent of their time on new ideas — yet of those thousands of ideas, the company can really invest in only a dozen per year, leading to dissatisfaction and defections as the best nerds leave to pursue their dreams.

Maybe they’ll leave for the startup that finally topples Microsoft ... or Google. But until then these companies will posture, spend a little money on research and development, and keep each other in check, while reporters and publications pretend that it matters.

The decoration is from the Boston Globe article.