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