Squash reckons the worst possible thing that Google can do is rub Microsoft out of the search/online advertising game.
Right now, Microsoft is a distant third behind Google and Yahoo and, let’s face it, it’s giving up a monster start. And ultimatey, Google’s defensive AOL play may well succeed in being the move that cruels Microsoft’s chances of making big bucks out of being an online advertising intermediary.
However, if Microsoft does give up on the market as a cashcow, it has a very appealing backup option. It can simply rip the guts out of the market and in doing so cut the legs out from underneath Google.
‘Startup boy’ Naval Ravikant writes similiarly on his blog. In a post titled How Microsoft can Obliterate Google, he opines “All Microsoft has to do is to give the revenues from any potential search to the site carrying it”.
Of course, first Microsoft must be “willing to forego the Google ad revenue stream in exchange for severely crippling Google”.
When you think about this, it wouldn’t be a purely defensive play, either. Sure, if MS came in and undercut the margins that Google is taking out with AdSense, it would make a big hole in Google’s bottom line and almost certainly slow down the companies momentum. But such a play would benefit Microsoft in other ways as well.
Microsoft will need AdCenter to gain critical mass. It has already conceded, that advertising-driven, on-demand applications is a space it will need to play in. The last thing it will want is to give a cut of iis ts online advertising revenues to Google or Yahoo as it starts to roll out next generation online mail and productivity applications. But if AdCenter fails to gain critical mass and AdSense and Overture control the market it won’t have a lot of choice.
If it takes a no-margin approach to AdCenter, it would have content producers converting in droves. That would make AdCenter so much more effective, driving up AdCenter rates and thereby increasing the revenue MS can derive from hotmail, msn, live.com, online versions of office, etc. Let’s remember that if Microsoft fully embraces this model, it could almost instantly become the biggest content producer on the net. After all, compare how much time you spend working in Word, say compared to the number of times you use search.
And then who’s the Internet do-gooder? Microsoft becomes the champion of the net, with its benevolent act of turning over all online advertising revenue to the people who produce the content. Hooray, hoorah for Steve and Bill. Suddenly Google at $430 a pop doesn’t look like such a great investment.