Paul Allen has a great post (via Scoble) about what Google can do (is doing) to attack Microsoft. I've been meaning to write about this since I think (as I said in a previous post) that Google is spearheading what is one of the 2 biggest threats MS faces.
Google really does have the potential to pull off something big. And their upcoming desktop search is a big step in that direction. Paul's suggestion that MS buy x1 and give it away makes a lot of sense. What else can MS do...? What I worry about the most is that Longhorn is 2 years away. Thats a hell of a long time, especially given the raft of innovation in this area we are seeing lately.
(Now, when I say "worry" it is because I am going to soon be working for MS. I like MS. But in no way do I dislike or have anything against Google. I think they are a great company. And this looming battle is actually quite exciting and should result in great things for consumers.)
What is Google's weakness? Well, for one, people may find another search engine. An article in the WSJ (subscription required) talks about a study showing that Google's results are marginally better, if at all. Its very feasible that someone will come out with significantly better search soon - potentially taking away traffic and therefore ad revenue (which would really squeeze them). But Google has such a brand built up, and so much buzz around it that this may not happen for a while, even if someone starts delivering better results. Plus, the fact that they are already profitable and are about to raise billions in their IPO means they will be able to hand around for a long long time (unlike Netscape). Finally, a successful launch of GMail and mass adoption of other services (Orkut, Froogle, etc.) will lessen their dependence on traffic from search.
Lots to think about...
One final note. If you believe that Google will be truly successful and will, as Paul says, "surpass Microsoft's market cap in 10 to 15 years" then its obviously a good buy-and-hold investment at the IPO price. I would bet however, that a better price will be available 6 to 18 months after the IPO. Why? Well, the fact that its going to be an auction should, in theory, mean a reasonably stable initial price (no huge first day pop). Sooner or later people will start to get nervous about some startup offering better search, or MSN coming out with their search, or Longhorn coming out, or another bubble developing, or something. The price will go down. That would be the time to buy. IF you think its going to be the next MS. But thats a big if ...
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