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Microsoft's Mistakes Proving Costly 
By Jim Hedger, StepForth News Editor, StepForth Placement Inc. (c) 2006

The wizards of Redmond turn thirty this year. Officially founded
in 1976, Microsoft appears to have lost its edge as it enters
its third full decade. At one time, not so long ago, Gates and
Co. drove the machine, setting standards that everyone else
conformed to. Virtually nothing could stand in their way and
competitors who did seriously threaten their dominance could be
effectively diminished in one way or another.

Over the past few years Microsoft has gotten slower. Key product
releases have been delayed, upper-management has been reshuffled
several times in two years, defining initiatives such as the
.net strategy have been virtually abandoned and worst of all,
Microsoft has lived in reaction mode for the better part of the
2Ks.

To complicate things, their chief rival, Google, opened the year
by signing a last minute deal with AOL, one it suddenly snaked
away from MSN Search. The company is not on the leading edge
anymore and to a staff member, they know it.

At times it feels like they have adopted a "fake it till you
make it" public face. Bill Gates and Steve Ballmer parrot each
other's speeches about facilitating the pending digital
lifestyle while demonstrating product ideas that other firms
have already developed. Both have been talking about "... beating
Google in six months", for over a year now but the search
division of Microsoft doesn't even seem capable of bettering
itself. They are so scared of Google that both have stated they
don't see Google as competition, and they still don't have a
functional pay-per-click search advertising model.

They are trying to develop a new search engine in Windows Live
(http://www.live.com/). The product is in its beta phase and its
interface feels experimental. One interesting personalization
feature they are testing is user controlled search macro commands.
Basically, users will be able to create personal information
buttons that will be added to a search toolbar running across
the top of the Windows Live screen. The buttons are used to
narrow or focus search results, the example offered by MSN being
actual recipes as opposed to results full of advertisements for
cookbooks. A detailed explanation is provided at the MSN Search
WebLog (http://blogs.msdn.com/msnsearch/archive/2006/03/28/563482.aspx).

The future of Microsoft depends on the web. It can still
exercise a great deal of power and influence by controlling the
core operating system of most PC machines but the shell
surrounding the OS has been breached by web-based services and
software and Microsoft's long term dominance is obviously
threatened.

The latest rollback on the delivery date of Vista, their first
OS upgrade since XP, shows how difficult it is for Microsoft to
evolve into an age when the desktop computer is reaching its
obsolescence. First expected in early 2005, Vista, (formerly
known as Longhorn), is now expected to be ready for release in
January 2007, a full month after the Christmas season.

Microsoft earned everything it has today by establishing control
over the basic user interface that everyone uses, the operating
system of most PC computers. To observers, the development of
its new one has spiraled out of control.

Pulling on its core historic strategy, the plan to deal with
Google and Yahoo has been tied up in the OS. Microsoft wants to
make the experience of working on one's desktop computer and
across the greater Internet, or an internal Intranet, virtually
seamless. Since late 2004, the plan was to bundle a number of
web services into something they could control, the OS.

That is why Vista is such an important milestone for Microsoft
and for the various industries that work around Microsoft's
massive sphere of influence. Vista has been pushed back year
after year and actually placed on Wired Magazine's list of
vaporware products for 2004 and 2005. Computer makers and
retailers most recently expected the product in November 2006.

The problem Microsoft faces moving towards that future, and the
reason the Longhorn/Vista initiative has been so difficult is
they have fallen behind the curve when it comes to servicing
consumer expectations over the web. They have been a constant
third in the race for search supremacy and frequently trail
behind their rivals when it comes to introducing branded
products typical consumers use over the web. That, in part, is
because consumers are using the web differently than they use
the XP driven computer they access the web on.

There are, of course, exceptions to this rule that tend to fly
below the radar screen of daily users. Windows Media Player is a
good example. It works directly with online information sources
to provide a richer multimedia experience. Users don't need to
turn to Google to learn the recording date of the CD or to
receive other information about a piece of media. It is simply
provided by the product. Hundreds of millions of people use the
product everyday but few think about Microsoft while they do it.
It is a subtle product that is taken as granted by North
American XP users.

Other examples are abundant. When they do lead, as in the case
with MSN Messenger, Windows Office, and other branded, daily use
products, they simply don't generate the buzz that keeps
consumers thinking about their products.

The problem for Microsoft, unfortunately, doesn't revolve around
creating more buzz for their products. Their problem is that
other companies are creating the products that people want to
use.

While Windows Media Player is a multi-functional product,
smaller digital music storage and replay devices have replaced
its daily use. Google is poised to introduce an online word
processing suite. Firefox has taken a significant share of the
browser market.

The crux of the problem is that when servicing a general web
based audience, the only large-scale profit model is found in
advertising, not subscriptions or purchase pricing. If users
aren't looking at a Windows Media Player screen when listening
to their MP3s, they aren't looking at, or following up on any
commercially sponsored information. Similarly, with Internet
Explorer, users could be subtly directed towards other Microsoft
products, properties and advertisers.

Microsoft has made some costly mistakes over the past few years.
Its long-term dependence on the OS as the tool in its fight to
dominate the online experience has put it behind its competitors
in terms of product adoption and loyalty. The door is thus open
and several other entities are walking into the room. Regardless
of management shuffles and realignments, the delays of today
will haunt Microsoft long into the future. The delay of Vista
will have a palatable affect on PC sales over the Christmas
season. Take your local PC dealer or manufacturer to supper
sometime. He or she could probably use a good meal.
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Jim Hedger is a writer, speaker and search engine marketing
expert based in Victoria BC. Jim writes and edits full-time for
StepForth and is also an editor for the Internet Search Engine
Database. He has worked as an SEO for over 5 years and welcomes
the opportunity to share his experience through interviews,
articles and speaking engagements. He can be reached at
"jimhedger@stepforth.com"
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