Google is the new Microsoft. Something tells me you've heard that one before. By my count, people have been saying that since 2005. But the question remains: Is it really a fair comparison?
Microsoft dominated the desktop computer industry for the past 15 years with purported ruthlessness and cunning business savvy. These days? Don't look now, but the role of the tech industry's biggest bully and most dominant force is increasingly played by Google.
If you compete with Google, you'd better be looking over your shoulder. Its search engine algorithm alone can make or break a business. From privacy issues to market dominance to passion among fans and detractors to government scrutiny, Google and Microsoft share more similarities than you may realize.
In 2005, Microsoft cofounder and CEO Bill Gates had this to say about Google: "They are more like us than anyone else we have ever competed with." Far be it from me to argue with Bill Gates. Let's take a look at just how similar these two technology megacompanies are.
1. Core dominance
The most obvious similarity between Microsoft and Google involves each company's ability to dominate its core industry. Microsoft has had well over 90 percent of the desktop operating system market since the days of Windows 95 and Windows XP. There are signs that Microsoft's dominance may drop significantly in the next few years due to the proliferation of devices running mobile operating systems, but Windows is still the king of the desktop.
Google doesn't have more than 90 percent of the search market, but there's no question that the company rules the search world. Google had nearly 67 percent of the search market in December, according to Comscore, the closest competitor was Yahoo, at just 16 percent of US searches.
The biggest source of Google's online dominance is web-based advertising. Google owned 83 percent of the highly lucrative online search advertising market worldwide in 2010 and 81 percent in 2009, according to metrics firm IHS Screen Digest.
The search giant is making big gains in other areas of digital advertising, too: Google grabbed 59 percent of the US mobile advertising market in 2010, up from 48.6 percent the previous year, according to IDC. That's a rise of nearly 11 percent in just 12 months. Google's acquisition of mobile ad network AdMob in May contributed to the company's massive leap in mobile advertising.
2. Monopoly mania
The downside of dominating an industry is that you're an immediate target for antitrust allegations. Microsoft experienced this during the late 90s and early 2000s, with accusations of unfair business practices against competitors such as IBM, Real Networks, Gateway, Netscape and Apple.
Google's antitrust headaches have just started, with European legislators looking into how it treats its search and online ad competitors. The company is also meeting fierce opposition from the online travel industry following its announcement of its intention to buy ITA Software, a flight-data aggregation company.
3. It's the platform, stupid
The core strategy for both Microsoft and Google has been to create a platform that keeps the user in each company's ecosystem. Microsoft led the way in the 1990s by distributing the most popular desktop operating system ever and offering tools that played nice with Windows, such as Microsoft Office, Internet Explorer and early online "cloud-based" services like Hotmail.
In addition, it's making a big push to popularise web apps through its Chrome web store and the forthcoming web-focused Google Chrome OS. Google also recently stepped up its game in encouraging third party development for its Android mobile operating system, with new features such as a web-based store for browsing apps and an in-app payment system.
Microsoft faced little challenge to its ecosystem in the 1990s, while Google faces formidable challenges from Apple's iOS platform for mobile devices and Facebook's continuing push to become the dominant platform on the web.
4. Apple rivalry
Microsoft is the new IBM, Google is the new Microsoft and Apple is the new... Apple?
After the release of Windows 95, Microsoft ate away at Apple's business, driving the Macintosh maker into a niche market. Microsoft's strategy of distributing Windows on as many platforms as possible was a huge success, a contrast to Apple's distributing of the Mac OS only on its own computers.
Fast-forward to 2011, and Google is trying to beat Apple's iPhone and iPad using a similar strategy: Although you will find iOS only on the iPhone and iPad, Android is on pretty much everything else, including devices from HTC, Motorola, Samsung and Sony. Android's smartphone market share is steadily overtaking that of iOS.
The most recent numbers from Nielsen say that new smartphone users are choosing Android devices over iPhones by nearly 15 percentage points, while the iPhone platform maintains an overall lead of about 3 percent. It hasn't happened yet, but Android is threatening to push iOS devices into a niche market much as Microsoft shoved aside Apple's Macintosh.
5. From rebel to lumbering giant
Microsoft started out as the plucky disruptor that popularised the PC graphical user interface through wide distribution and lower pricing compared to Apple's Macintosh OS. In a similar vein, Google was able to dominate search thanks to its amazingly relevant search results and its barebones homepage that featured the search box and nothing else.
Google's uncluttered front door and its eerie ability to deliver highly relevant results distinguished it from competitors such as Ask, MSN and Yahoo, all of which sported incredibly busy home pages, provided less relevant results, and failed to make a clear distinction between sponsored ads and regular search results.
But as each company has dominated its respective industry, each has had to deal with the transition from fast-moving startup to technology behemoth.
Microsoft was supposed to produce a slew of updates to its Windows Phone 7 devices in early 2011, but at the time of this writing it had yet to release even one update since introducing Windows Phone 7 in October.
Google is trying to escape Microsoft's fate by reinjecting a startup mentality into the company. Many observers believe that this is part of the reason Google is shaking up its management structure by removing Eric Schmidt as CEO in favour of Google cofounder Larry Page.
6. Trust us
Believe it or not, Microsoft, not Google, was once seen as the big, scary technology company trying to steal your data. In 1999, Microsoft had to address suspicions that the National Security Agency had a backdoor into Windows that allowed the NSA to peek at users' encrypted data.
Then, in 2001, Microsoft revealed a big plan for its Passport universal sign-in feature, which would store each user's name, password, address, email address and credit card credentials online to encourage people to shop on the web. The Passport plan was met with fierce opposition, however, because no one wanted to trust Microsoft with their data.
Today, Google is dealing with all kinds of privacy concerns over Google Street View's taking pictures of people's homes, Google's recent Wi-Fi sniffing snafu, the company's saving of search histories, the Google Buzz privacy breach and on and on. And, oh yeah: Google has also had its fair share of accusations about dealings with the NSA.
7. Hooked on Googlesoft
Want to get people to use your stuff and forget about going with the competition? Just pile some basic tools into your platform that are handy and free. Microsoft first bundled Internet Explorer with Windows to battle Netscape. Other tools packed into Windows include MSN Messenger, WordPad, and integration with Hotmail and who can forget MSN Explorer for that AOL-like experience?
Google has taken Microsoft's free software strategy to the extreme with Google Docs, Gmail, Google Translate, Google Voice, Calendar and Google Maps turn-by-turn navigation in Android. Google has also been accused of favouring its own products, such as Google Maps and YouTube, in its search results.
8. Competition crusher
A tweak in Google's algorithm can send online businesses reeling from a significant drop in web traffic. This is part of the reason the European Commission is looking into Google's search practices following antitrust complaints from sites such as price-comparison service Foundem and French law-related search tool eJustice.
Microsoft's tactics, in its heyday, were far more aggressive: For example, the software giant was accused by RealNetworks of pressuring PC makers not to install RealNetworks software on Windows PCs by default. And IBM said Microsoft pressured manufacturers not to offer computers running IBM's OS/2 system.
9. Me-too products
Despite each company's dominance, both Microsoft and Google have tried to insert themselves into business areas that have never quite worked out for them. After TiVo was introduced, Microsoft attempted to break into the DVR market with its own version called Ultimate TV. Microsoft's Virtual Earth mapping program followed Google Earth, and the Zune MP3 player followed Apple's iPod.
Google, meanwhile, has been desperate to get into the social networking game, with products such as Orkut and Google Buzz. Both have managed to grab only a niche audience. Whether it can compete against Apple's Apple TV or Roku's set-top box with its own Google TV remains to be seen.
10. Brain drain
Once upon a time, every software engineer wanted a job at Microsoft. It was the "it" place to work, thanks to the company's healthy compensation packages and exciting projects. Google eventually overtook Microsoft as a desirable place to work, offering perks such as free laundry rooms, dry cleaning, snacks galore, recreation rooms, bouncy balls for work stations instead of chairs, and the much-ballyhooed 20 percent time for working on experimental projects.
Change is in the air now, though, and Google is steadily losing employees to the new "it" place to work: Facebook. Google Wave creator Lars Rasumussen and former Google exec turned Facebook COO Sheryl Sandberg are just two high profile examples of people leaving Google for Facebook. Things have reportedly become so bad that Google is trying to retain its employees with bonuses and pay raises.
The tide appears to be turning in favour of Facebook. And that prompts one question: If Google is the new Microsoft, is Facebook the new Google?
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