eStrategy: Kill Google (Part II)




Microsoft's attempt to acquire Yahoo has its roots in its battle with Google. There are many lessons to be learnt by eStrategists.

Yahoo gets Googled! For those of you who remember the hay days of Yahoo might also recall the birth of Google. It started as the search engine on Yahoo. Now, it is beating the pants off Yahoo in just about everything Yahoo does. Most importantly, it is beating Yahoo by a mile on the thing that counts the most – profitability.?

Yahoo, like IBM was the 20,000 pound elephant that could not dance anymore. As it lay on its back, Google pulled a Microsoft on it. This one-two punch is very simple. Google established a relationship with Yahoo to:

  1. Market Entry: let users experience its search technology. Google did not have a prayer of getting where it is today without riding Yahoo’s coat tails.
  2. Competitive Chokehold: Yahoo, having found the excellent search engine had no reason to invest in its own search technology. Yahoo search was sitting on the sidelines while Google invested heavily and took an even bigger lead using Yahoo’s dollars!
  3. Customer loyalty: all the while building a transferable customer base which loves your product.

There are many similarities between these two stories – Google and Microsoft’s. Both came from nowhere and became giants in their respective fields. Both rode the coat tails of established giants who were asleep at the wheel and had to give up lucrative segements of their market. IBM gave up the PC software business. Yahoo is all but non-existent in the online search advertising business. The good news for Yahoo is that IBM is still a strong and vibrant business. Yahoo just has to find its core like IBM did. Now, the fight becomes interesting because the challengers face off. Microsoft versus Google To most of you, this battle between Goliath and Goliath is of no consequence. It may be interesting but it is not pertinent. Think again. This is a battle that any strategist must observe, from a ring side seat, no less. There is much to learn from it. First, focus on the prize. Why are these giants battling each other? They have plenty to eat as it is. As the world moves online, so do the dollars. Microsoft’s business model is facing extinction – slowly but surely its desktop software is giving way to open source served on the web. Its business model of “software for dollars” is being replaced with “free software but pay for service, by the sip” model that the whole open source and software as a service model has introduced. Google’s business model of serving advertisements to the world that moves online is working – it is extremely profitable with 77% of the market share. Next, on the landscape. Why is Microsoft trailing? Is it that it started late off the gate? Is it the technology? But the question now is: how does Microsoft catch up? We look at these questions in the next part. About the Author: Sourabh Hajela is a management consultant and trainer with over 20 years of experience creating shareholder value for his Fortune 50 clients. His consulting practice is focused on IT strategy, alignment and ROI. For more information, please visit www.StartSmartS.com. Or feel free to contact Sourabh at [email protected]StartSmartS.com


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