It seems like it's getting close to impossible to talk about Microsoft ( MSFT) without sooner or later mentioning Google ( GOOG). Or vice versa. The rivalry sparked a heated debate on this site this past week. First, Doug Kass
made the case that "Microsoft will provide the first real challenge to Google," prompting Michael Comeau to counter that any fall for Google won't be caused by "inroads from Gates & Co." Then Cody Willard argued that "Google still has everyone, including Microsoft, on their heels, and Google's on the offensive rather than the defensive." Elsewhere on the Internet, John Battelle, the author of the recently published The Search (and, full disclosure, my former boss at The Industry Standard), stirred up a discussion among bloggers by wondering: "Has the worm turned?" For Google, that is, as it did for Microsoft at the end of the 1990s, when its plans for complete domination of online commerce fell apart in the face of antitrust cases. To summarize, one of these things is going to happen: Google cleans Microsoft's clock. Microsoft cleans Google's clock. Google's clock stops after the growth in online spending peaks. Google is Microsoft, following the same hubris-driven trajectory. Before I cast my vote, let's look at some of the issues raised.
In fact, each delay of the new operating software seemed to also ratchet down its ambitions, until Vista became less of a revolution and more of a mere revision of XP. Meanwhile, buzz started spreading about something called GoogleNet -- a free, all-in-one gateway to all information everywhere -- whether on your PC, in a library or anywhere on the Web. It was Gates' dream in 2002, only Google wasn't as likely to compromise. Of course, Google has never remotely commented on anything of the sort, but neither has it given any sign it's not headed in this direction. Life After Search: True, Google can't ride the online-advertising wave forever. But online ads are so much better at connecting to customers than print and broadcast -- and at such a lower overall cost -- that it's got at least a year or two left and could get a second wind from the advent of
pay per call advertising. And then what? Google recently invited George Dyson to its buildings, and the scientific historian was surprised at how serious the Googlers were taking the idea of artificial intelligence. "We are not scanning all those books to be read by people," he was reportedly told. "We are scanning them to be read by an AI." Artificial intelligence? That would make for an ambitious second act. Last summer, Google copped to investing heavily in one area of AI: highly advanced automatic translators that factor in things like idioms that only a human translator can manage today. Tearing down language barriers would do wonders for broadening the market of Internet search, not to mention the new lines of revenue it could break open. By contrast, Microsoft can look forward to a few more upgrades of Windows and Office, plus growth in areas like the Xbox and security software, where it's recently gained an edge.
The Hubris Factor: Overlooked in the comparisons between Microsoft and Google is this key distinction: Microsoft didn't just borrow other people's innovation, it forced innovation to grow within its tightly walled garden, and in so doing stifled it. Google has taken steps to avoid that mistake. But as Battelle points out, Google's finding it tougher to avoid other pitfalls as it becomes an "agenda-shaping player responsible for navigating complex relationships with world governments, the personal privacy of millions, major trade organizations and hundreds of thousands of businesses." Such a position "requires a balanced mixture of leadership, will, and diplomacy," Battelle wrote. "There's very little room for the go-it-alone mentality which got the company to where it stands today. Can the company shift its culture and avoid the fate which ultimately hobbled Microsoft? That, more than anything else, will define the next chapter in the company's fascinating story." Where will all this leave Google and Microsoft? Microsoft has far too much cash to go away quietly. But its fate seems likely to be domination in markets that are growing increasingly ancillary. And Google? As always, its greatest liability is its greatest asset -- the tendency to set its sites on the big hairy goals and stop at nothing to get there. The biggest enemy facing Google is itself. And its biggest challenge will be to subdue that enemy before the growth in online advertising finally does slow down.