Henry Blodget, mostly known for being spectacularly wrong during the dotcom bubble of the early 2000s, and Silicon Alley Insider have decided to put pen to tablet (so to speak) and talk about how Microsoft is prepared to take advantage of the current weakness in the stock market. This is probably due to the observation that Yahoo can now be acquired at a much cheaper price than the $30 a share they were trading for last summer. In fact, that may be true, but Microsoft has a history of completely screwing up any online initiative they try. So far it has been a complete money pit for them with no end in sight.

To understand Microsoft and online, you need to understand that they got into the online business thanks to AOL. MSN was originally designed to protect your Windows business from the threat of dial-up services and a potential (which did not materialize) Netscape/AOL combo. MSN built online properties entirely on AOL’s walled-garden model. They were maniacal about making sure Internet Explorer (Spryglass browser) was preloaded on all PCs. Anyone who disagreed was threatened with having their Windows (read Compaq) license revoked.

AOL once had a vision of turning the Windows desktop into an operating system layer from which to run the AOL client you get from the ubiquitous supermarket CDROMs. Perhaps fortunately, however, those ideas did not come to fruition as people began to choose Internet connectivity and the Google search page as the de facto standard for Internet commerce.

Fast forward to 2008, AOL is no longer relevant, now relegated to the elderly and very rural areas. MSN is still completely immersed in past battles, unable to become relevant to today’s Facebook youth. MSN is like a Soviet-era airport terminal, still trying to sell 3-day-old buns warmed up with Fogers coffee. Among Dick Clarke’s fake burger joints are kiosks trying to sell him knockoff Burberry, Viagra, and offers to transfer millions of Nigerian oil (AOL has at least had a lick of paint). MSN isn’t so much a destination as it is a necessary stop for some on their journeys to Google goodness.

Google Apps appears and Microsoft suddenly has the threat they thought would materialize in the year 2000. Their answer is Windows Live. Amazon Clouds arrives and your answer is Azure. Microsoft’s fundamental response to any online initiative is to copy. In other words, Microsoft’s total online strategy is to respond to perceived and real threats, not to create really innovative products and services that people want, but to build on this beat-up MSN and grab people from the default home page of IE, you are too inexperienced to find your way out.

And herein lies the problem that Microsoft has. As long as their entire motivation is to protect the Windows/Office franchise, they will never be able to embed true innovation into their products and their competitors are free to execute them better.

Their real dilemma is that they see their customers as Windows/Office users who need extra things they can’t get from Microsoft, rather than people who need a problem solved.

If you need guidance, you just need to look at Xerox, Digital Equipment, Shugart, Hayes Modems, 3Com, Palm…

Leave a Reply

Your email address will not be published. Required fields are marked *