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Microsoft and Google: Wielding Hard and Soft Power

Vendor Lock In

Steve Lohr of the NY Times posted an interesting article on the economics of Google and Microsoft. As usual the Network Effect was front and center in the analysis. Bill Gates gets his props as the foremost applied economist of the 20th Century. For those keeping score at home, that would be the last century. According to Lohr, Google lays claim to the 21st century. But it’s Lohr’s extension of the metaphors of hard and soft power that open some new areas for conversation.

Microsoft is associated with hard power combined with the network effect. The idea is that through proprietary formats and an operating system, Microsoft created a lock in that couldn’t be broken. You can check out any time, but you can never leave. Interestingly, Microsoft’s network effect was created without the Network. Dominance was enforced at the Enterprise and OEM level, most users never actually had to buy a Microsoft product.

Google is associated with soft power. Users are free to leave at any time, no proprietary formats are used, but ongoing usage creates a form of addiction. The network effect enables the large scale harvesting user gestures to create a learning machine that constantly adapts their algorithms. The result is the ongoing incremental improvement of the value of their software products delivered through the Network. Switching costs are low, but finding better value is difficult.

The internet has detached the user experience from Microsoft’s hard power, and Google has created a cash machine located firmly within the Network. Microsoft won the 20th century battle for hard power, but the 21st century’s battle is over soft power. The major players have to dominate without lock in, and Microsoft is starting to pivot from hard power to soft power. The Yahoo play was part of that strategy, Live Mesh and Silverlight also move Microsoft up the stack to the level of the Network. To win in the soft power arena, you’ve got to play in the open and you’ve got to deliver more value. The other thing Microsoft needs is a source and engine for harvesting user gestures as an input to improving the value of the product.

The hard power metaphor is useful at looking at the lock in players that still have some dominance. The obvious move would be to look at the entertainment industry, but that game is largely over. It’s the Telcos that really still play hard ball with hard power. The iPhone is starting to break that lock as it floats above the telephony system and lets the Network dominate. Think about the raw usage percentages of the iPhone, how much telephony, how much Network? The big lie that the Telcos need you to believe is that voice data is special. They need to distract you from the fact that the Network is getting more and more real time and delivers multiple media types for a lower cost.

But the Telcos are safe until the internet identity problem is solved. Today you’re identified by a phone number. Tomorrow it may be OpenID or CardSpace, but you won’t need that phone number anymore. When the hard power war is over in that space, a huge wave of innovation will be unleashed. And you might be surprised about who’s leading that charge…


When Search splinters, will large pools of the Web go dark?

Sun spots

The point at which one competitor in the market begins to achieve unassailable dominance is the moment when the seeds of change are sown. Search is about to change, you can feel it in the air.

You can measure the quality of Google’s search results by searching for something and reviewing the usefulness of the first two pages of results. For example, the first result for the query “search engine” on Google is a link to “Alta Vista.” Google also indicated that there are 118,000,000 links in the result set. I couldn’t find any simple way to find the last result, the link that Google ranked as the lowest in importance. But since users rarely look beyond the second page of search results, all the rest is a puppet show. The business of Search is the quality of the first two pages of search results. For that search, the only link of interest was to Wikipedia, and Google itself only showed up as its UK site on the second page.

In a sense, this is why Mahalo can “compete” with Google. Mahalo doesn’t need to index the whole web and come up with 118 million links. No one cares about 118 million links. There’s a small consideration set that actually satisfies the query.

And further, a page of links is just a page of pointers, it’s the content that answers the question. This is why Mahalo is now offering a higher content to link ratio; it can be an endpoint rather than a relay station. The attack surface revealed is the understanding what is truly human readable and what satisfies a search query.

“Search” could be disrupted by many approaches: we want a better starting point that links to the thing we’re looking for. Twitter or Delicious could be pointers towards that new thing — Search as a back and forth conversations within a tribe, and contiguous tribes; Search of a subset of pages users cared enough about to bookmark (user gestures). The citation algorithm was a huge step forward in ranking the value of pages based on a keyword search. Citation is no longer enough, as Ray Ozzie notes, users now commonly link, share, rank and tag.  Currently search is anonymous, connecting to a preference set or a user profile could yield more valuable results.

The rise of specialized search raises the specter that some day the entire web will no longer be spidered and indexed. The economics of search are tied to a subset of search queries related to potential commercial transactions. Commercial search subsidizes all other search activity. At some point, that linkage will be cut. As search splinters and begins to operate in verticals, much of the web could go dark.


Human-Computer Interface: The Simplicity of Asking and Telling

Simplicity in user interface combined with the power of the what is returned equals uncommon success.

Google User Interface

The Google interface allows complex queries with the most basic interaction.


Twitter User Interface

The Twitter interface allows publication into the social conversation stream with a user interaction that looks very similar.

One interaction is asking, the other is telling.