This Is the Biggest Difference Between Microsoft and Google

Microsoft (NASDAQ: MSFT  ) and Google (NASDAQ: GOOGL  ) have a lot in common. The two tech giants sport market caps in the $300 billion range, supported by business models leaning heavily on the Internet. They often compete head-to-head for the same engineering talent, the same consumer eyeballs, the same big-ticket data management contracts.

But you can spot the core difference between Google and Microsoft from a mile away by looking at what makes them tick. I don't mean the financial platforms or even their product portfolios, but the values nearest and dearest to each company's heart.

  • In a Forbes interview this week, Microsoft's soon-to-retire CEO Steve Ballmer explained his strategy this way: "How do you make money? How do you make money? How do you make money?"
  • Compare and contrast that attitude to Google's stated philosophy: "Focus on the user and all else will follow."

I own Google shares and avoid Microsoft, and this philosophical split explains exactly why.

There's no question that Steve Ballmer is good at making money. Microsoft has more than doubled its revenues and nearly tripled net income over the last 10 years, and it wasn't a small company at the start of that period.

MSFT Revenue (TTM) Chart

MSFT Revenue (TTM) data by YCharts.

But the relentless profit focus has led Microsoft astray many times. Windows Vista might not have been such a failure if Microsoft hadn't overcharged international customers so harshly. The Xbox gaming console line requires a monthly Xbox Live Gold membership in order to do anything interesting online, and could boost its consumer uptake drastically by removing that silly restriction. The Surface tablet was always too expensive to succeed, because Microsoft just doesn't do loss-leader sales to build a new platform. The examples go on and on.

At Google, pretty much everything the company does is available for free. You can often pay for an upgraded experience, like a larger storage space or a business-class suite of email and productivity tools. But most of Google's revenue comes from advertising around a robust collection of free tools, from Google search to Gmail to YouTube.

The question is never, "How do we make more money?" Instead, Google asks how to make its stuff better, friendlier, and easier to use than what Microsoft and other rivals might come up with. Getting that crucial question right will bring in money somewhere down the line. Making money is not Google's main focus, and it shouldn't be. It's just a positive by-product of setting up an efficient advertising structure and then working hard to please the user.

Google would fall apart in no time flat with a dollar-chasing leader like Ballmer at the helm. Conversely, I think Microsoft would do well to pick a user-centric CEO instead of another bean counter when Ballmer finally steps out. And if you still want to call me a hippie dreamer, you haven't seen the next chart yet. Clearly, Google's approach isn't stopping the company from making money or rewarding investors:

GOOG Total Return Price Chart

GOOG Total Return Price data by YCharts.

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Comments from our Foolish Readers

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  • Report this Comment On December 12, 2013, at 11:31 AM, Drichter wrote:

    Pretty accurate assessment of the problem with Microsoft, but missed the mark on Google.

    Google's 'focus on the end user' just means that drawing market share is HOW they make more money. Right now they do that primarily with low prices, not truly outstanding products or services.

    I've noticed an increase in user-centric practices at Microsoft recently, so I'm optimistic for their transformation. Let's hope they do it right.

  • Report this Comment On December 12, 2013, at 1:59 PM, VegasSmitty wrote:

    Biggest difference is Google works directly for the NSA.

  • Report this Comment On December 12, 2013, at 2:13 PM, otter82 wrote:

    Google's goal is how to make money from data. Any kind of date, but personal data is particularly rich. Isn't the focus on user experience usually attributed to Apple?

  • Report this Comment On December 12, 2013, at 2:33 PM, frahman4800 wrote:

    Right Mr. Bylund, because Google is a world-renowned charity that is here to help the world. It obviously does not use, user data for every single "free" service it provides. By now you should know that nothing comes for free, your user data is a commodity that Google trades in. So stop being a blind Google follower and try to add some objectivity to your assessment

  • Report this Comment On December 12, 2013, at 2:41 PM, symbolset wrote:

    An insightful, informed and correct analysis published on the Motley Fool? We can't have that. Clean out your desk.

  • Report this Comment On December 12, 2013, at 2:45 PM, MortggProgrammer wrote:

    I think the question Google asks is this: How do we provide / acquire services that would allow us to get more info about the habits/interest of a user so we can send more targeted ads to that user!

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