February 03, 2008

Microsoft's Secret Weapon Against Google

Greetings. A couple of days ago in Microsoft, Yahoo, and The Three Stooges, I suggested that the proposed Microsoft/Yahoo merger might not create the anti-Google juggernaut that some observers have suggested would be the case -- though a range of complex and potentially troubling issues would certainly crystallize.

But there's certainly more to this story, as evidenced by Google's criticism of the merger proposal.

A natural reaction by many to Google's take on this situation might be to chuckle and mumble something about the pot calling the kettle black. But that wouldn't really be fair, since in reality Google brings up a crucial point.

For Microsoft still can use a powerful weapon which if unleashed remains potentially capable not only of seriously damaging Google but decimating many other firms as well.

That "secret" Microsoft weapon is our own complacency.

While Microsoft's business missteps in the Web world have led many to retarget their "big firms are bad firms" arguments from Microsoft to the services powerhouse that is Google, the undeniable fact remains that Microsoft has an immensely important structural advantage -- with vast anticompetitive potential -- that is without compare.

Despite some inroads by other operating systems, Microsoft's Windows incarnations, and their Internet Explorer browser, still control the overwhelmingly vast majority of desktop systems, as much as hardcore Linux and Firefox aficionados (and that includes me) might prefer to forget this fact.

And like the telephone and cable companies that control physical access to the Internet for most users -- wherein many network neutrality controversies reside -- Windows (and Microsoft) are usually in command of the fundamental software environment.

Most users of Google are on Microsoft systems, using Microsoft TCP/IP stacks, and accessing Google applications via Microsoft's IE browser.

It's hard to imagine a Microsoft/Yahoo merger scenario where Microsoft wouldn't in some manner wish to leverage this structural advantage to favor its own properties, absent relevant and effective judicial rulings or legislative actions to the contrary.

And this brings up another crucial and often overlooked difference between Microsoft and Google. By and large, for Google users to switch to another service provider for most applications is basically as simple as changing a URL, as quick as altering a browser bookmark. Leaving Google by voting with their feet (or rather their fingers) is usually an easy option. The only real hold that Google has on users is the high quality of its applications and services.

Microsoft is a different story when it comes to the Windows OS. Despite lots of talk, lawyers' fees, and complicated agreements, Microsoft's hold on the computing desktop is still overwhelming, and practical OS alternatives for most non-techies (especially that they can run on their existing hardware) are still lacking in many respects for this class of users, despite the continuing evolution of the Linux desktop environment.

These users remain firmly chained to Microsoft as the software gateway to all aspects of the Internet, and typically for them any major changes to this situation would be either uneconomical, impractical, or both.

This might be "merely" problematic if Microsoft had a history of what could be called "software neutrality" -- but unfortunately that's not the case.

Microsoft has a long rap sheet of predatory software practices, with their handling of Internet Explorer and their Media Player but two examples. Microsoft at various points -- prior to significant pushback -- has also appeared ready to leverage Internet Explorer's search access to favor their own search services as well.

Google and Microsoft are both large, powerful, highly competitive, and financially well-endowed firms. It's perhaps tempting to view them as two peas in a pod, but actually each has a structure and modus operandi that are very different indeed.

In any dispassionate comparison, it seems clear that Microsoft's potential for broad anticompetitive behavior -- that could have very widespread negative impacts -- remains vastly greater and more significant than Google's.

While evaluating the anticompetitive risks of the proposed Microsoft/Yahoo merger, we'd be wise to keep the fundamental differences between Google and Microsoft firmly in mind.


Posted by Lauren at February 3, 2008 05:47 PM | Permalink
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