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?
What a joke…Couldn’t help laughing… Does the author have any sense of the industry and its dynamics… it looks sillier than what can be written by a kindergarten kid… Microsoft making inroads in search… ROFL… eating share from its collaborator Yahoo!, the day is not near when Yahoo! will run away from Msft search deal…
FROM YOUR COMMENT LOOKS LIKE YOU DONT KNOW NYTHING ABT TECH MARKET, DNT TALK STUPID ALWAYS ITS NOT FUNNY
The only joke I see here is you and your post. In less then 2 years Android will outsell ALL of Apples iPhones by a margin of over 4 to 1 and in less then 5 years it will be 10 to 1. My source? CERT/US Federal Trade Commission AND the Electronics show out in Las Vegas. If the rumble from the people there is anything to go buy, Apple will soon be either a niche company or a dead in the water company. And dont start that crap about Apple being the most richest company in the world as it just isnt factually true. NO ONE with any brains is going to beieve that a company like Apple that at best has 8% of the worlds computer market and phone and pad market is somehow worth more then a company that holds 90% of the same markets! thats like saying you can blow up an atomic bomb in your hand and not get hurt or vaporized. According to CERT (Computer Emergency Response Team) more people now are using Bing (though I personally cannot stand it) then are using Google. So keep on with your delusions, and MS will keep on getting bigger and bigger and bigger. And no before you ask, I am no fanboy of MS as I think there is room for a LOT of improvement, but you go with what works. And since there is a third party program that restores the start tab and makes Win 8 look like Win 7 or XP…I can only see it getting sold by the boat loads.
Oh and I am not a newbie with this, my first computer was when we had the blazing speed of 4 baud and a large floppy drive of maybe 500KB, not to mention that no matter what board you connected to you had to do it by a hand receiver like you saw in the Brodric movie “War Games” and you had to be good at phone phreaking (look it up child) as all boards were long distance and it made no difference if you were next door or across town or in another state. So indian and Ulrich, go back to yer mommas and have them wipe yer nose and change your nappies as neither of you know a darn thing of what your trying to talk about.
I agree that you are a veteran… 4 baud and large floppy drive. And that is where Mr. Ballmer is stuck too… Looks like people like you and Mr. Ballmer cannot understand the fact that the world has moved and that too mighty fast…
Also in your article you said Microsoft is scared of Google. Now in your reply you say that Android will outsell Apple iPhones. Just because Microsoft makes a few hundred million from mobile patents does not mean that the company will mint billions in profits over the years to come… If I see it correctly Microsoft will not fade away but will have to chop off its non-performing assets some day. It will be a giant but a smaller one than it is today.
Anyway my bad that I have posted in a Microsoft Fanboy website. I wish you and Ballmer all the best. You can sit back, relax and have a cup of coffee to see how 2013 unfolds in front of you.
I loved the line about the beautiful windows 8 interface. Everyone I’ve met who has tried it can’t stand it. The author is living in another dimension. But yes, Android is a defensive move. Always was. Only needed because Eric Schmidt knows how Microsoft plays dirty pool. Better to get out front and then kick MS in the knees. MS is still at it locking down laptops so it is hard to install other OSes. So sad they waste their time with this crap when they could be innovating instead.
I’m actually loving Windows 8 on my laptop. I was afraid I wouldn’t at first, but it’s awesome. It’s pretty much Windows 7, but faster and with a much better start screen. I don’t know if I’d ever be able to switch to a Windows phone though. Android is where it’s at.
Garnet Ulrich, if everyone you’ve ever met can’t stand Windows 8, you need to get out more!
Apparently you must be surrounded by people who just simply hate changes and still prefer to use XP. I for one praise Windows 8 and so do many of my colleagues and friends. It certainly runs faster; one merely has to adjust to new technology as one does when changing cars, TV, etc. etc.
Microsoft gains in search recently and will continue to gain, but don’t know if they’ll catch Google – who cares. We don’t search as much from a browser but from other platforms (Facebook for example and Microsoft works with them).
As computing on many devices grows, apps, as good as they are and important they’ve become, will give way to systems on an OS which can do things several apps can do or have the ability to plug and play what we call apps now so the number of apps will not make a difference – just ‘can I do that’, not ‘do they have an app for that’. The Windows 8 platform is better suited to be able to do this if and when they develop it that way.
Surface is new and will be smoothed out in the near future and then all the other partners will up their game with better quality laptops, desktops and tablets that take advantage of what Windows 8, 9, 10, etc. can and will be able to do. Its funny how so many are judging the future with so little time dealing mainly with Windows RT and a little with Windows 8 pro, but the computing devices that can use the Windows products are bairly coming out now. Google relies on some of the same partners – we’ll see how they split their time, efforts and money (Android has such cool ads that have nothing to do with the android system but make you want to get it to experience the demonstrated ‘power’)
Microsoft will still dominate enterprise around the world. My nephew, an IT guy, who works for a Chinese company that makes tires, had a decision to make – use Google software fo rhis company (to use inhouse and to connect those in China, USA and India) or to use Microsoft Office and all the structure and support from them. He chose Microsoft and thinks he made the right choice. He had to make a decision what laptops and operating systems to use before Windows 8 came out so he went with Windows 7 and is not sure of upgrading to 8 at this time. He likes a lot of what Microsoft is doing with: security, skype, cloud computing and storage, integration of the products, etc.
Microsoft stil has to make inroads into the consumer market and I think they can do much better – phones, tablets, laptops. It will take time and getting them to make better ads and find a way to show off what their products can do for our lifestyle – People need to be able to say – “My system can do that” and not look for an app for that (but be able to plug and play new apps)
Does anyone think that MS will do to Google what they did to Netscape? Using Bing or Yahoo is so irritating it probably drives people to Google, at least those who can tell the difference. Using Google Docs is a real pleasure compared to giving away storage to install the massive clunker that OFFICE has become. I like Windows 8 as far as I could go with it. I tried the pre-releases on three different platforms. It even ran really well in my Dell Mini 9 netbook in 2 GB memory and minimal disk space. I will not be installing the release in any of my three laptops or the netbook due to driver issues. Some drivers are not available and may never be. I will wait. If MS is making so much money off Android, why would they want to kill the golden goose.