Making the Case: Google is Deathly Scared of Microsoft

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Who’s Making the Money?
The most amusing thing here is that Microsoft – with its massive portfolio of patents – was up until recently making more money from Android than from its own mobile platforms.

Why?

Because Microsoft has licensed its patents to major hardware vendors, such as HTC and according to Goldman Sachs, in 2011, Microsoft may have made almost half a billion dollars from Android licensing fees.

What many don’t realize is that Google actually makes no money directly from Android, licensing it for free to hardware vendors.  Instead, they seek to make money from the ‘ecosystem’ of Google services.

However, many of these services are free, such as Gmail, Google Maps and a whole host of others.  Google Docs is a paid service, as well as search marketing, but all in all, Google is NOT making out like bandits.

So here’s the deal: if Microsoft is making money off Android (less now with Exchange ActiveSync done and buried) and off Windows 8 and Windows Phone 8 systems through OS licensing, the fact is, they could actually make a lot more money than Google in mobile with a much smaller market share.

Google is not even making the same kind of money from its App Store that Apple is.  Marvasti, in SeekingAlpha, writes that they make 1/9 of what Apple makes off its App Store.  He also adds that the ‘promised revenue’ from advertising is not close to what Google say it is.

Microsoft is Making Gains in Search
The next reason Google fears Microsoft is that it is the only company out there with the ability to hurt them in their core business – search and search marketing.

It wouldn’t take a lot – acquiring Yahoo would give Microsoft almost 30% of search in the U.S. They have the ability also to build out search marketing equivalents of Adwords and Adsense very quickly. (Why they haven’t done this so far exasperates me!)

The day they decide to do it, online advertising will go from hegemony to a duopoly welcomed by every website owner and online advertiser.

Marvasti also adds:

Although Google is growing faster than Microsoft, its growth is slowing while Microsoft’s growth in the Internet and Search business is at a steady average of over 10% year on year since 2010. Microsoft runs an old software house business model rapidly adapting to the new online world; so overall growth is muted. However, this pace can only accelerate with the help of mobile penetration and it may exceed Google over the next year.

The EU is Not the FTC
As we earlier mentioned, the FTC pretty much gave Google a pass on misuse of patents and skewing of their search results to favor their products.

Here’s what we know.

The EU will not do the same. They have been investigating Google for the past two years and have vowed that their investigation will not be hampered by the FTC action.

Moreover, in Europe the member of the European Commission responsible for Competition, Manuel Almunia has made it clear that he will close his investigation of Google only with a formal, binding order that addresses search bias and other issues. This will give the advantage to Microsoft and others seeking relief.

So overall, you can see that Google has every reason to be afraid of Microsoft. They see beyond the headlines and know better then we do the grave threat Microsoft is to practically all their businesses – core and no-core.

If Microsoft executes even moderately well, Google knows it will have a really tough time on its hands.

The onus then is on Microsoft to live up to their potential and press their strengths.

Go ahead and contribute to the conversation below.  Do you think Google is scared of Microsoft?

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