So the big story these days is that Google and Microsoft are going to war and that either could win. This is a big story because it’s a great story: two undefeated heavyweights preparing to bash each other’s brains out. Alas, it’s also fiction.
Despite ten years of effort, vast technological and financial resources, and a legendary intensity, Microsoft is running a distant third in the web wars (behind Google and Yahoo!)–and it continues to fall farther behind. Importantly, this is almost the same competitive position Microsoft occupied in 1995, when Yahoo! was run out of a dorm room and Google didn’t exist. Microsoft was trying desperately to win the Internet war then, and it has tried desperately every year since. And despite all its assets, the best it has been able to do is run a distant third.
From a high level, this is not surprising: the leader of one technology revolution rarely dominates the next. Microsoft is an enterprise software company, not a consumer web services company, and therefore its success on the web is commendable. Commendable does not mean dominant, however, and those who argue that Microsoft’s new search technology will suddenly overthrow Google are forgetting all that has happened in the last ten years.
In the absence of disastrous mistakes by Google and Yahoo!, Microsoft’s best chance to win with MSN is to merge it with AOL and spin it off. This would be extraordinarily challenging, and it would not guarantee success: the merged company would still run third behind Google and Yahoo!. A combined MSN-AOL, however, would be far stronger than either company alone.
At Cherry Hill Research (fledgling industry analysis company), we recently published a piece on this. Feel free to view if interested. (The Web War is Over and Microsoft Lost, Cherry Hill Research, Sept 2005)