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Why Google need not fear Microsoft

• Tags:
• Google,
• Microsoft,
• Antitrust Ruling

John Carroll ZDNet.com

Published: 10 Feb 2004 15:25 GMT

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As the world awaits the European Commission's antitrust ruling, certain pundits see the makings of a future investigation as Microsoft moves to compete more forcefully in Internet search, a domain where Google currently dominates.

The fear, in short, is that Microsoft will integrate aspects of search functionality into Windows in such a way that it will foreclose opportunities to Google. No company stands a chance when faced with such integration, leading to the eventual demise of Google.

To put it simply, I don't agree. Google, as a company which accounts for 80 percent of all Internet searches and a billion dollars in estimated yearly revenue, is a company deserving of competition, and perfectly capable of standing on its own.

First, recognise that a contest with Google would be one between two dominant companies, only one of which has extensive experience in search technology. Second, Microsoft's track record shows that the company competes more on technical merit than distribution. Last, Microsoft should do more to defuse antitrust regulators' fears by making a strong and public commitment to openness in the manner in which search functionality will be integrated into their products.

Microsoft, the critical competitor
How many companies would go up against the dominant Sony game system, PlayStation 2? Sony is the gorilla in the game console space, and combined with the installed base of PlayStation games (all of which are compatible with PlayStation 2), Sony's position seems particularly entrenched. Even so, Microsoft spent billions of dollars entering and competing in that market, posing the most credible threat to PlayStation's dominance.

The same applies to other markets Microsoft entered, many of which are dominated by a single player. Microsoft competes with Palm in handheld operating systems, Symbian (Nokia moved to take controlling interest of Symbian on Monday) in operating systems for "smartphones", Oracle in databases, and America Online in Internet access. Though Corel's WordPerfect these days is considered an also-ran, WordPerfect was the dominant word processing product. When Microsoft came out with Internet Explorer 1.0, Netscape owned a whopping 90-95 percent share of the market for Web browsers.

In short, Microsoft is one of the few companies to pose competition in markets dominated by one company. Few bother to challenge Google in Internet search technology, in spite of last year's estimated billion-dollar revenue haul. Microsoft is "bothering", serving the same important roles its serves in other markets, which is sole competitor to a dominant player.

To Microsoft's critics: An honest accounting
The subtext to the claim that integration is the way Microsoft has beaten past competitors is that Microsoft only succeeds by leveraging its dominance of desktop operating systems. Microsoft has the ability to integrate its products into Windows, giving those products theoretical access to 90-95 percent of desktop consumers.

Though perhaps true in a limited sense over the long term, it applies little within the time frames at which computing evolves. The integration advantage theory presumes that everyone upgrades to the latest version of Windows shortly after Microsoft releases it. That is far from the truth if usage figures for Windows XP are any indication. Only 42 percent of Windows installations currently run Windows XP, an operating system that has been available for over two years. This means that features integrated into XP hardly gain a distribution that is far above what is possible for other companies.

Sun has managed to get the Java runtime onto HP, Dell, and Gateway computers, who in total account for a 55 percent share of the US market (although only 33 of the worldwide market, but I haven't looked into whether Sun has made agreements with non-American PC manufacturers). That's higher, in other words, than the share Windows XP has of the total Windows marketplace. Furthermore, such an avenue of distribution (paying OEMs to include your products) is unique to Windows, as Microsoft doesn't make the hardware upon which its software runs, while Apple and Sun do (in other words, Microsoft won't be getting .Net pre-installed on Solaris anytime soon).

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