Microsoft’s Ballmer blasts Google’s business strategy


Microsoft Corp. CEO Steve Ballmer criticized rival Google Inc., saying it is devoted primarily to ad-supported search while Microsoft has reinvented itself many times over.

In a presentation Thursday at the Graduate School of Business at Stanford University, Ballmer said a truly entrepreneurial company invents something, builds a business around it and then starts the cycle again. But Google hasn’t yet emerged beyond ad-supported search, he said.

“They’re really just one business, a search and advertising business,” he said, although he gave Google credit for reaching the US$10 billion revenue mark quicker than did Microsoft.

However, Microsoft began selling desktop software, particularly its Windows operating system, then created software to run servers, moved into the Internet space with its Internet Explorer Web browser and MSN Search, and more recently, moved into consumer electronics with its Xbox video gaming system.

In a brief interview with IDG News Service after his presentation, Ballmer acknowledged that Google’s 2006 acquisition of the video sharing Web site YouTube might qualify as a second entrepreneurial wave for Google.

“They’re trying to make it into a second one, that’s right and we’ll see how they do,” he said. “Bravo to them [for] trying to start a second business. But it’s a related business, it’s not a completely second [one].”

Google was not immediately available for comment.

In an hour-long public interview with Robert Joss, dean of the Stanford Business School, and responding to students’ questions, Ballmer also said Microsoft’s IPTV platform is another entrepreneurial cycle for the company.

Microsoft began developing technology to deliver television programming over the Internet in 1994, even though investment analysts at the time were skeptical it would succeed. Today, Ballmer said, IPTV is finally gaining traction as telephone companies offer TV programming to compete with cable TV companies.

“Just now we’re really starting to see the telephone companies getting after this as a real proposition,” he said. “We stayed patient, we stayed persistent and today I think our [telephone company] customers are going to take a big share of the TV business and the innovation will be built on our IPTV platform.”

Ballmer got his undergraduate degree in mathematics at Yale University. He entered Stanford’s Graduate School of Business in 1980 but left after just one year, to take a job at Microsoft offered to him by now-Chairman Bill Gates.

Ballmer’s knocking of Google’s business model comes on the heels of another blistering attack on Google’s “book search” practices by Microsoft’s associate general counsel Thomas C. Rubin.

Addressing the annual meeting of the American Association of Publishers in New York, Rubin devoted a good portion on his remarks to attacking Google’s practice of copying entire books into its database, often without the permission of copyright holders.

Some industry observers see these denunciations as an indication of the fierce rivalry building up in the Search market.

Microsoft itself has been assiduously attempting to boost its disappointing Web search market share.

To this end, it recently announced financial incentives for large enterprise customers whose employees use Microsoft’s Live Search engine.

The program is being tested with “a select number of enterprise customers based on the number of Web search queries conducted by their employees via Live Search,” Microsoft said in a statement provided via e-mail through the Waggener Edstrom public relations agency Thursday evening.

In exchange for their employees’ Live Search usage, Microsoft is providing “service or training credits” to these enterprise customers, the company said. The program also allows the vendor to gather feedback from these users regarding Web search use in an enterprise, Microsoft said.

When asked what type of usage commitment participating companies must make, a spokesman for Microsoft declined to provide further details about the program.

This is a shrewd move by Microsoft to boost Live Search by tapping into its loyal and well established enterprise customers, but the strategy has its risks, said industry analyst Greg Sterling from Sterling Market Intelligence. Specifically, employees could resent being forced or encouraged by higher-ups to use a specific search engine, he said.

“Ultimately you have to compete at the product level. The product has to stand on its own merits. There’s a fairly high risk this will not succeed at the grassroots level, because they’re using a top-to-bottom approach here,” Sterling said. “I’m very skeptical of the long-term prospects for success at the level of the ordinary worker.” While Live Search is a good search engine, this program hints at a mixture of anxiety and frustration on Microsoft’s part, in wanting to use its wealth and muscle to improve its Web search position, Sterling said. “It’s a bit of the old Microsoft behavior,” he said.

News of this program comes soon after Microsoft announced another initiative to promote use of its Live family of online services, including Live Search. On Wednesday, Microsoft said computer maker Lenovo Group Ltd. will pre-load Windows Live services on its ThinkPad notebooks, ThinkCentre desktops and Lenovo-branded PCs.

Despite heavy investments and efforts in recent years, Microsoft hasn’t been able to come close to rival Google Inc. in Web search. Consequently, Microsoft hasn’t capitalized as much as expected on the boom in search engine advertising, upon which Google has built its increasing revenue and profit.

In January, Google captured 47.5 percent of search engine queries in the U.S., compared with 10.6 percent for Microsoft. This week, Microsoft acknowledged that its highest-ranking search executive, Christopher Payne, corporate vice president of Windows Live Search, is leaving the company.

Microsoft confirmed the existence of the incentives-for-search program after details leaked out Thursday afternoon. The news was first reported by technology publisher and author John Battelle in his Searchblog Web site where he discusses Internet search issues.

“As search evolves into more of a productivity tool, and revenue sharing becomes more commonplace across the industry, we are engaging in mutually beneficial partnerships such as this and our recently announced deal with Lenovo to more easily enable customers to choose Live Search,” Microsoft’s statement said.


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