Microsoft CEO Steve Ballmer dropped the ax today, and it landed on Kevin Johnson’s neck.
Johnson, Microsoft’s soon-to-be ex-President of Platforms & Services, has been with Microsoft since 1992. He was in the unfortunate position of leading the recent Vista effort through its very troubled launch, and running Microsoft’s online efforts while watching their lunch be eaten by Google. He takes a consolation prize: He will become the CEO of Juniper Networks, a $12 billion network hardware manufacturer.
So what’s next for Microsoft? The Windows and Windows Live products now report directly to Ballmer. All the online stuff, including search, advertising and most MSN/Live.com services will be headed by a new executive. Ballmer says they’ll look for the person to lead their Google-killing efforts both internally and externally.
Putting Johnson aside for a moment, It’s damn well time Microsoft put someone in charge of its online efforts. Johnson had to split his time with the Windows cash machine and the results have been somewhat predictable. A half time executive running a product that doesn’t even have a brand (Live? MSN? Microsoft?) can’t win against Google.
The truth is that the next guy (or gal) isn’t going to make any fast gains on Google, either, no matter how awesome Mesh and Silverlight are. Ballmer seems willing to spend as long as it takes, though, noting that the war with Google is over the long term, not the short: “In the coming years, we’ll make progress against Google in search first by upping the ante in R&D through organic innovation and strategic acquisitions. Second, we will out-innovate Google in key areas…”
That sounds like Microsoft will channel yet more Windows and Office profits into their Internet startup. There’s no question that they intend to compete in search and advertising any more. The only question is whether they have any chance of winning.
Even if Microsoft concedes that they have a years (decades?) long war on their hands, they have to face the fact that Google’s commanding lead in search, and the network-effect driven advertising wealth that comes with it, will be hard to beat. And all those client software profits won’t last forever, particularly since Google is eating away at that via their suite of free Office products.
The first thing Microsoft needs to do is buy Yahoo – all of it. That brings them to half of Google’s market share in search, and at least they’re in the game.
Another thing Microsoft needs to do is simply pick a brand name for the Internet side of things, and stick with it. Microsoft. MSN. Live. Whatever, just name it something a little catchier than “Online Services.”
Good point. Pick a Brand Name. Stick to it and Do whatever you want.
The real problem was not Kevin, but the MSFT products in general. When was the last time or the first time that any of you used MSN to search anything or email ? I don’t remember. I have tried the Live office software is so bad that I just don’t know what to say. MOSS is a complete joke and every IT person knows it as well. Would buying Yahoo fix this, maybe and maybe not. This will give MSFT a big market share, but Google has a big jump start and many of the key people of Yahoo are leaving, so MSFT will be left with what? Money can’t buy you passion Mr. Ballmer.
microsoft is fighting a losing battle. it has been left far behind. ballmer is no where near competent to pull it together. yahoo is never going to give in. it is a fact of life, like death and taxes. MS is past its prime and will not be the biggest IT company in the future.
Time and again, there is one thing that has remained immutable in this business. Innovation. MS lags in that arena.
It might seem far fetched to say this but it isn’t. The changing global order, the redistribution of wealth and power to other countries is also going to make it harder for MS to spring back up.
MS will still remain a huge company. But waiting for it to catch up with google is like waiting for paint to dry. Good luck MS, but status quo has changed and will continue changing. Innovation is very important. Even google is not immune from a future downward spiral.
I JUST LOST A COMMENT I SPENT 5 MINS TO WRITE. CRAP.
Mike: I first want to know what war they are fighting. “Online” is a big place and I do not think anyone is going to win it, there’s simply too much diversification to do everything well. Ironically, this is a big element that is haunting Yahoo!
Now, if we are discussing search, I agree that bringing Yahoo! into the fold gets MSFT halfway there but I don’t think it helps them win the search war. Google will lead until some else comes in and re-defines search just like they did when they started, whatever type of search it is.
It looked (for a second) that could have been Powerset such perhaps with the technology acquisition, Microsoft can utilize it and execute more effectively to building a new search paradigm that wins the hearts and minds of a user base.
Well, I’m pretty sure Google’s winning right now.
Google are winning SEARCH right now. I agree with Lou, you can’t say that Google are winning “online”, it’s too diverse.
You may say that:
1) Google are winning search. In particular paid search.
2) Facebook are winning social networking and communicating
3) Yahoo! are winning portal (maybe?)
4) Amazon and eBay are winning shopping
etc…
yes thought that was a given, right now it clear search is the path to success in most online verticals except enterprise software and infructure type plays. But even as the online world seems to shrink with each Google acquisition, more interesting plays enter the market. And the verdict is still out as to whether social networking could be a paradigm shift that really infringes into the search space.
And does Microsoft need to buy Yahoo in order to compete? There’s no way around it? According to this article, Microsoft should forego the acquisitions route.
where did my comment go, Mike, did I write something bad here?
“In the coming years, we’ll make progress against Google in search first by upping the ante in R&D through organic innovation and strategic acquisitions. Second, we will out-innovate Google in key areas…”
Why does Microsoft insist on calling what they do “innovation”? It makes my ass itch.
Balmer is the wrong person for this. He’s been drinking his own Kool-Aid for far too long.
Just look at how he laughed at the iPhone. Or how he talked up the Zune. I can’t take a thing he says seriously. It’s like he’s still the guy in the commercial selling people stuff not giving them something that’s truly awesome.
I get the sense that Balmer is a strong operational guy, not a good product person and certainly not a good ceo or visionary.
Microsoft is in desperate need for fresh blood.
The main problem of MSFT is not the brand name of their services, but eh fact that you cannot buy passion. Yahoo was build with passion and love, MSFT with $. At least lately. There is no innovation as Dick points out, we all know it. I also go crazy when I hear that MSFT has innovation products and is a leader in the Social software space, come on people. This is just PR and more $. Now that Bill is gone, they are going down hill from here. Google is way ahead of the competition and they do it right. They don’t try to make things look sleek and cool, but to make them work well, fast, and to be reliable. Buying Yahoo will not solve the problem for MSFT, but it will buy them time and make the investors happy (for a while). Once Yahoo is Microsoftonized, another startup will come, get more funding and start competing with them. At least I hope so.
I’m not sure tat’s true, there are plenty of passionate people at MS – and they’re being given the time and money to develop interesting and important projects. Take a look around at the various Windows Live team blogs, and their personal blogs and tell me these people aren’t passionate. I don’t think, for the developers, it’s a question of money – although that’s obviously a worry for the senior members of MS.
I agree about branding. Nobody can define what each area in MS online strategy does. MSN (content? and some online services) Live Search (search?) and Windows Live (a weird combination of Windows Extensions and online services) – plus having Windows Live and Live Search on the same domains is confusing (with 3 different home page options, and 3 customised home page options, 3 file storage services….. ACK!!!).
Ali, my point was that MSFT is not driven by the same passion that Google and Yahoo has any more. I know many people at MSFT and the problem is that they are a very large company where the passion of the developers is no longer be driving the products they make. I get your point as well.
“by the same passion that . . . Yahoo has?” lol. are you referring to the passion to leave the company? buying yahoo won’t make ms investors happy (as evidenced by the stock price).
Microsoft makes things fast??
Vista is way slower than XP.
Ballmer is a monkey who flings chairs.
Aw Gawd
Enough already.
- just buy Yahoo as soon as you can
- put all your online dev money into it
- ditch all the MS branding for Yahoo (with exception of Hotmail)
Get on with creating a true competitor to Google, so that everyone who advertises with Google will be screwed less because they have a viable alternative.
Now please just get on with it.
MSN – as it stands now – is a mediocre search engine by today’s standards.
Their database just is not as huge as Google’s and their relevancy is just not that superior to switch from either Google or Yahoo.
Also, unlike Google, they do not attempt to communicate or establish a bond with the Webmasters. Both Yahoo and MSN are too standoffish and have not establish a brand identity that would make a bond with their users.
Sorry to be a geek but a Search engine is run from an index not a database (RDBMS or other).
While search engines don’t use RDBMS, they do have databases. They take a query and return data, the data being references, aka URLs, plus other info. (Not to mention that Google, Yahoo, and possibly MS provide access to their copy of crawled docs.) “Take a query and return data” is pretty much the defn of database.
Wow. better return your geek card for a stupid comment like that!
“And all those client software profits won’t last forever, particularly since Google is eating away at that via their suite of free Office products.”
- Michael: Please show me data to back that assertion. It irks me that people commonly predict the collapse of Office without a shred of real supporting evidence.
I completely disagree that a Yahoo purchase makes sense at the ~$35-40+ billion price range.
Yahoo grew through some very savvy acquisitions including Flickr and Delicious.
MSFT should do the same – commit to making creative and thoughtful acquisitions to increase its overall reach.
Also, “out-innovating Google” is a dull vision.
If Ballmer wants to really inspire people, he’d set some pretty big, amibitious goals that have nothing to do with Google and everything to do with creating the best damn customer experience across every one of their product lines. The customers will follow.
Microsoft’s core philosophy has always been, will always be, “Do NOT innovate, just wait for others to do the innovation, mimic what succeeds and force it on everyone via the Windows operating system.”
The above permeates every aspect of the company, they have been reliant on it for 20 years. But what happens if you can no longer force people to adopt your stolen innovation through the desktop computer operating system?
Microsoft needs a changing of the guard. Balmer has to go in order for their to be progress in it’s online service effort. There is simply too much pride and emotion in the roller coaster courtship between Microsoft and Yahoo. As Far as Brand is concerned..if they acquire Yahoo they should keep the band and all the people and merge or kill it’s own in-house brands into Yahoo anything else would be a disaster.
I think that TechCrunch needs to hold a contest to rename Microsoft’s Online Services. The winner gets a free Zune.
Here, I’ll start with my Top 10 Suggested Names:
10. Zune Live
9. SoftFace
8. Microhoo!
7. The 404
6. Zune Office Live : Millennium Edition
5. Microsoft Online Services 2009
4. Vista Online XP Pro
3. Bluescreen
2. Online Services Explorer 6
1. Yahoo!
Microsoft. MSN. Live. Whatever, just name it something a little catchier than “Online Services.”
How about Yahoo!
, Can’t get a bigger brand name..
Microsoft does innovate (yes, I know that may be flamebait).
Look at their patent filings and the amount that they invest in pure R&D. They’ve got some wicked smart people, a lot of them in Silicon Valley. I’ve worked for lots of silicon valley companies, start-up and public alike and I’ve now also worked at Microsoft (recently moved on). Despite the popular view in Silicon Valley, developers at Microsoft aren’t of sub-human intelligence…from my experience they are among the smartest I’ve ever worked with. I saw amazing side projects there that make other companies launched products look like crap.
The problem is that while Microsoft development teams develop amazing technology, others bring it to market faster. By the time innovative internal ideas make their way into launched products they then instantly get derided as “just copying X, Y or Z”.
It’s not a good time to be in Microsoft’s online group. It used to be that the E&D division was the company whipping boy, having been a huge cash sink for a long time, but that part of the company is making money now and has products that people love (Xbox and before yesterday the Zune…Zune tattoo guy has apparently lost his passion). The online services group at Microsoft is not only a huge money suck, but doesn’t have users that love its products (or even know what they heck those products are). People internal to Microsoft have a hard enough time trying to keep straight what all the different online efforts are. Microsoft needs to pick one brand, stick to it and kill the others.
I could go on, but many of you probably ignored this post when you read the first line, so flame on.
@hyloka
No flame from me. I think this is the most thoughtful and insightful piece on MS I’ve read in ages.
Mike, kudos for pointing out the branding mess, that’s where all of the confusion and non-starter efforts (see Windows Live Expo) begin.
Ballmer is always talking about things in an abstract muddle (”user experiences”, etc.) with no real clarity on what he would like the end result to look like.
The reason why they don’t know what they want to do/should be doing online is that all they really want is to protect their OS (and Office). And that just isn’t enough.
It’s been pointed out above (and many times before) that they do actually have smart people, the largest R&D budget of pretty much anyone, and are innovating on the margins. Which begs the question: Where’s the beef?
If all these people and money had acted IN CONCERT even a little over the last few years, there’s no telling what they could have achieved online. But there is no clear direction, no positive vision coming from the top.
(reprint of my comment on last night’s related post on the reorg)
[This reorg] would appear as deeply weird, except for the idea that this could be a prelude to some sort of spin-off plus cash to Yahoo deal that Henry Blodget over at AlleyInsider had championed early on.
If they aren’t going for that, then this is truly bizarre, and will come back to bite them. Windows is their least defensible position in the long run, and adding in Hotmail, etc. doesn’t do a thing for them in this regard, while they should instead be INTEGRATING search and ads more tightly with all of these properties.
Think about it: Google really had no business rolling out Google Desktop, except that MSFT’s own native search in their own OS still sucks to this day…
Ballmer (in his internal memo): “To keep today’s Windows applications alive, vibrant, and exciting, we need both—applications that run everywhere and rich client applications.”
Wrong. What he meant to say/should have said was:
“To keep Windows alive, we need… rich client applications…”
Problem is, the browser as client is getting richer by the minute…
(Arrington’s post calling for an open-sourced $200-400 tablet that runs on a baseline linux kernel and browser only, anyone?)
(end of reprint)
If Microsoft buys Yahoo, their number one priority will not be innovating, or introducing new products, or finding some way to outwit Google.
Their number one priority will be modifying all of Yahoo’s software to run on Windows servers.
It will absorb a huge amount of time and capital, and will deliver zero value to the end users. But they are bound to do it, because they are not an Internet company: they are an operating systems company that also does Internet stuff.
A pure-Internet company like Yahoo or Google has the freedom to use whatever tools work best, regardless of who makes them; while a technology conglomerate like MS is required, by intra-company politics and by the need to make other divisions of MS look good, to use its own tools exclusively.
That’s why Microsoft is going to lose out to Google, regardless of whether they absorb Yahoo.
@kevin
I don’t agree. Why do they need to modify Yahoo’s software immediately? I can see a gradual transition. It’s not like they’re going to realize financial benefits from moving from Yahoo!’s open source low cost server solution to Microsoft’s server solution. To the extent that Yahoo! code running on those servers is open source GPL type code, Microsoft will have to recode if it wants to integrate that code with proprietary Microsoft code (so that Microsoft proprietary code doesn’t become subject to open source software terms (sorry Richard Stallman, I meant “free software” Of course in some ways “free software” is a little like “free underwear,” free is great, but you have to look carefully at what’s in the package before you put it on).
No, it doesn’t make practical sense. But they will do it anyway. It happened when they bought Hotmail; it will happen again.
The server OS division tries to sell servers; customers note that Linux seems to be good enough, even for Microsoft’s needs; server division puts pressure on online division to get with the program (literally). When it comes to a fight between a division that makes money and one that doesn’t, the money-makers tend to win.
And aside from the marketing value, Microsoft puts great stock in “eating your own dogfood”, even when that turns out to be about as attractive as it sounds.
And finally, the top brass at Microsoft seems to be convinced that there is significant risk attached to having its developers work on, or even look at, GPL code. They don’t want to be vulnerable to legal claims that they copied GPL code into commercial products. So the lawyers too will be pushing to get rid of all that icky free software ASAP.
Good for microsoft.
KJ is a good sales man, he did very well leading the sales group, selling to businesses. But he doesn’t understand the search/consumer market well, nor he has any vision for that.
If Microsoft wants to take a larger share of the online market, they are going to have to stop being such a cluster**** organization and pony up. They have people working at Microsoft smarter than myself and many others, but the management has always had issues (Anybody read the Vista memos that came out a few weeks back?).
If you want to beat Google, you need to start by unifying the online services under one roof, make account control and moderation easier, let your users know you won’t tolerate spam (Gallery.live.com for example), and ultimately do your best to win users by supplying the best and easiest experience. Bonus points if it looks and works cleanly on the backend, something I’ve yet to see Microsoft do most places.
And in all honesty, I’m still not convinced that Ballmer is the guy to go to with the strategy. He seems to be great with the B2B, but sucks somethin’ aweful when it comes to consumers. He likes to play the marketing card way too often. And it’s killing the company’s online efforts.
The first thing they should do is fire Steve Ballmer. Eights years as CEO and what does he have to show for it? Nothing. They are lucky they have the operating systems and office monopolies. Remove those two divisions and the rest are a complete failure.
As much as Arrington hates Yang and his people, they are eating Microsoft’s lunch when it comes to search.
1. If Yahoo already has the right personnel, it would have shown off something that can come close to competing Google already. It does not.
2. If not, any Microsoft acquisition is really only buying the banner ad unit, which is not necessarily growing faster than text. Don’t tell me Microsoft knows how to run a portal.
3. Microsoft cannot run ANY online property. Is MSN, Live, hotmail, passport or anything else come close to being number 1? They do not have the corporate structure to succeed in this field. (Wanna bet: Facebook will never take another dollar from Microsoft). Schmidt said Google had one product but many FEATURES. This is where the competition is.
4. So why spend $40B+ on something that has a shrinking market share and will continue to shrink for sure? Even Yahoo is thinking to use/already using Google ad services.
5. Yahoo is making money, just not as much as Wall Street likes. If it totally forgoes search (sorry, Burbank), the cost savings and renewed focus will be better for the whole company. Don’t let (the ego of buying) Overture drag you down. Yahoo’s main problem is each unit not sharing customer data and serve more relevant ad. Seriously.
6. I think Microsoft is screwed, in the long run. I agree with the innovation comment above. It does not seem to innovate (or at least fast enough).
Microsoft developed the PC Platform, whilst Apple seem to be developing the Mobile Platform. But so far yet, not one Company has developed the Web Platform, although Google comes close with its hugely successful ‘Linked Data’ Search Platform.
So there is a tremendous opportunity for Microsoft to develop the perfect Web Platform, but only if they can get together the right team that could execute this vision.
I believe that ‘Platform Services’ for the Web, as developed by Microsoft could become a big hit for the Redmond Posse. But just as Mike stated, they must totally agree on One Web Brand Name.
With Google, its either Google this or Google that. But with Microsoft its totall confusion.
Just use your brilliant Windows Brand Name as your major Web Brand, you can even drop the ‘Live’ version.
Everyone knows the Windows Brand offline, so why not stick with it online. Did Apple change into a Lemon online.
It would be Windows Hotmail, Windows Messenger, Windows Search, Windows Maps, Windows Earth, Windows IE, Windows MSN.