“Let’s see how the competition goes…”
Just to beat a dead horse, after seeing the post noting Apple’s iPhone business now brings in more revenue than all of Microsoft’s businesses combined, Jason Hiner reminded me of Steve Ballmer’s classic 2007 video laughing off the iPhone announcement (above).
To be fair to Ballmer, he does say that selling a $500 fully-subsidized phone is insane, and Apple did end up dropping the price, which has fueled sales. Still, the business argument sounds like something RIM would (and did) make. How’s that working out for them now?
As for “I like our strategy, I like it a lot” — there’s simply no excuse. Windows Mobile was quickly exposed for the turd it was, and Windows Phone, while good, was far too late. But 2007 wasn’t all bad for Ballmer…
I went ahead and re-did two of Ed Bott’s charts to better reflect the reality of the situation.
I’m reminded of this…
(And no, it’s not really to scale. I did this in about 3 minutes. I didn’t feel like breaking out my high school math book to figure out correct cylinder volume circumference ratios…)
Size Matters
Earlier, I linked to this set of three pie charts by Ed Bott, but it’s worth mentioning something else about them. The subtle point that it seems Bott is trying to make is that out of Microsoft, Apple, and Google, Microsoft has the best business because it’s the most well-rounded. (Meanwhile, Google has the worst because it’s entirely dominated by one thing: advertising.)
At a high-level, that’s an interesting point to make, I think. But without context, the Apple chart is a little misleading.
It looks like Apple’s business is mainly about iPhone. And while it’s true that the iPhone is responsible for over half of Apple’s total revenue, it’s important to consider that Apple’s total pie is now significantly larger than Microsoft’s. Actually, it’s more than twice as large.
Last quarter, Microsoft brought in $20.89 billion in revenue. Apple brought in $46.33 billion.
Put another way: Apple’s iPhone business alone is larger than all of Microsoft’s businesses combined.
And — just as remarkably — if you took away Apple’s iPhone business from the chart, the remaining Apple businesses would still be larger than Microsoft’s total business. And Apple’s earnings would look a lot more evenly distributed then.
Point is: these charts don’t actually show Microsoft is a better business because they’re the most diversified. They just show how out-of-this-world Apple’s iPhone business is at this point.
Update: Just to drive the point home…
The Bing Backup Plan
Microsoft is going on the offensive. And they’re not just targeting Google Search, they’re targeting Gmail, Google Docs, and Chrome as well with their “Putting People First” ad campaign.
Given Google’s stumbles, Microsoft’s timing is right. But these battles ultimately are ultimately still about the products themselves. It’s not enough to say you’re better, you have to actually be better to make users switch. And in the case of something like search, you have to be so much better that it’s noticeable beyond a doubt.
Despite what Microsoft may think and say, Bing isn’t there yet. And I’m not sure they’ll ever get by conventional means. But they do have a very real opportunity right now — not by getting better, but by Google getting worse. Which sounds absurd, but it’s happening.
For their part, Google is attempting to counter these ads with their own ads. Which, unlike the Microsoft ads, are not a good idea. If you’re trying convince me that your privacy and data changes aren’t bad, the absolute last thing I’m going to believe is a paid advertisement.
Responding to Feedback, Microsoft Makes Changes to Windows 8 File Management
That’s fine. But the real question is: how on Earth did anyone working at Microsoft look at something like this nonsense and think it was fine in the first place?
The fact that they needed this feedback is actually the most troubling thing here.
Microsoft’s Facebook Investment: Smartest Deal Ballmer Ever Made?
Todd Bishop of GeekWire asks the question, I think the answer is “yes” (though the continued investment in Xbox and elements like Kinect should ultimately be close).
To me, there are two things that are most interesting about Microsoft’s Facebook investment.
1) Nearly everyone in the tech press at the time panned the deal as a ridiculous rip-off, sign of another bubble, etc. Those same people are now strangely quiet on the topic — for good reason, they look like huge jackasses.
It just goes to show you that you should never take anything the tech press says too seriously. Way too much is based on the present and there’s not nearly enough thinking about the future. This deal was all about the future.
2) Along those lines, while the return on this investment will be good ($15 billion valuation turning into $100 billion at IPO time — and it will probably be 10x in the near future), this is still not about the money — it’s all about the strategic alliance. Microsoft gave itself an “in” to get access to Facebook’s data. And the deal stopped Google from getting a similar deal.
Microsoft still hasn’t been able to do enough with the relationship to boost Bing, but even that doesn’t really matter. What matters is that Google and Facebook are at odds (or some may say, at war). Microsoft won by not losing.
Google Is Making A Killing Off Of Android — And By “Google” I Actually Mean “Microsoft”
Hey Google – we are the 70% #anotherandroidlicensebit.ly/w32SIE
— Frank X. Shaw (@fxshaw) January 12, 2012
1. Gotta love Frank Shaw, Microsoft’s head of corporate comm. (Unless you’re Google, of course.)
2. It’s actually over 70%.
3. Holy shit, over 70% of the Android phones sold in the U.S. are now contributing money to Microsoft’s pockets. Microsoft, not Google.
4. Given the volume we’re talking about, Microsoft has to be making more from Android than from Windows Phone, right?
LG is the newest member of Microsoft’s patent protection posse. The most notable hold out? Motorola, which, of course, is in the process of being acquired by Google. That’s one way to avoid the fee, I guess.
Steve Ballmer is getting a lot of love today (the press builds you up to knock you down to build you up again). Whether you think it’s evil or evil genius on Microsoft’s part to pursue these agreements, Ballmer was right: Android is not free, you have to pay Microsoft to use it.
I wonder if there’s a point where this stops making sense for certain OEMs? Certainly, it makes sense for Samsung, which is doing very well with Android and is likely happy to avoid anymore patent lawsuit headaches lingering over them. But what about the others not doing so hot? If they’re going to pay Microsoft, shouldn’t they at least get something out of it? Like say, a license for Windows Phone? These are the questions.
The other aspect that isn’t talked about a lot: Chrome OS. It’s another free Google OS that you pay Microsoft to use.
Microsoft's Share Of The Search Market Is Finally Bigger Than Yahoo's
Big day for Microsoft. Spend another $10 billion or so and they may pass Lycos.
Twitter Responds To Antitrust+
And out come the knives for Google’s forthcoming search changes that push Google+.
The only words you really need to know in the statement below emailed to me by Twitter: “We’re concerned”…
For years, people have relied on Google to deliver the most relevant results anytime they wanted to find something on the Internet.
Often, they want to know more about world events and breaking news. Twitter has emerged as a vital source of this real-time information, with more than 100 million users sending 250 million Tweets every day on virtually every topic. As we’ve seen time and time again, news breaks first on Twitter; as a result, Twitter accounts and Tweets are often the most relevant results.
We’re concerned that as a result of Google’s changes, finding this information will be much harder for everyone. We think that’s bad for people, publishers, news organizations and Twitter users.
We’ll see if Facebook responds as well. I’m sure they’re having the disucssion right now as to whether they should ignore this or take their shot. The problem they have is the relationship with Microsoft for Bing social search — but that’s different, it’s an agreement between two independent companies (though Microsoft owns a small share of Facebook via the investment a few years back).
Microsoft is likely in a similar boat. They probably want to say something but they have to think about their Facebook deal — and they have a Twitter deal too. Yahoo may respond, but will anyone really care? I’m sorry, but it’s true.
Meanwhile, look for a Google response to the Twitter response to the Google move…
Update: Sure enough, here’s Google’s response.
Exclusive: I Know Everything But I'm Not Telling You
What a strange post from Paul Thurrott. The information is interesting, but the set up and tone is bizarre. He has information, but he’s holding it back — until he sees false information, then he comes forward. But not with everything because, well, that would be mean to Microsoft.
Serious question: does Thurrott work for Microsoft or for himself? His site is obviously all about Microsoft, but it at least gives the illusion of independence. So why act as an extension of the Microsoft PR team if they’re not paying you for that?
Ben Brooks seems to have this right:
In other words: Thurrott does as Microsoft wishes, not what is best for his not-so-super site.
As does Matt Mullenweg:
Mr Thurrott, perhaps if you didn’t sit on stories for so long other people wouldn’t break them. Your responsibility is to your audience, not Microsoft’s CES launch plans.
What If Apple Shifts From "Fuck You" To "Fuck You, Pay Me"?
Peter Burrows’ Bloomberg report points out something that’s largely been overlooked the past several months: the opposite approaches that Microsoft and Apple are taking with Android.
Microsoft is aggressively going after Android partners with the intention of forcing them to license Microsoft’s patents. Right or wrong, this effectively destroys the Android “free” proposition.
But Apple is going after the Android partners to stop them from selling their devices. They’re not interested in licensing their patents. They want these rival devices destroyed. Period.
But given the success Microsoft has had with forcing others to license their patents, what if Apple decides to do the same thing? Kevin Rivette of 3LP Advisors argues that this is the prudent thing to do from a business perspective.
Steve Jobs clearly didn’t care about that perspective. He wanted Android destroyed because he felt like Google copied most of their Android innovation from Apple. But Tim Cook could alter Apple’s strategy. After all, forcing Android partners to pay both Microsoft and Apple for each device sold may be a huge deterrent for many of them.
Most speculate that Microsoft is getting about $5 from each Android device sold by partners now licensing their patents. Rivette believes Apple could get $10. The end result would be billion of dollars or, again, Android partners second-guessing going with Android.
Also, with such deals, Apple could possibly dictate other terms for using the patents (something like: you can only use them 6 months after we do).
A dick move? Very much so. It would also be a big break in strategy by Apple. But Burrows and co. do a good job laying out why it may be inevitable. The patent-based injunctions are temporary at best — rivals figure out little tweaks to work around them. But they spend millions in court in the process, so it may be worth it to them to simply license patents from Apple. This is exactly why Microsoft is getting these royalties.
At the very least, this is certainly fascinating to think about.
"Superphones"
Idea for Microsoft: whenever you decide on something brand-related, you should pause — then pick something that’s the exact opposite of your initial thought.
Also, the bigger problem remains. If the “Superphones” are coming in Q4 2012, they’re going to run headfirst into dozen of Android “Superphones” and likely one big “iSuperPhone” — which is I’m sure what Apple will call it. It just has such a nice ring to it.
Update: As Hunter Walk reminds me, there’s actually a name for my new strategy for Microsoft: The “Costanza”.
The Windows Phone Problem In Three Words: Way Too Late.
Earlier today, Charlie Kindel, a former Windows Phone GM, posted some thoughts on why Windows Phone hasn’t taken off. Essentially, he blames Microsoft’s model pressuring both OEMs and carriers — so much so that neither really wants to push the platform.
Perhaps not surprisingly, I largely agree with his criticisms of Android. He believes Google’s platform has completely laid down for both the OEMs and the carriers to the detriment of the users (hence, the fragmentation we continue to see). This has allowed Android to flourish with regard to market share, but he thinks it won’t last forever because eventually the consumers will revolt, just as they did against Windows Mobile.
I agree.
Where I don’t agree with him is that Windows Phone is the correct model. I like the model a lot more than Android’s, and I like the OS a lot. But I don’t like the OEM strategy. And I hate the timing.
Pay To Stay
I’ve been thinking more about Google’s renewal of their search deal with Mozilla for Firefox. It’s fascinating on a few different levels. Most notably: Google is committing close to a billion dollars to bankroll a browser which is a rival to their own browser.
Why?
Well, on the surface, they do get something out of the deal — something quite substantial. Firefox is a browser used by millions of people. Thanks to this deal, it means that almost all of those users will also be Google (Search) users by default.
I don’t know what the exact percentage of searches flowing through Firefox is, but you can bet it’s massive. Google searches mean Google ads shown. This is still by far their primary way of making money. Makes sense. Got it.
Okay, but…
Google Triples Their Firefox Pay To Keep Microsoft Away
Looks like the thought that Bing could step in as the new Firefox benefactor weren’t far off the mark at all. In fact, Microsoft tried to make such a deal happen, Kara Swisher reports.
Ultimately it didn’t happen for one reason: money. At $300 million a year (with a minimum three-year contract), Google is nearly tripling their annual payments to Mozilla to keep Microsoft away.
Also interesting: Yahoo was bidding for the contract as well. But they didn’t have enough money to throw at Mozilla to compete with Google or Microsoft. Considering Bing powers Yahoo search, you’d think the two could have worked together on a bid to displace Google. Though who knows how high Google would have been willing to go.
On the other hand, considering how much Microsoft spends to try and make Bing competitive each year, you’d think they’d be willing to go all-in on such a deal.
Regardless, Mozilla played this well. Historically, over 80 percent of their revenues have come from their Google deal, and that will be much higher now as revenues will likely triple as well.
