Monday, May 09, 2005

Is Google the next Netscape? More like the next Microsoft...

Update: I posted this in the Spring. Looks like the NY Times has a similar POV (reg req'd - free).

There's been a lot written about Google being the next Netscape but I think it's closer to being another Microsoft though still a long ways from having MSFT's scale and breadth. I saw MSFT transition from early adolescence to adulthood (I was there from the early 90's until a couple years ago). I'd consider Google to be in early adolescence. Thinking back on that stage of MS' development, there are striking parallels with what made MS a success or were attributes of the company. Some of these bode well for Google while others are ones that Google would be well-advised to learn from Microsoft's missteps. Here's a (growing -- thanks to all the input I've received) list of some of the similarities ranging from small coincidences to core cultural issues...
  1. Both were lionized in the press during "adolescence" -- go back and read Business Week, Forbes, etc. and similar gushing articles being written about Microsoft/Bill in the late 80's/early 90's. These are being re-written for Google.
  2. They both thought they were going to build business one way and hit it big with another. Google was going to search corporate sites while MSFT was started as a programming language company.
  3. Both businesses were profitable relatively early in their existence for a tech business.
  4. Both had two geeky founders who attended the same top schools and decided to start a company together.
  5. Big partner(s) make Microsoft/Google when they were tiny and their large company partner decides they rather partner to get a piece of technology rather than build what they perceived to be "non-strategic" technology that turns out to be strategic after all. They regret it later when they have to go compete with the company they enabled. In Microsoft's case it was IBM. In Google's case, it was Yahoo and AOL that "made" them. Read here for an interesting critique of Yahoo's competition with Google. [My POV is that Yahoo will have more long-term success against Microsoft as they have both the technology acumen AND they fully understand marketing, the media business and the value of relationship selling.]
  6. Google and Microsoft learned the value of ‘efficient distribution’ early. Google got to critical mass partly w/ the AOL deal, but partly by doing revenue shares on ads on partner sites that put 50% to 100% of revenue in the pockets of the affiliates. With ads as a secondary revenue stream, Google knew that they could acquire traffic cost-effectively in this way (low-cost distribution), which would in turn boost queries, which would in turn grow their top revenue stream – keyword sales. By contrast, Microsoft used the OEM channel – with very favorable deals granted to folks like IBM –to distribute efficiently. [Thanks to Microsoft veteran Craig Bartholomew for this one]
  7. Being product/tech centric is sufficient for success in early adolescence but not enough later. This is just starting to play out with Google whereas Microsoft has been gradually learning this lesson. I wrote about this in my Ballmer finally gets it post. Founders at both companies apparently had/have little grasp of the value/impact of relationship selling during their adolescence years.
  8. Both Microsoft and Google put out incomplete products with intent to rapidly evolve until they get it right.
  9. Perceived arrogance starts to chip away at their media darling status.
  10. Both play by their own rules to redefine their industry.
  11. Both are effective at thinking long-term.
  12. Both operated as mysterious "closed societies" into their adolescence with lots of conspiracy theories being cooked up about what they were/are up to. [See comment at the end of this post highlighting how MSFT is no longer a "closed society"]
  13. Both have bold, audacious goals -- Microsoft wanted to have a computer on every desktop which sounded ludicrous in the mid-70's while Google's goal of organizing the world's information sounds similarly ludicrous when you consider their scope. Both will probably achieve their stated goal.
  14. Neither organization thinks of themselves as "evil" but increasingly perceived as such as they move into adolescence. A recent example is the hullabaloo about Google's Autolink feature. First, Steve Rubel started a stir when he said that Google is doing something similar to Microsoft SmartTags. I also saw Dave Winer talked several times about this issue in the past few days. Robert Scoble also did a nice job of recapping the issue, history and response from Google here.
  15. At similar stages, they were/are hot places to work with individual autonomy pulling many graduates from the world's top universities. Both place a premium on talent and have gained reputations for their grueling hiring processes.
  16. Both are accused of "master plan" when individual projects are much less coordinated than people thought/think.
While Google has tried to contrast themselves with Microsoft, it's interesting to looking at the similarities. What else do you see in common? Add your comments below.

Time will tell whether Google is more or less like Microsoft which will make for interesting punditry. Here's a few articles looking at this issue.
A few more came to my attention after the original post (seems like it's sport to compare Google to just about any successful corporation)
The only thing that matters to my clients is ways they can reduce collateral damage or better yet, be like one of those birds that feeds off the hippo. Understanding how Google is likely to progress given their mindset and studying history is what I advise my clients. It will be interesting to see if/when Google can no longer roll out stuff in a stealth mode. Microsoft is so scrutinized that they no longer can do that -- every move is reported. Rich Tong (a founding partner at Ignition Partners -- a VC firm) who was at Microsoft in a similar timeframe to me commented on Google rate of product rollout and ability to operate under the radar which MSFT could do at one time.

After writing the previous comments, a firestorm of sorts hit Microsoft around whether it would/wouldn't support legislation in the state of Washington related to gay rights. What's relevant to this post is how Microsoft was once a "closed society" much like Google is today. They thought it was "none of your business" to know the inner workings of the company. It was late to realize that increased transparency would be an asset rather than a liability -- certainly Robert Scoble is a great example of that. Google has already fallen into the same "none of your business" trap Microsoft fell into earlier in its history. I can't imagine Google having employees embrace the transparency in the way Microsoft has as evidenced by this latest firestorm. Check out these links for an example of corporate transparency -- it's a bit like finally getting inside a sausage factory. Though it's not pretty, it's the reality.

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