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October 10, 2006

Ballmer comment on Google YouTube acquisition

Posted by David Hunter at 11:06 AM ET.

Yesterday’s Google acquisition of YouTube is being endlessly dissected today, but Steve Rosenbush has an interesting article at Business Week Online on the implications for Google competitors including Microsoft:

The software giant considers Google a top rival and a threat. Google already challenges Microsoft by creating free online software applications that compete with Microsoft’s spreadsheet software and other products. Microsoft’s MSN site competes with Google in search, advertising, video, and online media, and Microsoft reportedly had an interest in buying YouTube.

Microsoft CEO Steve Ballmer, meeting with BusinessWeek editors Oct. 9, said Google could emerge from the YouTube deal an even stronger rival. If Google can work out a good advertising model with YouTube, he said, it makes Google a stronger competitor to Microsoft. It will have a larger share of the growing online ad market, and can use the cash to create more products like the free online spreadsheet software, calendars, and word processors it already offers. But Ballmer says Microsoft has a long-term strategy, not to mention a history of coming from behind to overtake rivals such as Netscape, the early leader in the browser market. “We’re very long-term. We’ve got a stick-to-it-iveness, a tenaciousness that I would argue is unmatched,” he said.

All quite true and deep pockets certainly help with the persistence, but a lot of checks are being written on Microsoft’s stick-to-it-iveness account lately. I also think it’s interesting that Ballmer focuses on the Google’s free office software as if it were the ultimate objective of raking in the advertising bucks.

So what’s Microsoft to do about online video?

Microsoft has several options. It can continue to try to build MSN as a rival to popular sites such as YouTube. It could also borrow a play from Google and combine its technological prowess in a deal with a content company. While Microsoft’s employees can match Google in terms of technical brain power, it will be tough to find a company that can match YouTube’s cultural appeal and power on the Web. One possible target could be Yahoo!, which is suddenly looking like a laggard in the world of online media. But Yahoo retains a vast base of users and remains a powerful force on the Web.

There are smaller players in Internet video who could be takeover candidates, but they would not add much to Microsoft’s portfolio. Why not think big with a Yahoo acquisition which has advantages beyond just video?

Update: Speaking of stick-to-itiveness, Todd Bishop notes that coincidentally invitations went out yesterday to beta testers for MSN Soapbox, Microsoft’s nascent YouTube competitor.

Update Oct. 11: Business Week has the full transcript of the Ballmer interview here.



Filed under Acquisitions, Coopetition, Executives, Google, MSN, MSN Soapbox, MSN Video, Steve Ballmer, Yahoo, YouTube

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2 Responses to “Ballmer comment on Google YouTube acquisition”

  1. Google spiffs up free online office software offering -- Microsoft News Tracker Says:

    [...] The Zoho links are worth noting since there are other players in the online office game. Yesterday we saw that Steve Ballmer’s biggest concern about the Google YouTube acquisition seemed to be that it would help to subsidize free online office software and while Microsoft may trot out free online Microsoft Works to play too, either option cuts into the lucrative Microsoft Office revenue. Yes, there are functionality limitations in all the online offerings compared to full boat Microsoft Office, but as always the question is how much function the bulk of the users really need, plus the attraction of the online offerings’ trump card and possible danger point: the ease of sharing. Filed under Office, Coopetition, Google, Office Live, Microsoft, Microsoft Works, Zoho [...]

  2. Microsoft Weekly Miscellany, October 14, 2006 -- Microsoft News Tracker Says:

    [...] Steve Ballmer’s Business Week interview also produced the revelation that Microsoft is not losing money on each Zune sold although he would have liked it better if Apple had kept the price of the comparable iPod at $299.  This is directly contrary to previous Microsoft statements. [...]

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