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May, 2008:

“Mob Rules” & Power of Networks

Mark Pesce, a consultant based in Sydney, is someone I’ve just started recently following on Twitter. He recently gave a good talk regarding Twitter which discusses the emergent use cases of the service and its global impacts. He topped it with his closing remarks at Web Directions South 2007. He gave a fantastic and insightful talk called Mob Rules which discusses the power of networks and how the networks (the mob) always find a way to the solution where “value” lies.

It isn’t just Twitter or FriendFeed. It isn’t always technology. It is about People and the power of People networks. The power of people networks (and their needs) will drive the technology because technology in many cases will be used to find the solutions to “appease the mob” and their needs. Really gets to the heart of some of the key issues of what is making social networking so pervasive today and all of the lately hyped social software so important.

Recommend checking the video out, worth the time if you are interested in stepping back and thinking about some of the themes and under-currents that are driving a lot of the change we see on the net and will continue to see. You can also check out Mark’s blog at the human network.

BTW, if the fisherman story doesn’t raise an eye-brow about how the world is changing before our eyes, well….

Why does Microsoft Need to Play in Search?

Yesterday, I wrote a post about Microsoft Live Seach Cash Back.  Near the end, I ask a simple question that only has complex answers:  Why does Microsoft have to play in search at all?

Perhaps the answer is obvious:  MONEY.  But that is the easy way out.  Perhaps there are other obvious answers that I’m eager to listen to.  My view is there are tons of ways to make money and Microsoft has some of the strongest (while showing signs of weakness in some cases) revenue streams in their Windows, Office and XBox franchies.

So again, I ask the question:  Why does Microsoft have to play in search at all?

Does Microsoft have to play in every arena that is technology-related and has a large market pie?  That does not strike me as a good strategic criteria and in the long-term, successful companies are successful by deciding what to do as much as the things to not do.  Microsoft has traditionally built an organization that has been able to successfully play in a number of areas due to sheer size, strength, capital and aptitude.  I think those days are over, the technology industry is too multifaceted for any one company to have their hands in too many different cookie jars if you want to lead in any.

Google is the leader in search, that is their core.  Apple is the leader in digital music device, that is in their core.  Why does Microsoft have to be in search with Live/MSN and in digital music device with Zune?  Because they can doesn’t see like the right answer and it sometimes feels like that to me.

To be clear, I am not shaking a stick at what Microsoft has accomplished (in anything they do or have done).  It is incredible what they have and continue to accomplish, particularly from a revenue perspective.  Even what they’ve done online with MSN and Hotmail while I am not a user of either.  So it isn’t about that.

It is about my asking what is truly their core business and why not place so much more focus there rather than diversifying into a space like search that I think everyone knows is a much different “kettle of fish.”  If they spent their efforts in the core, would they be demonstrating amazing new offerings in the area of online office tools, perhaps even acquired Zoho?  Why didn’t they buy Plaxo and integrate it into Outlook (always seems like a not brainer to me) and also consistent with their attempts to grab Xobni.

I don’t know.  There seems like a number of angles that Microsoft can compete from its traditional areas of strength to compete in the online world.  All this talk about Yahoo! and all of the investment in search is geared towards, well, competing in the search space.  But is that necessary when there are so many other (perhaps non-du-jour) areas to play in on the web.

Anyway, just some thoughts…  Interested to here what others have to say on the topic, I’m sure the opinions will be passionate and wide-ranging.

UPDATE on Sunday, May 25:  Tim O’Reilly has a great and very related post to this one up on his blog.   Arrington over at TechCrunch has his own views about the risk to the industry of creating a search monopoly.  I’m much more with Tim on this one.  There is merit to having competition in search and I have no doubt there will be even if everyone does outsource their search to Google in the short-term.  But I don’t see why Microsoft has to be that competition, better to concentrate closer to their core.

Here’s Some Cash?

Rebates are an old tactic in the old game “use my service or buy my product now, and I’ll give you money back later.” So after Microsoft announced Microsoft Live Search Cashback and I’ve had some time to ponder it, I can sum up my opinion as this is a very interesting play in the area of ecommerce search. But I do not view this as a big strategic salvo in the search wars. Some do, and with some very compelling arguments.

Here are some of my thoughts of Microsoft Live Cash Back:

  • I do not view this as “big” news out of Redmond nor do I feel it is a huge strike into the hull of the Google search tanker?  Verdict:  No material effects on Google’s search bottom-line.
  • I always get very concerned when “cash back” or “lower prices” is the angle.  Sometimes it makes total sense when it is the underpinnings of the business model (which it could be here).  But because this is Microsoft and they tried so many different tactics against Google, the combination of attempts conveys to me a “this is our last shot” attempt at doing something sort of feeling.
  • I feel only the truly price-sensitive will use this as one of their many tools when looking for the lowest price on a product they know they are actively shopping for.  Is this a large market? Perhaps. Could this become a leader in commerce showing?  Absolutely.  But that should be a concern for the Shopping.com’s of the world and Google Checkout.
  • On the point above, why is everyone looking at this against Google overall.  Perhaps Microsoft simply has decided that grabbing share in the general search arena is a losing proposition and that commerce search is still really the unclaimed frontier?
  • People search for products all the time.  However, often they are doing research on the best product for them.  So while a large percentage of Google searches are commerce related they ARE NOT NECESSARILY commerce related with the “intent-to-purchase”.  And that is the only thing Microsoft’s offering real tries to solve for.
  • People care about experience and ease-of-use.  That is why everyone fell in love with Google in the first place, because it works.  So, premise is only 10% of the battle.  Any new search-related product better beat Google (and beat it hands-down) in experience, ease-of-use and results.  Otherwise, people are going to switch and the low switching costs of the web are not going to help.  By early look didn’t impress and it didn’t impress others either.

In my mind, I am looking beyond the points above and asking a more philosophical question:  Why does Microsoft have to play in search at all? To me, that is the fundamental strategic issue and probably another post which I’ll follow-up on.  The rest of this is just details if that question was answered incorrectly in the first place.

Impressive Small Scale Ingenuity

Sometimes ingenuity even on the smallest scale is impressive.  Controlling lights with Twitter, I find this remarkable even if only the tech geeks will appreciate it.  Saw the video from Justin Wickett via TechCrunch this morning and felt it was worth the relay.


Control Lights with Twitter from Justin on Vimeo.

This is quite a ways away from “What are you doing?”.

Welcome to the Land of Irrationality

My morning today started with a cup of coffee and seeing Robert Scoble’s tweet and related post regarding the rumors flying around Microsoft/Yahoo and possibly Microsoft/Facebook, started via John Furrier’s post.  And I found myself in sheer disbelief.  Not because I do not think Microsoft isn’t being intelligent about its online strategy.  Not because of what a great product Facebook has built.  But simply because it is placing yet another face on the irrational valuations being thrown around, $20 BILLION! for Facebook.

Sorry, I love Facebook but this simply strikes me at late nineties irrational valuations but an new stratospheric levels.  Of course this is a rumor and very inline with the 1% valuation Microsoft has already placed on the company but buying 1% and buying the whole enchalada at that valuation are two completely different things.  And I’m sure Microsoft has a team of folks a lot smarter than me doing IRRs, synergy analysis and long-term value analysis on what Microsoft can do from a revenue perspective overall with a great site like Facebook in its arsenal (not to mention it from a defensive maneuver against its core business).

To me, this is the Alex Rodriguez signing brought to the Internet.  The Rangers signed him, 10 years $275M.  The Yankees just parlayed that into 10 years, $325M.  Rodriquez, great player (Facebook).  Yankees, great franchise (Microsoft).  But completely off-the-grid and irrational.  Keeping the sports metaphor going and trying to put such an aquisition in perspective:  Microsoft could buy the TOP 18 NFL Franchises for the price of Facebook and those franchises have a cumulative revenue stream of $3.88B! (according to Forbes).

Think about it from that perspective.  The top 18 storied franchises in football with the likes of the Cowboys, Giants, Bears, Patriots, Redskins, Jets, Packers and Steelers to just name a few.

I see such an acquisition and such a valuation as crazy.  Bad for the web overall (for another post).  Potentially bad for Facebook and its users (again, another post).  And for that, I do not (or at least hope I do not) see this happening.  Sara Lacy doesn’t see it happening for different reasons.

UPDATE:  More conversation and interesting points on this topic at TechCrunch.