January 2005

What's Next for Google

Continued from page 3

By Charles H. Ferguson

Architecture wars generally begin with a fierce competition for market share. Eventually, the market settles on a de facto standard, a dominant architecture under the proprietary control of one company. Subsequently, only a few rivals survive in the leader's shadow, while the leader expands its empire into neighboring markets.

The search industry is the next place in which a vast architectural empire could be built. Some portions of the emerging search space are now occupied by Google, others by Microsoft, most by nobody. But in the end, there will probably be room for just one architecture. Google's idyllic childhood must therefore give way to a contest much like those Microsoft has fought and won against companies ranging from IBM to Novell to Apple to Netscape. But for several reasons, this architecture war may end differently. First, many of the companies defeated by Microsoft over the past 20 years suffered as much from self-inflicted wounds as from Microsoft's predation. In Eric Schmidt, Google may have a CEO with the technological depth and painfully acquired experience essential to surviving Bill Gates. Second, Google's principal services run on a platform that Microsoft doesn't control -- the Web. Third, in some cases (like its fight against Linux, for example), Microsoft's software is now the high-cost incumbent.

Fourth, some analysts believe that Microsoft has lost its edge, that its size and age have bred complacency. Commenting on the collision between Google and Microsoft, Internet industry observer John Battelle recently wrote, "Microsoft is indeed a fearsome competitor, with extraordinary resources (and I don't mean the $50 billion in cash; I mean the ability to leverage Windows). But it's a middle-aged company that moves far more slowly than it did ten years ago, when it first recognized the Web threat." (For John Battelle's views on the future of publishing, see "Megaphone")

Fifth, Microsoft hasn't always won: Adobe and Intuit are doing just fine, MSN hasn't killed AOL or Yahoo, and the Xbox hasn't defeated the Japanese game industry (not yet, anyway). And finally, Microsoft's recent entry in the search wars -- the beta version of MSN's search tool -- is decidedly unimpressive. (Then again, Windows 1.0 was pretty bad, too.)

So Google's defeat is not a foregone conclusion. Indeed, if it does everything right, it could become an enormously powerful and profitable company, representing the most serious challenge Microsoft has faced since the Apple Macintosh. But if Microsoft gets serious about search -- and there is every reason to believe that it will -- Google will need brilliant strategy and flawless execution simply to survive.