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Nick Hodge is a Professional Geek for Microsoft Australia. More info lives underneath the About Box...

-33.831416, 151.222526

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Working for the Underdog

By Nick Hodge | May 30, 2009

Photo by TCM Hitch­hiker/Jason Jerde
The fol­low­ing is the per­sonal opin­ion of myself and is not a formal state­ment nor pos­i­tion of my employer

Firstly, think about news­pa­pers. They exis­ted from the 17^th cen­tury until the first dec­ade of the 21^st cen­tury on advert­ising. Using the money received from advert­ising, they fun­ded con­tent cre­ated by journ­al­ists and writers. The con­tent attrac­ted atten­tion (ie: eye­balls), which in turn attrac­ted more advert­isers. A vir­tu­ous circle.

News­pa­pers will not com­pletely cease to exist; how­ever both their busi­ness model and lack of envir­on­mental sus­tain­ab­il­ity – and most import­antly, lack of atten­tion, will chal­lenge long term strangle-hold of power.

Now, think about Google. Star­ted in the first dec­ade of the 21^st cen­tury. Using money received from online advert­ising, they fun­ded tools and applic­a­tions cre­ated by soft­ware engin­eers. Online, the cost of cre­at­ing con­tent is near zero, so every­one had the chance to cre­ate and share. These tools attrac­ted atten­tion in help­ing people find/sift/manage this con­tent. By provid­ing these tools, Google attracts and holds atten­tion, which in turn attracts more online advert­isers. A vir­tu­ous circle.

Tra­di­tional journ­al­ism will con­tinue to exist as open soci­et­ies demand inde­pend­ent, know­ledge­able voices. How­ever, who will pub­lish their stor­ies, and under what busi­ness model; is one of many changes hap­pen­ing in today’s society.

As more attention-time is spent online, the first model is under dis­tinct threat; as is any tra­di­tional attention-driven busi­ness model. The atten­tion is increas­ingly head­ing online.

Google has no dir­ect need to earn rev­enue from these tools and applic­a­tions dir­ectly. Using the online com­munity to adopt (via APIs, etc) these tools, modify and con­trib­ute – Google wins more atten­tion via the net­work effect. We have seen Google pro­mote browsers (Chrome) with advanced APIs (HTML5, SVG, Javas­cript) as a strategy to shift the plat­form off Win32/.NET, MacOS/iPhone and simple HTML4

It just hap­pens that Google’s model of soft­ware devel­op­ment is ortho­gonal to Microsoft’s model of obtain­ing rev­enue. As an added bene­fit, the model has the poten­tial to cripple their largest poten­tial com­pet­itor, Microsoft.

The effects of new soft­ware model will not dra­mat­ic­ally affect the major­ity of the tra­di­tional, sat­ur­ated soft­ware mar­ket­place. Microsoft will con­tinue to main­tain a rev­enue stream from tra­di­tional enter­prise plat­forms (oper­at­ing sys­tem, office, serv­ers, data­bases, CRM/ERP etc), but these are not long term growth busi­nesses. Growth will largely fol­low World GDP rather than accel­er­ate, as you would expect on a new busi­ness model. Growth at World GDP is merely a baseline

This is why Microsoft must, and is break­ing out of tra­di­tional software-licensing model into tools and tech­no­lo­gies such as Bing, Azure etc. Using the cash­flows of the cur­rent plat­forms to ensure a long-term and viable busi­ness. Struc­tural and product changes are already under­way as seen with Microsoft’s Online hos­ted applic­a­tions, and industry acquisitions.

The next 5–10 years is going to be an inter­est­ing ride, and Google under­stands their com­pet­it­ive mar­ket­place. And this time, Microsoft is the under­dog. I like work­ing for under­dogs. It makes life inter­est­ing.

Notes, follow-up:

• Henry Blod­get “It’s Time For Microsoft To Face Real­ity About Search And The Inter­net“
  (Nick) Henry has an inter­est­ing per­spect­ive on how Microsoft is fram­ing it’s approach to the inter­net wrong, stra­tegic­ally. Henry’s premise is that Microsoft should refo­cus as a pure enter­prise soft­ware play, and give up on the con­sumer inter­net busi­ness. This is cer­tainly an altern­at­ive not dis­cussed above; but this does seem like a growth by mar­ket­share strategy. When you are already a large player in a mar­ket, this does become dif­fi­cult without caus­ing more reg­u­lat­ory ire. Extend­ing from tech­no­logy moun­tain ranges, the new rivers of gold are too attract­ive to be for­got­ten. To suc­ceed Microsoft has to exhibit and execute a major mental/strategic shift without abandon­ing the cur­rent rev­enue streams.
  I read Steven Hod­son over at The Inquisitr has a sim­ilar per­spect­ive as mine above, although com­ing from a dif­fer­ent angle. Don’t under­es­tim­ate the attract­ive­ness of rivers of gold.
• Michael Gold­haber, “The Atten­tion Soci­ety“
  (Nick) In post-industrial soci­et­ies the scarce resource is atten­tion. Grabbing atten­tion, such as the H1N1 Influ­enza Pan­demic is at the time of writ­ing, is valu­able. In the above text, I make men­tion of the Atten­tion Eco­nomy, or the mech­an­ism of mon­et­iz­ing the atten­tion of soci­ety. Once, as people sat down to tele­vi­sion after work: con­tent pro­viders could sell this atten­tion. (Advert­ising is primar­ily a mech­an­ism for obtain­ing attention).

Topics: future, internet | No Comments »