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  • The Truth Revealed: Microsoft Can’t Compete!

    March 20th, 2007

    I’m sometimes criticized for writing tabloid headlines to get attention, but I’d like to think that they all accurately reflect the contents of my articles. At the same time, I realize some of you will fight me tooth and nail over this one, because you can’t imagine that the world’s largest software company — which has its operating system on over 90% of the world’s PCs — is unable to compete.

    But the facts demonstrate that I’m right on the money here. So let me explain.

    Exactly where does Microsoft own markets? Well, as most of you know, they dominate in operating systems and applications. Both Windows and Office overwhelm their competition by huge margins, and they contribute to the largest percentage of Microsoft’s revenue and profits.

    However, when Microsoft strays outside of its core business, it runs into trouble, even though they can be a fearsome competitor. Or at least that’s the usual perception.

    Take online services. Once upon a time, AOL was sitting pretty as the world’s number one ISP in the years before the disastrous merger with Time Warner. The arrival of MSN was greeted with fear by many of the folks laboring over at AOL. I remember it well, since I was a paid forum manager for AOL at the time.

    Of course, in retrospect, AOL had other things to worry about of more immediate concern. MSN only built a subscriber base that was a fraction of AOL’s, and then the market moved towards broadband.

    Today, the remnants of MSN have been rebranded as Windows Live. You see, when Microsoft can’t succeed at something, they give it a shave and a haircut and call it something different.

    Now when it comes to search, what is there about Windows Live that would have more traction than MSN Search? Well, maybe because Microsoft has developed this obsessive-compulsive scheme to give everything it does the Windows label, as if that name had sex appeal.

    Except for the Zune music player, where the Microsoft brand name was buried in a smaller typeface, so maybe you wouldn’t notice. But you did, of course. Of course, it didn’t matter if Zune was renamed Zone or Zapp or Windows Portable Player. Well, at least the latter would give it a name that is consistent with other Microsoft products.

    Regardless of what the player was called, it wasn’t destined to succeed. Aside from the flawed Wi-Fi technique of “squirting” songs to a fellow Zune user — if you could find one — there was nothing new or different about the player.

    As an aside, I just wonder if Microsoft’s betrayed PlaysForSure partners are gloating over Microsoft’s latest failure. Worse, while the other companies actually try to make a profit from their music players, Microsoft had to subsidize theirs to keep the price competitive with the iPod.

    But what about the Xbox? Isn’t that a success, a viable competitor to the PlayStation and Nintendo? Sure, tell me another one. You see, Microsoft is dumping billions of dollars to prop up the Xbox, in the hope that sales of games will account for the difference.

    Now let’s compare that to Apple’s approach, where they make a profit — or try to — on everything they sell. Indeed, the iPod is a huge income generator, and the more they sell, the less they pay for the raw materials. So they can cut the price — or keep them stable — and up their margins. It’s a neat deal. They even earn a few cents on every song they sell. I gather the phrase “loss leader” isn’t in the vocabulary of Steve Jobs.

    Sure, Microsoft’s intentions are probably honorable as profit-making corporations go. They hope and pray their investments in gaming and music hardware will some day pay off and yield genuine profits. On the other hand, their track record of success when they stray beyond their traditional product lines isn’t all that terrific.

    Sure some tech journalists will simply fawn over anything Microsoft does, however ill-thought, simply because they are Microsoft. They are supposed to be all-powerful, invulnerable, unbeatable.

    That is until you compare the market share of the iPod against the Zune, or see what the MSN online service achieved compared to AOL at its peak, or what Windows Live search does now compared to Google.

    Oh yes, Windows Live is been losing market share even as Yahoo maintains its status quo and Google continues to grow.

    Now I won’t go into the nasty details of how Microsoft sealed its dominance of the PC operating system and office suite markets way back when. Microsoft may believe it can repeat history, but so far they haven’t done a very good job trying.



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    14 Responses to “The Truth Revealed: Microsoft Can’t Compete!”

    1. Michael says:

      “Windows Live is been losing market share even as Yahoo! maintains its status quo and Google continues to grow”

      That’s not all–it’s less safe than Google or Yahoo! as well:

      http://www.theregister.co.uk/2007/03/20/windows_live_malware/

    2. Jake says:

      Microsoft does go into markets that they maybe shouldn’t. Microsoft has never been strong in the entertainment business. Microsoft has made it’s mark in producing functional products. See Office and Windows. When it comes to what Microsoft does best no one can compete with them. When it comes to what Google does best I do not see anyone competing.

      The simple truth is Microsoft can and does compete. Microsoft went into the ISP business against AOL and suddenly AOL started to improve everything they did. Microsoft releases products to go head to head with Apple and Apple has to improve. The problem is Microsoft is coming in behind and whenever someone starts before you they have more oppurtunity to improve faster.

      Compitition creates a better product. Microsoft definantly competes, but sometimes that compitition provieds more benifit to the competitior then it does to Microsoft.

    3. Mike Peter Reed says:

      Windows This. Windows That. A classic brand-extension trap.

    4. James Robinson says:

      The good folks at Roughly Drafted have been running a series of articles on how Apple shepherded QuickTime through an all-out “competitive” assault by Microsoft, which is characterized by a few inept attempts at actual competition and a lot of (far more effective) bullying and arm-twisting of Apple’s partners.

      The areas where Microsoft is unchallenged are unchallenged because they pose a very high barrier to entry. Replacing a behemoth like Windows or Office is outside the capabilities of the small, nimble competitor that haunts Gates’ dreams. It took Microsoft years and years to accrete them and the byzantine and proprietary file formats that accompany them, so they’re safe from just about any head-on competition. In fact, I wouldn’t be surprised if that was part of Microsoft’s strategy: Make it so that people can literally do everything from Office, and then anyone who wants to replace any part of Office will have replace the whole bloated beast.

      There are also legacy considerations. There are books and courses and seminars on how to use Word and Excel and Windows, and the people that have invested time and effort and money in those things fear having to jettison that training to relearn a new tool. The fact that Word, especially, is remarkably difficult to master merely increases the fear.

    5. Microsoft does go into markets that they maybe shouldn’t. Microsoft has never been strong in the entertainment business. Microsoft has made it’s mark in producing functional products. See Office and Windows. When it comes to what Microsoft does best no one can compete with them. When it comes to what Google does best I do not see anyone competing.

      The simple truth is Microsoft can and does compete. Microsoft went into the ISP business against AOL and suddenly AOL started to improve everything they did. Microsoft releases products to go head to head with Apple and Apple has to improve. The problem is Microsoft is coming in behind and whenever someone starts before you they have more oppurtunity to improve faster.

      Compitition creates a better product. Microsoft definantly competes, but sometimes that compitition provieds more benifit to the competitior then it does to Microsoft.

      Since you raised the issue, how did AOL improve after MSN arrived?

      How did the iPod improve when the Zune arrived in ways that it would not have done otherwise?

      Peace,
      Gene

    6. The good folks at Roughly Drafted have been running a series of articles on how Apple shepherded QuickTime through an all-out “competitive” assault by Microsoft, which is characterized by a few inept attempts at actual competition and a lot of (far more effective) bullying and arm-twisting of Apple’s partners.

      The areas where Microsoft is unchallenged are unchallenged because they pose a very high barrier to entry. Replacing a behemoth like Windows or Office is outside the capabilities of the small, nimble competitor that haunts Gates’ dreams. It took Microsoft years and years to accrete them and the byzantine and proprietary file formats that accompany them, so they’re safe from just about any head-on competition. In fact, I wouldn’t be surprised if that was part of Microsoft’s strategy: Make it so that people can literally do everything from Office, and then anyone who wants to replace any part of Office will have replace the whole bloated beast.

      There are also legacy considerations. There are books and courses and seminars on how to use Word and Excel and Windows, and the people that have invested time and effort and money in those things fear having to jettison that training to relearn a new tool. The fact that Word, especially, is remarkably difficult to master merely increases the fear.

      You make some great points in your article. And I do want to direct our regulars to http://www.roughlydrafted.com for Daniel Eran’s cutting-edge commentaries. That’s why we have him on periodically on The Tech Night Owl LIVE.

      Peace,
      Gene

    7. Steve M says:

      Microsoft does go into markets that they maybe shouldn’t. Microsoft has never been strong in the entertainment business. Microsoft has made it’s mark in producing functional products. See Office and Windows. When it comes to what Microsoft does best no one can compete with them. When it comes to what Google does best I do not see anyone competing.

      The simple truth is Microsoft can and does compete. Microsoft went into the ISP business against AOL and suddenly AOL started to improve everything they did. Microsoft releases products to go head to head with Apple and Apple has to improve. The problem is Microsoft is coming in behind and whenever someone starts before you they have more oppurtunity to improve faster.

      Compitition creates a better product. Microsoft definantly competes, but sometimes that compitition provieds more benifit to the competitior then it does to Microsoft.

      Hi Jake,

      Hi Jake,

      I have to echo Gene here. I really don’t see that Microsoft’s entering the market has helped anybody else’s game particularly – although I’m certainly not against competition! No – Conversely, I think that other companies competing with Microsoft have finally started to shift it from its monopolistic inertia. Browsers are a good example. Without Firefox and its browser share gains, do you really think MS would have brought forward their release of IE7 to XP the way they did? Tabbed browsing was years old, for heavens sake! IE didn’t have it because MS had the market and they couldn’t be bothered. Along came firefox – took 10 percent of the market and – bang – tabbed browsing in IE!

      Likewise Vista. Can you honestly say that MS has made *Apple* improve its products by competition, when Vista is so clearly a late response to Apple’s leadership in the OS market with OSX? Even hardened Vista fans acknowledge the OSX influence in Vista!

      What has really changed is the competitive environment. There are new markets, new media, and new ways of competing. MS is a giant, and isn’t going away any time soon. But its old assumptions are now being challenged in a way they weren’t before – and it finds that competition without monopoly is a little trickier to do….

      Steve

    8. Tom B says:

      With regards to MSN Live search: rather than craft a competitive product, they have recently adaopted the highly illegal practice of BRIBING CIO’s and ComCast and box makers to “Switch” from Google. Shades of Netscape. But I think this tactic is a bit long in the tooth now. I’m betting on GOOG, this time around.

    9. Shane says:

      Microsoft does go into markets that they maybe shouldn’t. Microsoft has never been strong in the entertainment business. Microsoft has made it’s mark in producing functional products. See Office and Windows. When it comes to what Microsoft does best no one can compete with them. When it comes to what Google does best I do not see anyone competing.

      The simple truth is Microsoft can and does compete. Microsoft went into the ISP business against AOL and suddenly AOL started to improve everything they did. Microsoft releases products to go head to head with Apple and Apple has to improve. The problem is Microsoft is coming in behind and whenever someone starts before you they have more oppurtunity to improve faster.

      Compitition creates a better product. Microsoft definantly competes, but sometimes that compitition provieds more benifit to the competitior then it does to Microsoft.

      Your statement “The problem is Microsoft is coming in behind and whenever someone starts before you they have more oppurtunity to improve faster.” Fails to explain how Apple succeeded with the iPod, which started far later in the MP3 player market than its competitors. It will be interesting to see how things pan out with Apple TV and the iPhone which likewise are starting out far later than the competitors in their markets.

    10. […] sure I agree all of this one, but an interesting article from The Mac Night Owl, about Microsoft’s inability to compete. Posted in Current […]

    11. Bruce W says:

      Gene,

      I was in San Francisco this weekend and took BART rapid transit to get there so I wouldn’t have to hassle with downtown parking. Imagine my surprise (shock? horror?) to get off at the Powell Street BART Station and find that EVERY SINGLE advertising space on two levels was devoted to an ad for Microsoft Vista — and not only all the ad space but on one level ALL of the upright columns holding up the station were completely plastered with ads, plus ads on the FLOOR. Everywhere you looked it was Vista, Vista, Vista.

      Maybe it’s because of my own often strong prejudice against many things Microsoft but I thought to myself what a pathetically lame approach to getting people’s attention, one that smacks of desperation — and in San Francisco of all places — definitely uncool. It was like having only one channel of TV to look at or one radio station to listen to or one magazine or newspaper to read or one website to visit. Or having someone yelling the same thing at you every step of the way. Can you hear me now?

      In a way I suppose this total saturation bombing approach to an ad campaign pretty accurately represents Microsoft’s general business model and practices. You can easily visualize the always entertaining Steve Ballmer up on stage somewhere jumping around and yelling, “Vista is the BEST operating system! Why? Because we have bought the most advertising! Competition, what competition? We want to have it ALL! Do you hear me, we want it ALL!! No one else can exist! If they do exist, they do not deserve to exist and we will crush them! Resistance is futile!”

      For many years I have heard insanity defined as “continuing to do the same things and expecting different results.” This would definitely apply to this latest Microsoft ad campaign. I don’t know if it’s even possible for Microsoft as a company to ever really “get it” when it comes to influencing people in more real and subtle ways. The final irony of the Powell Street BART station story is that when I finally escaped the Vista ads and got up to street level, there was the gleaming San Francisco Apple Store, beckoning everyone who passes to come inside and experience a different approach to marketing and educating and informing potential customers about what Apple for years has called “insanely” great products—a whole OTHER definition of insanity, believe me!

    12. Andrew says:

      What is it with the Zune? The thing’s a flop, everyone knows its a flop, even Microsoft isn’t advertising it much, but almost every day, I come to read The Mac Night Owl and rarely do I make it through an article without at least one mention of the Zune.

      Gene, the Zune really is old news. Nobody cares about it, least of all Apple. The Zune isn’t competition, its a failed product launch, like many other failed product launches by many companies. Heck, even Apple’s had a few, remember the Mac TV, or how about the Cube? Some failed products are actually very good (cube), while others should never have seen the light of day (Mac TV, though the black keyboard was cool). I saw a Zune and its actually a pretty nice media player. Its just too expensive and not refined enough to compete with the superior iPod. Its like the Segway people mover thingee, cool product and terrific engineering, but too expensive and not capable enough to displace the much cheaper and superior bicycle.

    13. What is it with the Zune? The thing’s a flop, everyone knows its a flop, even Microsoft isn’t advertising it much, but almost every day, I come to read The Mac Night Owl and rarely do I make it through an article without at least one mention of the Zune.

      Gene, the Zune really is old news. Nobody cares about it, least of all Apple. The Zune isn’t competition, its a failed product launch, like many other failed product launches by many companies. Heck, even Apple’s had a few, remember the Mac TV, or how about the Cube? Some failed products are actually very good (cube), while others should never have seen the light of day (Mac TV, though the black keyboard was cool). I saw a Zune and its actually a pretty nice media player. Its just too expensive and not refined enough to compete with the superior iPod. Its like the Segway people mover thingee, cool product and terrific engineering, but too expensive and not capable enough to displace the much cheaper and superior bicycle.

      It’s an example of where Microsoft’s efforts to compete failed miserably. No, it’s not in every article 🙂

      Peace,
      Gene

    14. tom says:

      Gene,

      I was in San Francisco this weekend and took BART rapid transit to get there so I wouldn’t have to hassle with downtown parking. Imagine my surprise (shock? horror?) to get off at the Powell Street BART Station and find that EVERY SINGLE advertising space on two levels was devoted to an ad for Microsoft Vista — and not only all the ad space but on one level ALL of the upright columns holding up the station were completely plastered with ads, plus ads on the FLOOR. Everywhere you looked it was Vista, Vista, Vista.

      Maybe it’s because of my own often strong prejudice against many things Microsoft but I thought to myself what a pathetically lame approach to getting people’s attention, one that smacks of desperation — and in San Francisco of all places — definitely uncool. It was like having only one channel of TV to look at or one radio station to listen to or one magazine or newspaper to read or one website to visit. Or having someone yelling the same thing at you every step of the way. Can you hear me now?

      In a way I suppose this total saturation bombing approach to an ad campaign pretty accurately represents Microsoft’s general business model and practices. You can easily visualize the always entertaining Steve Ballmer up on stage somewhere jumping around and yelling, “Vista is the BEST operating system! Why? Because we have bought the most advertising! Competition, what competition? We want to have it ALL! Do you hear me, we want it ALL!! No one else can exist! If they do exist, they do not deserve to exist and we will crush them! Resistance is futile!”

      For many years I have heard insanity defined as “continuing to do the same things and expecting different results.” This would definitely apply to this latest Microsoft ad campaign. I don’t know if it’s even possible for Microsoft as a company to ever really “get it” when it comes to influencing people in more real and subtle ways. The final irony of the Powell Street BART station story is that when I finally escaped the Vista ads and got up to street level, there was the gleaming San Francisco Apple Store, beckoning everyone who passes to come inside and experience a different approach to marketing and educating and informing potential customers about what Apple for years has called “insanely” great products—a whole OTHER definition of insanity, believe me!

      I’m a little late to the conversation, but Apple has been doing stuff like this in Toronto for a few years now and we never thought of it as desperation. The St. George subway station (3rd busiest overall and 2nd busiest transfer station) was like that with all the columns and stairs covered in March 2004 http://www.macbillboard.com/pictures_billboards/0007.jpg , as well as streetcars http://www.macbillboard.com/pictures_billboards/0045.jpg and even a few whole subway trains http://www.macbillboard.com/pictures_billboards/0054.jpg in the summer of 2005. There also were see-through posters on virtually every streetcar shelter (but not bus shelters) http://www.macbillboard.com/pictures_billboards/0053.jpg also in the summer of 2005. I thought it all looked great.

      tom

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