Microsoft going after the internet

Microsoft have barely had a mention in this blog so far, which reflects where they are in the internet world.  I have just got back from a “Microsoft Digital Day” and they have a BIG DESIRE to make that change.  In the words of Steve Balmer, as they came from nowhere in spreadsheets to take Lotus 123 totally out of the market, so they will come from behind in search.  And they never give up (or so he claimed).  They are doing a similar thing to Sony with the Xbox. Overall I was impressed by the day they put together.  Their was a lot of good content on the state of the industry, they get a lot of the important ideas in the web2.0, in particular the need for authenticity and for the user to be respected and in control. Microsoft were commendably low on arrogance. 

Also impressive is the level of resource and brain power they have available to understand markets and figure out how to play.  E.g. they flew anthropologists into Japan to re-shape their offering to deal with the fact that pestering people with IM there is rude and characters are difficult to type.  They have also done a lot of research into social nets.  As an entrepreneur you have to back your inspiration to beat their perspiration.  I am always looking to understand the next moves of companies like Microsoft so I can figure out how industries are going to evolve and make smart investments.  For me the key points today were: 

  • Search – as I said above, they are going after this, and the first weapon in their inventory is innovation – I guess we all feel that even Google doesn’t exactly return great results, best we’ve ever had by some margin, but still not great, so there is space for MSFT to do something clever.  As Balmer pointed out at the moment there is the crazy situation that the more information (words) you give a search service, the worse the results are (too many false positives).  The second weapon is distribution – expect to see MSFT search syndication deals coming.  I fear for Yahoo! 

  • Microsoft Live – they have a Netvibes type product with some nice advertising features.  They have enabled detailed behavioural targeting and have also added a “why did I get this ad” link which clicks through to your profile and allows you to edit it.  Shades of the Bebo “tell us what adverts you want to see” idea here.  It will be interesting to see how much traction they get, I’m no expert but the underlying platform seemed a bit flat to me. 

  • Adcentre (Google Adwords copy) – the demographic targeting capability in Adcentre is resulting in high click through rates and the word from Nick Hynes of SearchWorks (UK market leader in search marketing) was that their product is excellent.  So if they get there with search they should be in a good place. 

Their determination to dominate this space may push them into making big acquisitions, which would be good news for everyone.  Their acquisition of in game advertising company Massive earlier this year for c$200m could be the first of many.