When It Comes To Google, Microsoft’s Ballmer Is Still Fighting Old Battles With Old Tactics

I’ve watched Microsoft fight Google in search for a very long time. Bing has come a long way, and I’ve been pleased to see a strong competitor emerge. But Microsoft hasn’t actually hurt Google’s share. It’s only robbed from its partner, Yahoo. So how’s Microsoft going to beat Google? Comments from departing CEO Steve Ballmer suggest there are no new tactics in the playbook.

Ballmer spoke yesterday at Microsoft Financial Analyst Meeting 2013, saying that, among other things that Google was a monopoly. That might sound scary if even Google executive chairman Eric Schmidt hasn’t admitted that.

But being a monopoly isn’t necessarily illegal, and Google was cleared of any wrong-doing in the search space by the US Federal Trade Commission last year. So what’s the plan? Complain or find another way to win?

If there is a fresh, innovative plan, I certainly didn’t find it in Ballmer’s comments. Below is a transcript of his discussion of competing with Google, which I’ve annotated with my own thoughts and observations.

Google Didn’t Get Search Share By Giving Away The Operating System

KEN COPLEY, Capital Executive: Hi. This is Ken Copley with Capital Executive. I realize this might be an off-the-wall question, but at a time when Microsoft was even more dominant in the market than it is today, Google strategically made a decision to attack you guys by giving away the operating system, calling it open source, and any way you cut it it’s been successful. They’ve garnered about, what, 79 percent of the market.

And right now they’re generating about 83 percent of their business in search-related advertising or search-related services. It’s a highly concentrated revenue stream, and I think when you get a highly concentrated revenue stream that creates a weakness or a vulnerability so to speak.

And I’m just wondering if you can talk about any kind of strategies that might be in play where you might take advantage of or attack that vulnerability within Google?

Ken’s a bit confused in his question. Google is indeed giving away the operating system, in terms of Android on mobile devices and Chrome OS on the desktop. But Google doesn’t have 79 percent of either of those markets. He seems to be referencing Google’s share of the US search market, which gets into that range by some estimates.

Getting to that share had nothing to do with giving away an operating system. Google does “give away” search, but it does that just like everyone else does and did before it. That includes Microsoft, which was in the search game before Google.

Google was successful because, primarily, it built a better product. It also gained most of its share without Android and without Chrome OS.

Microsoft Helped Kill The Search Competition

STEVE BALLMER: Well, first of all, we’re the only guys in the world trying. And that starts with a great product. We’ve invested in Bing, particularly in the United States, some of the new investment in Bing is to make it as good outside the United States as it is in the United States. And that requires more investment because you have to index more of the Web. You have to know more about local events and information, et cetera. So, number one, got to get the product right.

Sorry, there are plenty of companies trying to compete with Google — and winning. There’s a little company called Apple having a pretty big day today selling its latest phones. There’s Facebook, which still gets a chuckle out of the whole Google+ thing. Amazon’s not exactly sitting back and taking Android however Google wants to give it, either.

If you mean competing in search, yes, within the United States, Microsoft is the only large player fighting Google. Of course, that’s because, in part, Microsoft helped convince the US Department of Justice that it would be an excellent idea if Yahoo couldn’t cut a deal with Google to use some of Google’s ads but keep Yahoo’s own in-house search technology. That helped pave the way for you to step in a year later and make Yahoo abandon its search tech.

The promise was that Yahoo would just wrap up your Bing results and still do as well. The reality is Yahoo continues to die a slow death as a search player, with all its lifeblood flowing to Bing. That’s where your gains have come from.

So if there’s no other major player still trying in search, that’s because Microsoft helped turn a Google-Yahoo-Microsoft world into a Google-Microsoft one.

So When’s That Critical Mass Happen?

Number two, you sort of have to be at critical mass. This is a scale game because the market for advertising is auction-based economics. So if we have exactly the same quality of algorithms, but a lot less scale in search advertising, we will get less revenue per search than Google does, which means they have more money to pay for distribution on Samsung devices, or Apple.

Yes. Scale. That’s what Ballmer and now-departed Yahoo CEO Carol Bartz kept talking about when the Microsoft-Yahoo deal was announced in 2008. I’ve heard the word “scale” used so often as a mystical solution to all of Microsoft’s search problems that I think there should be a swear jar for it, if any Microsoft executive ever uses it again.

We’re five years into the deal with Microsoft and Yahoo that was supposed to produce the scale that would make everything better. If it can’t be done  five years, which is like 50 internet years, how much longer is needed? Or is it time to simply give up that argument?

Transparency On Distribution Deals?

Rumor has it that they probably pay each of those guys 1 to 2 to 3 billion a year for distributing their search product. So we have to generate volume in order to step up.

I sure wish this was transparent, that Google explained its deals in more detail. Heck, I think it goes to the consumer experience. It was part of what I wrote the FTC about, asking that it consider such deals be made more public. It didn’t seem to care. But maybe Ballmer, while he’s still CEO of Microsoft, could explain more about Microsoft’s own deals, to lead by example? I’ll get back to that….

Cleared Of Competitive Issues, In The US

I do believe that Google’s practices are worthy of discussion with competition authority, and we have certainly discussed them with competition authorities. I don’t think their practices are getting less meritorious of discussion. We’ve highlighted some of their bad practices in our advertising, in our discussions with regulators, the bundling that they’re doing with YouTube and Google Maps and some other things. Anyway, suffice it to say that I think they need pressure from competition authority. I think they need pressure in the marketplace.

Well, it’s over in the US. Google’s not doing anything wrong. We’re still waiting on the EU, which is likely to be tougher — but probably not that tougher.

You know what went wrong here? I could, and maybe will do, an entire piece on how Microsoft’s FairSearch.org attack dogs wasted the one good chance Microsoft had to try and stop Google. Who argues the crazy notion that a search engine should point to other search engines. Waste. Of. Time.

If Microsoft ever gets another chance, it’s all about the closed loop, how so much else that Google does produces data that reinforces its search position plus poses some anti-competitive conflicts. I laid it all out here before any FTC investigation even started. That closed loop has only gotten worse.

Your Own Devices Aren’t Key

I think with product, with investment, with scale. How do we get scale? The easiest place for us to get scale is on our own devices or on somebody with whom we are closely aligned.

Microsoft has shoved its own search engine at consumers through both its desktop and mobile operating systems since 1998. It hasn’t worked. People still go to Google. So skip the entire “we’ll just tap into Windows” pitch. Windows integration is helping keep Bing above water. It has never, and still doesn’t seem likely to, pull serious share away from Google.

Transparency On The Siri Deal?

We’re very pleased to be providing Bing results as part of the Siri offer now with Apple. And you might say, wow, that’s unusual. But we have made an investment that Apple hasn’t, and we found a way to partner with them and we’re excited about that in this dimension. So there’s a range of things that we’re doing. And I do believe that’s an important pressure point.

Congrats on that deal. Seriously. I like Bing. It was nice to see Bing has matured into a search engine that Apple would trust integrating so tightly into Bing. And so far, there’s been no Bing-gate over Apple dumping Google from Siri to match last year’s Map-gate, when Google Maps was dropped.

But how much was that deal? What are you paying, what are you getting? Maybe if Microsoft opened up about that, then we could get Google feeling some pressure to open up on the search deals it cuts. Consumers would win, because they’d better understand why some of the default decisions are being made for them.

apple-siri

And Is The Siri Deal Really Boosting Bing?

By the way, what is Microsoft really getting out of the Siri deal? On the surface, it sounds like a real win. But after digging into the actual implementation of Bing within Siri, the Bing branding is hardly noticeable. Bing ads don’t appear to show. People aren’t even sent to Bing at all.

If Siri’s driving scale, it appears to an outsider that it’s scale Microsoft’s not making anything substantial off of. Not yet, at least.

After 15 Years, “A Little Bit More Time”

That advertising marketplace right now, Google has pretty well defensed. But I think we’ve got a pretty good attack strategy. It will take a little bit more time, and a little bit more patience. I think it will have great economic return for our shareholders, and at the same time changes a lot of the competitive dynamics overall between our companies.

Microsoft has been doing its own search engine since 1998. MSN Search, remember? In 2005, it switched to using its own in-house search technology. In 2009, it made major rebrand into Bing. The deal with Yahoo kicked in a year later.

In short, Microsoft has been trying to win at search for between four to 15 years. Even the short end of that scale is a really long time.

I don’t think more time is going to change things, not in terms of gaining share that approaches Google.

If it’s about making more money off its existing search traffic, maybe Microsoft can ramp that up more quickly. But whether that means its search operations are paying for themselves, who knows? Microsoft doesn’t break those figures out.

Neither does Google, of course. But Google gets away from that because it’s clear that its search activities are fueling so much cash that Google can play with little things like trying to solve death.

Really, The Search Charms?

KEVIN TURNER: The one thing I would amplify there on the compete strategy was the Search charms that we’ve got in 8.1 are certainly an accelerator to Bing as well. So Qi touched on that when he was up here. We see a game changer both from a usability perspective and a search perspective in that particular piece of technology.

As I said above, the embed of search into Windows 98, Windows XP, Windows Vista, Windows 7, you name it, none of that has shifted search share into Microsoft’s favor. If anyone at Microsoft is still believing the operating system will knock down Google’s share, it’s wake-up time. It ain’t gonna happen.

Windows Phone Won’t Change Things

STEVE BALLMER: Let me just build on that with Windows Phone. I know we have small market share in phones. I’m not confused. But we have a high share of searches on Windows Phones. And it is a reminder, just take a look at the share Apple has of maps on their own phones, and I know they had all the celebrated hullabaloo, but if I remember the numbers correctly, about 65 percent of the map usage today on iPhones is Apple Maps.

So in a sense probably one of the best ways to get some share in search is to get some share in devices. Google happens to say let’s not have any profit be in the device. Let’s move it all into search. We and Apple kind of have a different view of the world. Amazon, I don’t know where they want to put market profit, they don’t seem to put the profit anywhere. And that’s not a shot, it’s just I can’t tell you what profit stream is important to them the way we can about us or Apple or Google.

Quick. What’s the only app that Google has decided is worth building for Windows Phone. The Google Search App.

Let’s assume that Windows Phone grows share, which is tough, but I’m actually rooting for Microsoft here. You can bet Google’s is going to work even harder to convert the relatively few people who don’t use its app or just go to Google directly.

Microsoft’s not going to get share in Windows Phone, because it doesn’t have share to give. It might get it from Apple, if it can convince Apple to dump Google out of Safari — then convince people who use Chrome on iOS to stop, because that’s tied into Google and….

Remember that whole closed loop thing? Yeah, that’s really hard to fight. And Microsoft is so very late to that game.

To Counter-Balance Google, A Smarter Microsoft Is Needed

But when Google is busy turning its entire shopping search engine into paid ads or withholding traffic data from non-advertisers perhaps to boost its ad sales, Ballmer is right that Microsoft is a major counter-balance to Google. And we need a counter-balance. But we need a smart counter-balance from Microsoft, not one that keeps reaching into a playbook that hasn’t worked.

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About The Author: is a Founding Editor of Search Engine Land. He’s a widely cited authority on search engines and search marketing issues who has covered the space since 1996. Danny also serves as Chief Content Officer for Third Door Media, which publishes Search Engine Land and produces the SMX: Search Marketing Expo conference series. He has a personal blog called Daggle (and keeps his disclosures page there). He can be found on Facebook, Google + and microblogs on Twitter as @dannysullivan.

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  • http://www.seo-theory.com/ Michael Martinez

    They don’t need to “beat Google” at search. They only need enough “search share” (in reality, advertising page views — which have nothing to do with real search) to earn enough money to make a growing profit. Let Google win the race as long as Microsoft can make money and their investors will be happy.

    This game was never about search. It was always about advertising revenue. Microsoft knocked Yahoo! out of the way and they’ll do what they can to keep others from getting in their way but they don’t have to beat Google at all.

    Besides which, the real problem for both companies may be the steady growth in consumer use of ad blockers in Web browsers. It seems like Google may be working on getting around those blockers. That remains to be seen.

  • Steve

    This is the chicken or the egg scenario.

    When Google first started, it was all about the user/search. Then, Google went public and now they have to please the investors. But, guess what… how do you make money, from ads. Are ads good for user experience? No. So, now they risk losing users because they have to please their investors/advertisers. Less users, less money.

  • http://www.seo-theory.com/ Michael Martinez

    It’s not a chicken and egg scenario. It’s an apples and oranges scenario.

    Web search is wearing two hats. The first hat is a public service, indexing content on the Web and helping people get to that content. No one actually measures that public service.

    The second hat is being an advertising platform. Google and Bing are competing for advertising dollars, not for kudos on how many people they can send to other Websites for free.

    You can’t have Web search without a revenue model. The revenue model, however, is not Web search. It’s advertising.

  • Amir Ariff

    Are ads good for user experience? I think yes. We can discover new things that should be related with what we are searching for and that we know what’s going, community message and the trends etc.

  • Gagool

    On scale:

    I believe Microsoft still doesn’t offer either an AdSense-style product for publishers or an AdWords-style advertising platform for a large part of the ‘rest of the world’.

    Google made both of those available even for small, from a U.S point of view almost irrelevant countries, about 5 years into its existence.

    Couldn’t those two products have helped Microsoft with scale, by significantly increasing the number of people with an actual stake in Bing; ultimately as an endorsement of Bing?

    Or would it have been an unprofitable venture for wise old Microsoft? Was it only profitable for this stupid, naive 5-year-old start-up? (Never mind that history already answered this question, Mr Ballmer surely knows better and he shouldn’t let anything get in the way of a quixotic grand plan…)

    On the quality of Bing:

    I don’t know about the U.S. but for my country Bing’s search quality leaves much to be desired. I, for one, keep trying to use Bing, and somehow I always end up back at Google in desperation.

    I’m not even talking about fancy stuff like a good algorithm. Ah, that would be the next level. Microsoft can’t even come up with the bare minimum: a proper, reliable, comprehensive indexation of the web.

    Where a 1000-page site can safely expect about 900-1000 of its pages indexed in Google, with Bing the same number might easily be 300.

    That’s pathetic. If any company can clear the (admittedly huge) infrastructural hurdle of practically complete indexation, it is Microsoft. The fact that they are still not willing to do it speaks volumes, and in itself totally negates every pompous word uttered by Ballmer.

    On Microsoft’s understanding of search:

    Any person following Google’s rise and having half a brain understands that a fundamental part of their success is the realization that creating an excellent product and giving it away free is not philantropy but by far the cheapest way to acquire users wholesale.

    Microsoft, on the other hand, has, from time to time, been trying to buy users directly with money: competitions, promotions etc. You can’t get more ineffective and misguided than that.

    What can you expect from a company that doesn’t understand even the basic premise of its main competitor’s business model?

    Microsoft is strong on fighting words, investor-oriented bombast, and the ‘old tactics’ (where ‘old’ could be substituted for a dozen negative adjectives).

    However, in their struggle against Google they keep demonstrating their ingrained, company culture-deep, hopeless-to-fix ultimate cluelessness regarding search.

  • Steve

    That makes no sense… what do ads have to do with community message and trends? It sounds like you are speaking from an advertising competitor perspective and not a user. Everyone needs to learn how to think from all perspectives not just one.

  • Steve

    “Google and Bing are competing for advertising dollars, not for kudos on how many people they can send to other Websites for free.” That may be the bottom line, but how do you get there?… by providing a great public service. Google was built on the idea of providing the users with the most relevant search engine. It’s start with the product, not advertising. Companies that are built on revenue first, users 2nd, won’t succeed.

  • Amir Ariff

    Sometimes advertising companies tend to do those things and I like those. Well, as long as they are related to what we like, then it’s okay with me.

    Bad ads are something that not interesting, something that are not tailored for us. Like when we watch tv and see those toys ads when we are watching that alone. Thats why it is crucial that these companies knows us.

  • Pat Grady

    “Consumers would win, because they’d better understand why some of the default decisions are being made for them.”

    As a consumer, I like the way you think!

    2nd point, people who say they can’t allow us to choose which engine feeds Siri, well, since it was G, now it’s B, I don’t buy that. Search is big enough, a few choices can be made to be available. I suspect that not offering the option to choose, is akin to the monopoly accusation they hurled. Glass houses babe, glass houses.

  • Mary Desilva

    What a boaring lenghty post

  • http://www.sktthemes.com/ Professional Wordpress Themes

    We can never undermine the fact that other search engine can win if they offer something new to their customers…when google came already Ask was there, when facebook came orkut was there….so its just an innovative and fresh something in the offing which can really turn the tables in web world…

  • http://www.seo-theory.com/ Michael Martinez

    Yeah, well, they weren’t any more relevant than Altavista’s last incarnation back in the day — and, frankly, the original concept behind Google was smoke-and-mirrors.

    Web search has changed and it may change again but it’s doubtful that it will go back to being what it once was. The “free” search days were exploratory, experimental, looking for a monetizable service. Well, they found it. And they monetized it.

  • sarge8521

    I was confused as to why so many words were used to talk about a lame-duck CEO. The fact that he is using the old tactics vs Google should be of little importance moving forward since he is no longer the head man in charge.

    A better article would be to write about the challenges the new MSFT leader will be facing within their first year on the job.

  • http://rafaelmarquez.me/ Rafael Marquez

    If Siri did indeed switch over to Bing for searches, that explains why Siri can’t find diddly squat anymore. It’s gotten worse since going to iOS7. I need to find out how to switch it back to Google Search or even Wolfram-Alpha. Bottom line, I don’t care who handles the search, I just want to get relevant results. Bing, in my experience, does not provide me with relevant results.

  • datmony

    The term you’re looking for to describe the balance of keeping investors and searchers happy is ‘two-sided market.’

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