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Microsoft and Google – An Assessment of the Battlefield

Posted on Wednesday, December 5th, 2012 by Print This Post Print This Post

Categories - Featured, SEM

Most of us know the story of the Tortoise and the Hare – a moral about the risks of overconfidence and the rewards of determination. Between Google and Microsoft, I think we can all recognize who’s playing the role of the tortoise, but is the analogy of Google as the overconfident hare a fair one? Not necessarily, but that doesn’t mean Microsoft isn’t doing its best to catch up.

For the first time in five years, Google’s search share has dropped below 90% in the UK, with Microsoft’s Bing picking up a decent gain. In October Google’s search share slipped to 89%, from its September share of 91% (a loss of 1.4%). From this loss Bing gained 0.72% (the rest going to Yahoo) bringing their share to 4.71% in total.

This may not sound like much of a change – and indeed the numbers are small – but the gain in itself is significant, especially if it carries on at even a fraction of the same pace. The reason for these gains is perhaps enigmatic; but it’s possible that we might be seeing similar gains next month as well due to the release of Microsoft’s new cross-platform software, including Windows 8, which is said to understandably have an inherent preference towards Bing.

In other positive news for Microsoft, Windows Phone 8 has hit the market and the initial reactions are looking good; Nokia’s new handset, the Lumia 920, has sold out in several countries and has managed to maintain a stable place on Amazon’s best seller list. Of course, there are no numbers yet as it’s only been a few weeks, but at a glance it looks promising and there is nothing really stopping it from taking a decent chunk out of Android’s market share in the future.

Now, while Microsoft seems to be playing catch-up with their latest releases, Google’s timing has historically proven to be an overwhelming strength. Google’s phone software (Android) has – just like their search engine – come at the perfect time to control a market which was emerging in the tech sector. Anyone who has a new smartphone, or simply has done some research about getting one, can recognize that Android is controlling a serious portion of the market.

The key difference here is that Android, rather than holding autonomous value for Google, is acting as an expansion of Google’s ad reach. There are no licensing fees for handset makers, and no charges for app developers; it is simply meant to be a platform extension for creating more ad revenue generated from Google search. The only problem with this strategy, Google has found, is that mobile phone search ads aren’t worth as much as search ads on a PC or tablet, but it’s an investment for the future. These things take time before you can see their true worth and more importantly, are necessary in order to avoid becoming irrelevant or even obsolete, especially in the technology sector.

Indeed, it’s completely necessary for tech companies to invest in development, and at times diversify their operations, as Microsoft and Google have had to do. However, there are always pitfalls to look out for. Where diversification can minimize the risk of becoming irrelevant in a fast-paced industry, it also has the power to divert attention and resources. In Google’s case the biggest problem with their diversifying efforts isn’t the loss of money – and they certainly have lost a lot on deals such as Motorola – but rather the amount of attention which has been diverted away from their main area of business.

If we examine the new markets which Google has entered into, that of software (Android) and mobile phones (Motorola), it is not difficult to recognize that these are highly competitive and transitioning markets which require lots of attention in order to keep a competitive edge. It’s natural that they put more into these new areas of business, but perhaps at the same time they have become too involved in these new ventures to address the threat of Bing and the fight which has been brought to their doorstep, on their own ‘search’ turf. So they need to get back in that ring if they want to guard their large market share.

It’s possible that Microsoft won’t have a huge problem getting a foothold in the tablet and smartphone software market as their name is synonymous with software to most of the world, whereas Android is still slightly more obscure; many don’t know it’s even owned by Google. However, it seems Microsoft are not ones to rest on their laurels; they recognize that they are being pushed out of their market, that their industry has changed, and that there is a need to fight for their position and so they’re doing just that.

As for Google and search/search advertising, well, it’s much harder to put in a good fight if you don’t think you have much to prove. Google has dominated the market for years and they have become comfortable being the frontrunner in the race. But with this slight shift in market share, it looks like the Microsoft tortoise is gaining ground by maintaining a consistent effort and focus. Recently Bing has had success with its Bing It On challenge and their heavy ‘election hub’ marketing for the recent US presidential race. If they’re not careful, Bing just might sneak up on them, but at this point it is still very much Google’s to lose.

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