Steve Ballmer is in an interesting situation. This past week he’s had to address tough challenges with two of Microsoft’s biggest competitors: Apple and Google. Translation: mobile, search, and advertising.
In his most recent letter to employees, Ballmer specifically addressed Apple, Yahoo!, and Google. As many know, Ballmer has pretty much called it quits on their bid for Yahoo!. In the meantime, Apple has continued to grab chunks of the PC market, and the iPhone is dominating the smartphone world.
Ballmer has announced Microsoft’s intent to spend a lot of money acquiring companies to heal their search engine wounds several times. So far they’ve acted, investing $240 million into Facebook (Oct. 2007), and there are reports that the relationship is becoming even closer. This isn’t a bad move from Microsoft. They can’t seem to buy their way back into the search engine ranks just yet, and they need to find exposure for their ad network.
But I wonder: is Microsoft really getting the most out of their relationship with Facebook? Most of what Ballmer has talked about has been purchasing to compete with Google, instead of researching and redesigning. It reminds me of the Intuit vs. Microsoft story (see: Inside Intuit). Back when Intuit was first designing Quicken, they beat Microsoft by effectively researching the target demographic and designing a product to meet their needs. In contrast, Microsoft approached the issue by designing Microsoft Money the way they felt software should work. In the end, Microsoft’s extremely high marketing budget would fail to get Money to consumers, and Intuit’s better designed product won out. For me, that story has been a big lesson: understand who you are designing your product for.
Apple and Google have succeeded by understanding the needs of their audience. The iPhone OS is more intuitive and stable than Windows Mobile, and Google search actually pulls up legitimate results. Microsoft needs to spend more time looking at their audience and designing their product appropriately. They actually did very well with the XBox; it’s not a surprise this was designed through a separate product development process.
Facebook can be a saving grace for Microsoft, but not in the way they seem to be working right now. Instead, Microsoft needs to take full advantage of its exposure to 70+ million web consumers and allow them to influence their next product. The information age has changed, no longer can Microsoft be the second or third mover and expect to succeed by throwing more money at the problem.