An Open Letter to Steve Ballmer

Dear Steve,

Microsoft (Nasdaq: MSFT  ) is in trouble.

Threats are everywhere. Apple (Nasdaq: AAPL  ) leads in digital entertainment and is emerging in mobile. Google (Nasdaq: GOOG  ) is killing you and everyone else in search. And your top technologist, Ray Ozzie, pegs Amazon.com (Nasdaq: AMZN  ) , not you, as king of cloud computing.

But Google is the elephant in your Redmond, Wash. boardroom. You know it, too. You said as much in a summer memo to employees:

We continue to compete with Google on two fronts -- in the enterprise, where we lead; and in search, where we trail. In search, our technology has come a long way in a very short time and it's an area where we'll continue to invest to be a market leader. Why? Because search is the key to unlocking the enormous market opportunities in advertising, and it is an area that is ripe for innovation. [Emphasis added.]

Trouble is, your investments have yet to pay off. You're not doing anything different. Consider your much-hyped search deal with Facebook, which went live in October. It's like, well, pretty much every other search engine I've used that isn't Google.

Opportunity, lost. Or as Mashable's Adam Ostrow put it in his review of the engine, "Facebook (and to an extent, MySpace through its deal with Google) has an opportunity to do something cool with social search, but so far this looks like a typical search engine-content partner deal." It still does, Steve.

Which isn't to suggest that your team at Microsoft is sitting idle. I know better; I've seen the reports. You're in a data-center arms race with DoubleGoo, and your weapon of choice is a crate of servers and storage that some are calling "cloud containers." Dell (Nasdaq: DELL  ) is among the various component suppliers whose gear you're using to transform the newly minted Windows Azure into a cloud infrastructure rivaling Amazon's largely unsung Web Services platform.

Could you be a little more social, please?
But a darker, denser cloud won't help you kill Google. For that, you'll going to need to be better at search -- a lot better. You're going to have beat Google on its turf.

Forget trying to do that conventionally. Build a better index? Cuil tried and failed. So did Yahoo! (Nasdaq: YHOO  ) and IAC's (Nasdaq: IACI  ) Ask.com. Build a better interface? Kosmix.com is among the many trying that, but Google still controls a majority of search market share.  In the face of several persistent rivals, its dominance continues to grow. There's no out-Googling the Google.

Drastic measures are all that's left. You have to do something Google hasn't tried but everyone wants. You've got to master social search, and then embed it with every platform you own.

What's social search? Google vice president Marissa Mayer gave her thoughts in an August interview with VentureWire:

So if we took Web History and allowed that data to influence rankings, such that pages that your friends have visited were now bumped up in your search ranking, that that might be a good augmentation to something like personalized search. In essence, it's a fusion of personalized and social search. In this case, what we would do is say: This Gmail account which maps to Marissa Mayer then maps to these other friends, allow those friends to influence this ranking ... But no, we have not done anything like that to date.

Key words there: to date. Google will implement this feature or something like it, because when it comes to search, it's important to understand the sources to which we ascribe value. Friends are more valuable to us than strangers.

But strangers also have value. Social networks have seen to that by providing a mechanism for indexing groupthink. Twitter aggregates these digital conversations better than any other platform on the Web.

Facebook knows this. So does your neighbor, Jeff Bezos. So does Google. And so should you. Because someday soon, Google is going to make a bid for Twitter, and you probably won't be given a chance to counter that offer. Want to beat Google? Go get Twitter. Now.

Foolish best,
Tim Beyers, analyst, Motley Fool Rule Breakers

Apple and Amazon are Stock Advisor selections. Microsoft and Dell are Inside Value picks. Google is a Rule Breakers recommendation. Try any of these Foolish services free for 30 days. There's no obligation to subscribe.

Fool contributor Tim Beyers is a member of the Rule Breakers team; he had stock and options positions in Apple and Google at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy will be mixing cocktails at tomorrow's New Year's Eve party.


Read/Post Comments (8) | Recommend This Article (4)

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  • Report this Comment On December 30, 2008, at 3:31 PM, MurphyMacdotCom wrote:

    Is anyone actually reading other people's tweets on twitter? or is it just a place to vent? I don't understand the point of following 900 people on Twitter.

    http://twitter.com/murphymac

  • Report this Comment On December 30, 2008, at 4:53 PM, FoolAnil wrote:

    I am a bit disappointed with the lack of research and superficial nature of this article. I have posted some thoughts on it on my blog (http://anilanilanil.blogspot.com/2008/12/microsofts-strategy...

    Excerpt....

    "...I think the Motley Fool should sharpen their research on the longer term strategy with Microsoft Azure. Microsoft is going to win in the cloud computing race as being one of the leading cloud computing platforms. I don't think anyone will have the dominance that Windows has in the PC market. Microsoft is going to make it possible for the existing developer community to develop, deploy and maintain cloud applications with little or no retraining..."

  • Report this Comment On December 30, 2008, at 5:05 PM, TMFMileHigh wrote:

    Hello, Anil. Thanks for commenting. My apologies for having disappointed you. A question, though. You close your blog post -- bad link, by the way -- with this:

    "Indexing more web pages better and providing minor improvements to the search results is not going to be a game changer. Microsoft will have to build the network effect and that is the toughest challenge to overcome in the viral web marketing environment "

    Exactly my point. Microsoft can't win by going for incremental improvement. Social search is a breakthrough that someone is going to perfect. We know that Google is trying.

    Also, I strongly disagree that Microsoft is creating simple interfaces for the cloud. Software + Services, by its nature, is a complex platform that's at least partly intended to preserve the desktop. Azure is part of S+S.

    FWIW and Foolish best,

    Tim (TMFMileHigh)

  • Report this Comment On December 30, 2008, at 5:07 PM, DargFool wrote:

    Regarding search:

    To beat google you need intelligent search. The ability to organize the results by context.

    If I type Port 48926, Port could refer to a shipyard, a logical tcp connection, teleporting as in a game, software development from one platform to another, etc.

    If the search results were grouped by all of the found contexts, I could more easily filter out what is irrelevant to me.

    If the search interface allowed me to assign weights to the search words (or at least to enter them in the order of importance), this could help intuit the purpose of the search.

  • Report this Comment On December 30, 2008, at 5:21 PM, DargFool wrote:

    Hit submit too soon!

    Also, naturally organizing search by context also allows greater add targetting which in theory leads to greater advertising profits.

    So adds for the latest game from blizzard would be displayed to the gaming context of port instead of the shipyard context...

    Etc..

    I don't know to what extent Ask.com tried this approach, using humans to define the contexts. Instead, you tap the social networks to define the contexts for each search keyword.

    Implementation is really not as hard as it seems, it is just a big relational database. The best part is, you could start with a standard dictionary as the best way to generate default contexts as the multiple definitions of a word often relate to different contexts.

    This idea is probably too obvious for anyone at microsoft or google to consider, so it will become like all my other ramblings and musings... an idea awaiting the research to find out if it is a gem or a pile of refuse.

    -Kent

  • Report this Comment On December 30, 2008, at 5:22 PM, DargFool wrote:

    Oops.. forgot to spell check... I meant Ads, not adds :)

  • Report this Comment On December 30, 2008, at 6:03 PM, FoolAnil wrote:

    Tim,

    Thanks for responding to the comment. Btw, I am a big fan of The Motley Fool for the past 10 years and have been active consumer of the website content, books and newsletters. I am glad that there is a an open mindset to listen to different opinions.

    Correct link: http://anilanilanil.blogspot.com/2008/12/microsofts-strategy... (hope the whole link comes up this time)

    I agree with the search perspective that search was a core technology once but the market has evolved and it is all about the "whole product" now (Geoffrey Moore reference). Game changers are going to be outside the core search technology.

    On the Azure front. I was at the PDC 2008 and got first hand look at some of the roadmap. I think they are going to change their development, deployment and management tools to build once and deploy either in an enterprise (traditional), private cloud or the MS cloud. This is not going to happen tomorrow but fundamentally, I believe, MS is on the right track.

    regards,

    Anil

  • Report this Comment On December 30, 2008, at 8:05 PM, markstrelecki wrote:

    It seems to me that the whole issue of data security has been conveniently avoided in almost every marketing speech about SaaS and cloud computing.

    If Microsoft cannot get it's security act together on the desktop (the history of this is quite clear), how in God's green Earth can any reasonably intelligent person think for once second that their application, data, or user information will be safe when hosted out there "somewhere in the cloud"???

    It seems to me there is MUCH work to do on the client side of this (by any other name) client-server model before we go misplacing even more trust on ANYONE, let alone folks with a very bad track record when it comes to security and exposure.

    Private cloud computing is the only variant which places at least SOME control on the service provider, with the possibility (inevitability??) of employing server technologies other than Microsoft's.

    If the browser is to (has) become the new desktop, then HTML will (has) become the lingua franca of the online experience. Why do we need unnecessary additional layers of proprietary INsecurity that we'll be forced to upgrade year after year for exorbitant license fees in a never ending downward spiral of value?

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