Microsoft Comes Out Fighting

This week Microsoft finally declared war on Google, using Internet Explorer 7 as the WMD. Microsoft is putting a search capability in the top right corner of its browser that will jump right to Microsoft's search site—just like the Google one at the top right of Firefox goes direct to Google. Google is, of course, complaining vociferously to anyone who'll listen (and may formally complain to the DOJ and the EU Commission). Methinks it doth protest far too much.

I've never been accused of being a Microsoft friend. In fact some people think I'm down right antipathetic to the jolly giant from Redmond. Let's fess up. I am. It is born of the desktop disaster that Microsoft foisted on the world, by combining ruthless monopolistic practices with terribly poor products. But let's set that to one side. Microsoft knows how to play Monopoly, but so does “don't-be-evil-knievel” Google. (Throw the dice, buy the houses, charge the rents, display the ads).

Is playing Monopoly evil? Well, in practice, it usually turns out to be anti-consumer. So governments across the world try to prevent monopolies from ever forming—with mixed success.

In March 2006, Google had 42.7 percent of the search market, Yahoo 28 percent, Microsoft 13.2 percent and various also-rans 14 percent. (figures from ComScore). IMHO, Google is heading for monopoly status. That, by the way, is the search market not the ad market. In the ad market Google has 30 percent of the whole Internet. IMHO that's close to a monopoly position. Google has very substantial ad revenues that come from other sites through its Ad Sense service. These revenues would be unaffected by a decline in their search popularity.

So what could the IE move by Microsoft do to Google? Well Google seems to think that between 30 and 50 percent of searches start in the top right corner of the browser. (Let's say 40 percent.) IE has 85 percent browser market share. (but it's falling and its share of active browser users is much lower) So how many searches might be affected? Well, worst case would be about 35 percent of the total. (I'm convinced it's less). Depending on how you model this, it suggests that Microsoft could draw ahead of Google and that would damage Google revenues severely. As it happens, I don't think it will even pull Microsoft level, but time will spill the beans on this.

That's the reality behind the current PR war—with Google crying “foul” (Look, look, the beast of Redmond is competing! Cry havoc and unleash the dogs of law!), and Microsoft crying “fair” (The user is in control. What could be fairer. The quality of searching is not strained, it droppeth as the gentle rain from heaven, etc.). Truth is—Google is facing competition. I think this is healthy. Stop whingeing and start sprinting.

When Microsoft crushed Netscape it did so primarily because Netscape behaved stupidly, believing that it could take the commercial battle to the desktop—which was, after all, Microsoft territory. “Doh!”. Google has not behaved stupidly and has dragged the battle onto the server. Microsoft is competing on equal terms here. IE gives it an edge on the desktop, but all the free services that Google provides even up the score somewhat. This is a commercial battle that will not be over in a few months. It's a contest between heavy-weights and I think it will go 15 rounds.

Is Google the good guy here? The everyman's champion? Those of you who believe that Google is a fountain of benevolence should visit this web site. It's shrill and it's fundamentally one sided, but it serves as a balance for the various anti-Microsoft sites out there—of which there is no shortage.

Omnifone Goes Apple-Bashing

Will anything upset the dominance of Apple in the music market? In the short term, probably not. The iPod isn't a product, it's an industry and music consumers have become used to the excellent combination of device, software and channel that Apple has provided. In the long run though, Apple will not be able to maintain its dominance. Here's why:

1. Apple is not going to dominate DRM. Microsoft probably is. I feel uneasy about being too positive about Microsoft technology, but there is no denying that Microsoft did a really excellent peice of technical work on DRM. And it has the advantage that it owns the OS that most video will play on. If Sony puts a root-kit on your PC then we all cry foul, but Microsoft can put anything it wants on your PC. This gives it a huge advantage over other DRM providers except for Apple. But the television and movie industry is not going to wait for Apple to become dominant in the PC market. Microsoft will have its piece of the action and this will put Apple in a far more competitive position than it currently is. It will not dominate video like it dominates music. It will be a shared market.
2. Apple's dominance of music is under threat anyway. The point is simply this. The mobile phone carriers and manufacturers of this world are not going to donate their industry to Apple. All that is required to upset the Apple cart is software that can out-iPod the iPod on a mobile phone.

It exists and it's British. Are you serious Bloor?

Well yes, actually. Long time associates of mine and software industry heavyweights of long standing Rob Lewis, Phil Sant and Mark Knight have been nurturing a start-up called Omnifone. Now it has product and, technically, it's very impressive. Put simply, it's software that plays music on a mobile phone. I know these guys. This is not a dim-simple MP3 player. Sticklers for technical elegance, they've gone and designed it as self-configuring so that it optimizes its foot print and runs on anything. It has a pretty interface. It has parallel downloading. DRM is built in. Am I boring you yet?

It is British, so it must be great technology that goes nowhere? Well perhaps, but as things stand, operators that collectively have more than 50 percent of the world mobile market have signed up with Ominfone as development partners.

And what does this mean for Apple? It means that Apple is going to run very fast to maintain its share of the music market. It means that Apple's real iPod phone needs to be very compelling. It probably will be, but Apple's share of the music market is set to decline anyway.