Photo by TCM Hitchhiker/Jason Jerde
The following is the personal opinion of myself and is not a formal statement nor position of my employer
Firstly, think about newspapers. They existed from the 17th century until the first decade of the 21st century on advertising. Using the money received from advertising, they funded content created by journalists and writers. The content attracted attention (ie: eyeballs), which in turn attracted more advertisers. A virtuous circle.
Newspapers will not completely cease to exist; however both their business model and lack of environmental sustainability â€“ and most importantly, lack of attention, will challenge long term strangle-hold of power.
Now, think about Google. Started in the first decade of the 21st century. Using money received from online advertising, they funded tools and applications created by software engineers. Online, the cost of creating content is near zero, so everyone had the chance to create and share. These tools attracted attention in helping people find/sift/manage this content. By providing these tools, Google attracts and holds attention, which in turn attracts more online advertisers. A virtuous circle.
Traditional journalism will continue to exist as open societies demand independent, knowledgeable voices. However, who will publish their stories, and under what business model; is one of many changes happening in todayâ€™s society.
As more attention-time is spent online, the first model is under distinct threat; as is any traditional attention-driven business model. The attention is increasingly heading online.
It just happens that Googleâ€™s model of software development is orthogonal to Microsoftâ€™s model of obtaining revenue. As an added benefit, the model has the potential to cripple their largest potential competitor, Microsoft.
The effects of new software model will not dramatically affect the majority of the traditional, saturated software marketplace. Microsoft will continue to maintain a revenue stream from traditional enterprise platforms (operating system, office, servers, databases, CRM/ERP etc), but these are not long term growth businesses. Growth will largely follow World GDP rather than accelerate, as you would expect on a new business model. Growth at World GDP is merely a baseline
This is why Microsoft must, and is breaking out of traditional software-licensing model into tools and technologies such as Bing, Azure etc. Using the cashflows of the current platforms to ensure a long-term and viable business. Structural and product changes are already underway as seen with Microsoft’s Online hosted applications, and industry acquisitions.
The next 5-10 years is going to be an interesting ride, and Google understands their competitive marketplace. And this time, Microsoft is the underdog. I like working for underdogs. It makes life interesting.
- Henry Blodget “It’s Time For Microsoft To Face Reality About Search And The Internet”
(Nick) Henry has an interesting perspective on how Microsoft is framing it’s approach to the internet wrong, strategically. Henry’s premise is that Microsoft should refocus as a pure enterprise software play, and give up on the consumer internet business. This is certainly an alternative not discussed above; but this does seem like a growth by marketshare strategy. When you are already a large player in a market, this does become difficult without causing more regulatory ire. Extending from technology mountain ranges, the new rivers of gold are too attractive to be forgotten. To succeed Microsoft has to exhibit and execute a major mental/strategic shift without abandoning the current revenue streams.
I readÂ Steven Hodson over at The Inquisitr has a similar perspective as mine above, although coming from a different angle. Don’t underestimate the attractiveness of rivers of gold.
- Michael Goldhaber, “The Attention Society”
(Nick) In post-industrial societies the scarce resource is attention. Grabbing attention, such as the H1N1 Influenza Pandemic is at the time of writing, is valuable. In the above text, I make mention of the Attention Economy, or the mechanism of monetizing the attention of society. Once, as people sat down to television after work: content providers could sell this attention. (Advertising is primarily a mechanism for obtaining attention).