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Google Spreadsheet and Google’s Microsoft Obsession

Let me first eat some crow about arguing last year that Google and Microsoft were not going to go to war with each other because, except for the MSN crossover, they were in different businesses.  They are in different businesses, and I still think it would be a disaster for Google to compete directly with Microsoft Office by ginning up a Google version of OpenOffice.  But as the Writely word-processing acquisition and, now, Google Spreadsheet, make clear, Google wants the casual Microsoft Office user.

A few thoughts:

First, if Google’s long-term ambition is to bring Microsoft down, this is, in fact, the way to do it.  Google Spreadsheet and Google Word, as described, resemble classic disruptive technologies: cheaper, more convenient, no-frills solutions aimed at products with fat product margins whose complexity and usefulness have overshot the mainstream.  History suggests that, if such products take hold, Microsoft will have an extremely difficult time competing.  The company will be driven to the high end of the market, and, ultimately, displaced—-following in the footsteps of most of the doomed incumbents in The Innovator’s Dilemma. Importantly, the problem will not be technology: Microsoft is obviously capable of releasing its own web-based spreadsheet.  Rather, the problem will be in conflict with the existing business and profit model.  All this, however, depends on Google Spreadsheet, et al, capturing the low-end user and then gradually moving up the value curve.

Second, although it is easy to extrapolate from “Google Spreadsheet” to “Google Takes Over the World!”, I do not think it is a given that the product will be a hit, especially initially.  Few professional Excel users are going to use a stripped-down, web-based alternative, so the core Office market is safe for now.  Furthermore, free or nearly free spreadsheets have been available for years, and they haven’t made so much as a dent in Microsoft’s monopoly.  So it would be easy to overestimate Google Spreadsheet’s impact, especially initially.

Third, what is the business model?  To seriously compete with Excel, and to avoid the fate that has befallen many of its “WOW!” product introductions, Google will ultimately have to dedicate a big team to the spreadsheet and word-processing services.  At some point, that team will start costing real money, and no serious spreadsheet and word-processing user I know of is ever going to stop working on documents to click nearby ads (The “PPC ads in apps” concept is absurd).  If the goal is simply a portal strategy–soak up more of a user’s computer time, and you’ll capture a greater percentage of their searches–then, fine.  But the ROI on a free spreadsheet designed to capture more of a user’s time is way lower than that of a successful tweak to a search algorithm.  Google’s overall ROI, therefore, should continue to fall.

Bottom line, I am still not convinced that office-productivity tools a la Word and Spreadsheet are Google’s best route to revenue diversification.  They offer usage diversification, certainly, but, so far, no revenue diversification.  I continue to worry that Google resembles Yahoo! in 1999–a mile wide and an inch deep–and until a few other products emerge as category killers, I will continue to worry about this.  To be fair to Google, of course, it bears noting that the company developed its search service for years with no revenue model, and that story certainly had a happy ending.

32 thoughts on “Google Spreadsheet and Google’s Microsoft Obsession”

  1. “Low end execel user” doesn’t exist. People who need it have it. and the general public will use online calculators for their needs, ie mortgage, home equity line, car etc. This product is worthless

  2. IMO, there will be a tiered system of “free” and “premium use”.

    i see where an small biz would want the cheaper alternative so long as the info can be absolutely secure. (or as secure as office on ur desktop is)

    and if the functionality of a web-based system is greater than the desktop offering (and cheaper) the question becames, “why wouldn’t a small biz do this?”

    i envision many upon many college students and entrepreneurs using this offering (albeit a free version) especially if the offering is compatable with excel… as writely is compatible with Word.

    Google is simply catering to the ‘on-demand’ world we are transitioning to. (i would of thought Microsoft would of done it first, but they have been the constant lagger in this new tech world.)

  3. I have that book Henry. Should I read it? Its been sitting for years. I am reading The Nordstrom Way and
    Built for Growth: Expanding Your Business Around the Corner or Across the Globe right now.

    Should I be reading The Innovator’s Dilemma for my retail business first?

    Let me know what you would do fucker.

  4. There are lots of low end excel users…but I would argue that what most of them are doing is studying spreadsheets created by a high end excel users.

    That being said, it’s annoying to pay big bucks to read a document. Where is the PDF of spreadsheets?

  5. What is the basic need here of a spreadsheet: It is to do math calculations/analysis and store numerical info. People do not want a spreadsheet per se. They want to do financial planning, taxes, investment strategy, eduction expense planning, household budget. and guess what? that stuff is already out there. i stand by statement this product will not take off. henry is right, if you want to compete with ms in software you will have to sell to businesses including fortune 500, and that means bulking up.

  6. I am Director of Business Development for Microsoft’s Emerging Business Team. Google is directly competing with open source projects like OpenOffice and Sun’s free StarOffice.

    Google acquired Writely (word processing) and now has a spreadsheet. There was speculation last year that Google would partner with Sun to offer a version of StarOffice. Instead Google has decided to go its own way and compete with OpenOffice and StarOffice.

    C/Net says “Google spreadsheets turns up heat on Excel” I don’t think so. Microsoft Office is a powerful, industrial strength, client based, information worker productivity platform. Microsoft Office is moving beyond just being a collection of applications (Word, Excel, PowerPoint) to being a server based application platform for ISVs. Lots of companies run their business on Excel spreadsheets. Now creative start-ups are using Office as a front end User Interface to a whole variety of business applications.

    I wrote a blog on this subject today

  7. The way this is all going to matter is when Google announces that all of the Enterprise Search Appliances are also Enterprise Application Appliances – the thousands of pizza boxes that have been sold to corporate america & SMBs only do search today. Sometime soon, they’ll also do hosted email, calendaring and application deployment. THAT is what can kill MS.

  8. The technology will have a much better chance of taking off if they incorporate something like TurboExcel, so people can hide the parts of the shared spreadsheets they want to keep to themselves, and also offer a killer home to web services.

  9. Henry, think of it as a chess game. Google is making feints on one side of the board while mountain their bigger more strategic attack on the other side. Clearly the cost of launching writely, and this spreadsheet is negligible to google, but can you imagine the frissons of fear running through Microsoft’s management at the moment? And for exactly the reason you mention. Google is going after MS’ fat margin business, and even if they make a fractional dent, that would be disasterous for MS. For Google it’s but a small feint. For MS it’s a question of rethinking their entire business model. Do we, or do we not embrace the web and make our products free on it? If they don’t Google will begin chipping away at their core market. If they do, they’re going to cannabalize their huge cash cow. It’s scary times for MS.

  10. Yes, scary times for MSFT indeed. This is the first time anybody has ever offered an office suite product cheaper than MS Office. I wonder why nobody thought of doing this a decade and a half ago.

    They are going out of business for sure. Especially since MSFT has virtually no track record of successfully competing with anybody and winning. The scariest thing of all is that they probably never expected this move up there. They are so stupid.


  11. Haha SI, that was funny.

    Henry says its Google’s Microsoft Obsession. I think It is far worse than just an obsession. Google has developed a Obsessive Compulsive Disorder. G’s OCD is going to be devastating.

    What G doesn’t understand that now they are public they have also mom and pop money in their pocket. They have responsibilities. Wasting money on non-core-business related developments without a viable business model is going to be to the detriment of G overall business and credibility.

    For the rest, less said, the better.

  12. I think you nailed it with your “business model” comment. Pie is not free at the truck stop. To make a meaningful dent in Microsoft it must offer/solve a problem that the current application does not. That’s going to take years and require a serious programming team, which in turn requires commitmant and $$$. They have the latter not the former. To me this is just another toy for the programmers to play with and to keep them busy.

    Google really is a mile wide and an inch deep. They are first and foremost a search engine. 99% of their revenues come from that. We can take them more seriously when a new revenue number shows up on the balance sheet – until then, it’s very much a case of “so what”.


  13. MattyDread, talk is cheap. If you really think Google is set for a big plunge in 2007, then get on the short bandwagon! Or buy an assload of long-dated puts. More likely you’ll end up with all the other people who thought it was a good idea to short this growth stock. I.e., you’ll be left with naught but the shirt on your back

  14. victor,

    MattyDread has a very simple but realistic analysis of Google.

    You think Google is a growth stock? It is a yo-yo stock, and it will remain so for a lil while before it will plummeth to oblivion.

  15. I agree that Google has been way off track with its other projects. Regarding the spreadsheet app., I can’t think of any group that would download it. People who can’t afford microsoft software are usually not PC literate enough to understand what google app’s are. I don’t think college students will want it. They can buy office at student prices (cheap). Those who are too lazy to will just pirate it. I would use this spreadsheet app. if it were tied into Google Maps to visually display data, but that would be too useful of a tool for Google to make.

  16. Neal, stop posting. I think it’s already been widely acknowledged that you’re a crank. When i said “growth stock” i was referring to a classification that’s derived from P/E. Value stocks have low P/Es.
    And if you believe that google will plummet to oblivion, why not make some money out of it? My money is certainly where my mouth is. As I’ve previously acknowledged on Henry’s blog, i’m net long GOOG.

  17. Its Day 1 of the product’s Beta launch. What is everyone expecting? They’re simply gathering user info at this point. This is a far better way to do it than doing market research the old way, with focus groups or surveys or whatever. Project this stuff out…Google is perhaps only borrowing the user paradigm of a spreadsheet for folks who like to use spreadsheets like a simple database to store info. Why change a user paradigm that is so ubiquitous. People have struggled with a user paradigm for online general purpose databases, and this seems to be it. Think of mom & pop online merchants maintaining their inventory in Google Spreadsheets, inventory pictures as well, then loading it up onto Google Base or Froogle, collecting payments through Google Pay. Think of them marking unique keywords against each inventory item in one cell, and unique ad copy in another cell, and loading it up into AdWords….could go on and on..

  18. Victor,

    I am so sick an tired of your personal attacks. It shows what a person you really are. Insecure, and loud mouthed.

    In my early business years I had learned that I should never point at others while knowing that 3 fingers point back at me.

    And Indeed, I haven’t been frequenting this blog anymore just because it is not worth my time to shift through the bullshit comments and personal attacks that low-lives like you post here just to find a few gems.

    BTW, get a life.

  19. Victor,

    I’ve already posted here quite a bit about the stupidity of GOOG getting into a knock-down-drag-out with MSFT. I honestly didn’t feel like bringing it up again.

    But there is an update:

    I had suggested that it might be a strategy for GOOG to bolster their up-and-coming DOJ case after MSFT wipes them out, but it looks like the DOJ told them to grow the fuck up.

    Now there’s no reason at all for GOOG to go MSFT hunting (although it is certainly possible this newest announcement was already in progress before GOOG got the devestating news from the DOJ).

    For GOOG’s part, it now appears that they are doing everything they can to tone down the anti-MSFT rhetoric. Perhaps the demoralizing effect of whining to the DOJ on all GOOG employees finally caught up to the top management.


  20. The google’s mystique is based entirely on the company’s deliberate secrecy, and its stock on hypes. Except for initial contribution to search algorithms, what “innovations” have come from this overhyped company that is supposed to have sucked up all the brightest minds on the planet? If this were true, and the company itself knows it were true, then why all the nervousness regarding every moves from microsoft (or any other company for that matter)?

    Let’s see, apart from search, what other “brilliant ideas” have come directly from google: gmail, base, desktop, earth, map, froogle, video, calendar, picassa, talk, finance, page creator, writely, etc. and now, spreadsheets? Any? Oh yes, their business model somehow reminds me of overture. Talking about a company changing the world with originality and innovation! Curiously, it closely resembles “embrace and improve” tactics (greatly admired, i might add!) from microsoft; however, unlike microsoft, i’m sure they do no evil – at least that what they claimed.

    Yet, every time a well-timed “company announcement” occurs as the stock is being depressed it’s immediately touted by financial networks and pumped up by wall street’s crooks as another “brilliant innovation” that’ll surely either “seriously challenge” or even “kill” other companies, including yahoo, ebay, microsoft, etc., and bring enormous revenue to the company “some time in the future.”

    I wonder why they have this obsession with “the destruction of microsoft”, so to speak? Could it have something to do with their ceo’s humiliating experience in fighting microsoft before, when he was still with sun and novell?

    Other companies like yahoo, ebay and amazon, to name a few, also seem to have been reserved honored spots on this coveted “hate list”. I’m glad they have begun taking steps to do something about it.

  21. First of all, worrying that Google needs to be revenue diverse is like saying you worry that CBS, NBC or ABC get too much of their revenue from television ads, so maybe they should do something other than broadcasting. They get so much money because they operate in a rare space, the ability to let ads be broadcast to so many people. And it’s difficult for others to come into that space, since not everyone gets to be a major television broadcaster.

    Google’s the same way. The are one of the few major reverse broadcasting systems, where mass numbers of people broadcast their desires to the world, for advertisers to tune in on. Moreover, it’s not some low barrier of entry for others to come in on. Running a search engine is hard, just alone from the spam you have to deal with. Google’s a leader, not perfect, but certainly the closest competition is showing no real signs to close the gap.

    In addition, search revenue (search revenue, not contextual revenue) is only going to go up. It’s undervalued for the return advertisers already get. There’s far less inventory than there is demand. People are tracking their conversions online and offline better, learning lifetime values and realizing they can afford to pay more.

    In terms of search, I find it difficult to believe that in the near to medium term, say the next five years, Google really has anything to worry about even if it remains heavily dependent on search revenue (search, not contextual). The other forms of advertising might stall or reverse — but search advertising was born and grew during the dotcom downturn, when things were at their worst. It’s powerful advertising. It’s going to survive and thrive.

    So Writely and Google Spreadsheets to be shouldn’t be measured on whether they help with revenue diversification. Instead, my view is that Google understands that having an office suite might hurt Microsoft a little, perhaps a lot, and that’s a very wise move. Anyone doubt Microsoft wants to hurt them. Hitting back at a core product like this unsettles Microsoft in areas it assumed is was save, in exactly the same way Gmail flipped out Microsoft and Yahoo two years ago. That’s smart business, if you can also make the move fit with your general strategy.

    Secondly, they tie people in with Google more. No, I’m not dumping Excel. My my mom or my wife or friends with less intensive needs might. And no, they won’t click on ads. But you can bet that if the data is stored with Google, they’re going to be at Google for other things. At the very least, through the cost of maintaining basic word and speadsheet tools into the marketing expense column, and they really don’t seem so crazy then. Google still by and large spends zip on marketing to consumers (they spend plenty on advertisers). They could do the TV commercial thing, or instead they can give away the ultimate swag, free useful software. Doing that, they capture a users — perhaps a lifetime user — letting the marketing money also be a product investment.

  22. I follow Danny’s logic on search, at least to some extent. There is a reason the broadcast networks are owned by larger, more diversified companies, though, and most of them do generate ancillary revenue streams (through syndication, DVD sales, etc.) Search will clearly be around for a long time, and the inventory constraints should help it continue to grow. I still think there is a significant likelihood of a temporary overshoot on keyword pricing, but the initial search boom has lasted longer than I thought it would.

    I don’t follow the logic on introducing spreadsheets, etc., to “hurt Microsoft”–and, in fact, that’s why I view Google’s Microsoft attitude as an obsession/distraction. If the spreadsheets keep people on the site and clicking ads, then fine–as long as they generate a positive ROI. Introducing a product just to hurt (and annoy) Microsoft, though? That I don’t follow, especially when you’re competing directly with them in other areas. If the goal is really to hurt/compete with Microsoft, the word-processing and spreadsheet applications are going to require some serious resources, regardless of whether they ever generate any revenue. They will also galvanize and antagonize a massive powerhouse not known for going gently into the good night. So if “hurt Microsoft” really is on the list of Google Spreadsheet justifications, I think the move is unwise.

  23. i find it hard to believe that people can’t grasp Google’s use of their ‘office’ applications. they have an enterprise unit to their company, and they recently paired with Dell again… (albeit their recent announcement w/dell is most likely related to the software package deal).

    Is it so difficult to believe google will offer a perimum web based office suite to enterprises via their Enterprise division when its out of beta? (if small biz can trust salesforce.com and other CRM companies for certain business functions, why will they not try google’s office applications?… note… i stated “small businesses, not major companies… yet) If some small businesses already entrust Google w/their mail applications, why not trust them for other ‘on-demand applications’?

    google is not distracted w/outside projects, even though Eric will tend to admit to it now and again. But that notion is rediculous!

    follow the numbers because the numbers don’t lie… however u cut it, they are still growing market share in search. (that is because people, like me, don’t care about fancy tools, we care about results.) (personally i don’t find the tools on ask.com at all useful, they are pretty cool, but i still use google.)

    and they do have a diversified rev base (relatively speaking)… 1. search ads… 2. Adwords.

  24. Why not antagonize Microsoft? It’s not like they aren’t aware of Google or considering backing down in any way. Microsoft has said loud and clear, Google, we’re coming for you. I doubt they’ll stop trying if Google were to respond, OK, we’ll skip the whole spreasheet/office stuff.

    Google’s doing this things because in my view:

    1) They were easy, cheap wins, done mostly through acquisitions it seems.

    2) No major player is currently offering them.

    3) They are useful and can tie into the information mission Google has, to some degree.

    4) They lock you into Google even more, which protects the breadbasket of you later perhaps searching with Google.

    5) Lastly, it does cause Microsoft to spin yet more resources away from search development and back into shoring up the stuff they thought they were secure in.

  25. Why buy Office when I can use Open Office?

    Why buy Office when I can use Google Office?

    Why buy MS OS when I just use the Internet?

    My kids don’t buy games and load them on the PC anymore, they play sophisticated flash games across the internet. My kids have sat down at an Ubuntu machine and not even realized they weren’t on a MS OS.

    Why invest in MS when all they have are promises about the next generation and nothing to show for it today?

    Why should I develop stuff for MS OS when all they do is compete with me if I become too successful?

    Why should I pay MS a licensing fee to load MS stuff on my hardware when my customer doesn’t care as long as my device works?

    Google isn’t competing, they are changing the world.

    Google won’t add a lot of features to their products, an army of unpaid developers will do it for them by extending on Googles simple APIs. (see google maps)

    Google won’t take over the world by excluding other companies with propriatary formats and overly complicated APIs. They are making the world bigger by making things open and simple.

    Will Google succeed? Will Google make money? I don’t know. But their stock price seems to indicate others believe so.

  26. Good post.

    I really do think that Google has a strategy to turn software from a product into a service. And eventually they will start the “Freemium” model. And that’s scary.

    Imagine if, albeit a long shot, users adopted this full force. And your data was held hostage because your credit card expired. Or Google’s servers went down. Or someone hacked into the system. Etc. Etc.

    Now I’m certainly not a MSFT fan but I also don’t want to trade one monopoly/ behemoth for another… especially a company that has that much data about me.

    The service vs. product plan seems to be the only way they’d make any money on this in the long term.

  27. We are heading towards a world of Web-Services. Google is the leader so far. Henry, it’s not e-nabling or web-nabling of existing products and porting to a web-server. They will be built on a whole new concept and idea like Google Maps was 2 years ago. Don’t worry about revenues, Google will get the corporates to sign-up for their fully integrated web-services while consumers will enjoy it for free.

  28. The last few commentors are drawing a best-case scenario. In all optimism we often forget that there must be a real business model behind every endeavour.

    The thing with Google is that is is -as one of the commentors earlier said-, “A mile wide and an Inch deep.” What more features and web centered/enabled concepts are there not left… let say a million more. If Google wants to grab all opportunities, the warchest may prove to be rather limited.

    Where is the real sense, the direct inpact, the true benefit, the major sweep. I am sure Google has done some modelling and some philosophizing on bringing out such features, but I am afraid that they really have lost the clue. They are not doing this for the long-term. They are betting on anti-MSFT feelings of people, and at the same time benefit from a temporary hike of their shares – the yo-yo style, and then unload yet more shares.

    If Google is really going to be tops, why aren’t insiders BUYING shares?

  29. Most people use about $29.99 worth of $329.99 Office 2003 Standard (Amazon.com price quote). Yet we’re almost obligated to shell out $200 every time Microsoft changes graphics on their paper box…

    “The Miracle of Monopoly: How We Learned to Stop Worrying and Love the Microsoft.”

    Btw, maybe some brave soul here could entertain the idea that Google’s project is meant to compliment Excel (employ instead of erase Microsoft’s market shares). Not every company is obsessed about “search & destroy” like Redmond. Cheers! =)

  30. Dimitar,

    That analogy doesn’t hold water in the technology and business world. Why?

    1. A vessel is a solid and highly visible target that can be bombarded and torpedoed. The only target in the business world in similar terms would be MSFT Redmond HQ, and I think that would go to far, even for Google!

    2. A navy vessel can’t fend off multiple attacks, true. But in the world of announcements, betas and hypes there is a lot of bullocks and no bullets. What is the real damage done to MSFT? None at all. The only major thing happened to MSFT was the marketvalue whipe-off a few weeks ago, which was a good thing -in terms of a lesson for MSFT.

    3. It seems all cool, hip, and innovative what Google is doing in the non-search industries, but it is not so innovative as it seems.

    I think, for the long term, Google is making severe strategic mistakes. All these announcements and betas will cost them dearly for the reason that they will soon have to come with REAL stories. The proof is in the pudding, not in the ingredients. These “veni vidi vici” feelings caused by Google’s announcements will be the most critical measure-points for future punishments. And when the management won’t be able to keep its promises (too many as is), it will be slaughtered in terms of stockprice and marketcap.

    One major advice to Google insiders: Sell!

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