Ballmer defends Microsoft’s Internet strategy: Google and Yahoo aren’t Netscape

May 26, 2007

Ballmer defends Microsoft's Internet strategy: Google and Yahoo aren't Netscape With Microsoft’s recent acquisition of Aquantive, an online advertising company, for $US6 billion, it’s pretty clear that Microsoft wants a slice of the online advertising market, which is dominated by Google.

During a recent whirlwind visit to Australia, Microsoft chief executive Steve Ballmer defended Microsoft’s online strategy, saying that while there is some possibility that the Internet market could overheat, the current situation is very different to the dot.com bubble of the 1990s, which as we all know ended in tears in March 2000.

“I say that for a lot of reasons this is different to competing against Netscape … the simplest one is that Google and Yahoo have real revenues. Netscape never did,” Microsoft Chief Executive told the Australian Financial Review

As you may recall, Netscape was one of Microsoft’s main competitors during the dot.com bubble. Netscape developed the Netscape Navigator web browser that helped propel the web into the mainstream. In the mid 1990s Netscape Navigator had 85% market share; today it has less than 1%. The main reason for this is because Microsoft developed its own web browser, Internet Explorer, that it gave away for free as part of Windows. As Netscape found, it’s very hard to compete against a free product that is given away to almost all of your potential customers.

Ballmer admitted that while Microsoft was trying to build a powerful “online advertising and commerce marketplace”, Windows would remain the company’s cash cow, which Ballmer described as a $10 billion business.

Ballmer is both right and wrong.

He’s right to say that Google and Yahoo are real businesses (unlike Netscape during its heyday, which was fueled by speculation rather than revenue), but he’s wrong to think that Microsoft can buy its way into the online advertising market and expect to be a major player like Google.

Microsoft was able to destroy Netscape by giving away an alternative browser away for free. In the online advertising market, Microsoft won’t get very far if it tries the same strategy — but then again, stranger things happened on the Internet.

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5 Responses to “Ballmer defends Microsoft’s Internet strategy: Google and Yahoo aren’t Netscape”

  1. Massimo Moruzzi:

    Windows may be a 10 billion dollar business today, but there’s no guarantee that things will stay that way for long, and Google will soon be making that kind of money anyway…

  2. Wayne Smallman:

    Microsoft are being haunted by their own tactics.

    Right now, their collective nemesis is free software of another kind (both Open Source as a whole and Linux,) which are forcing Microsoft to contemplate competing in a way they’ve never had to before — on quality and not price.

    They’re also entering into a battle with Adobe that I don’t see having a happy ending for them.

    The current problem for Microsoft is their aging business model. To a large degree, it’s just not applicable anymore.

    Plus, if it wasn’t for Windows and Office, then there wouldn’t be a Microsoft, since those two product lines effectively subsidize everything else they do, including their Xbox platform. Which incidentally, is yet to turn of a profit, despite its relative success.

    And when you consider that almost everyone at Redmond are hanging their hats on the Xbox, it’s more like salvation they’re looking for more than a strategy.

    Problems deepen, though. If we consider the lamentable Zune as being, well .. lamentable, and that Microsoft may be looking to produce an Xbox portable, they become their own competition more than any true competitor to either Apple or Sony.

    In the eyes of the consumer, it’s not clear which gadget to buy, or for why.

    And this is what Microsoft just don’t get. They’re constantly trying to apply their corporate knowledge to everything else.

    Sometimes, lots of choice is no choice at all…

  3. Mehnaz:

    Online Advertising is in full swing. I have been reading about acquisitions by Microsoft, Google, Yahoo and Adify. Read more about it in SRamana Mitra’s blog: http://sramanamitra.com/blog/1006.

  4. Abhishek:

    Talking about steve ballmer, have you ever wondered how his office looked like from the inside? The capital of his empire from where he supposedly rules?

    Check this out:
    http://abhishek-myspace.blogspot.com/2007/07/microsoft-ceo-steve-ballmers-office.html

  5. Just:

    Hello!!! I seriously enjoy this blogging, especially the pattern. :D Regardless, I just wanted to say thank you for all the posts and also please keep writing. I certainly anticipate browsing more.

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