Your argument misses the fact that the sexiest social networks and web properties don't make any money--how much has Google spent and lost on YouTube over the years? So why shouldn't Microsoft sit on the sidelines?

Investing in Opalis and beefing up System Center isn't going to win over the cool kids in Silicon Valley, but that's an impossible mission for MSFT and one that, as a shareholder, I'm glad the company isn't too interested in.

The problem is...

Microsoft makes its money in old-fashioned software - Windows and Office. They are almost as terrified of apps "as a service" on the web, as they are terrified of the public finding out about Ubuntu Linux. They view it as the death of their industry and the cash cow that has served them so well.

Developing for the web therefore seems to go against everything they stand for - like working for the enemy almost....

Google uses it's advertising dollars to constantly spend on companies and services that lose money.

Sooner or later the gravy train of "look at all the cool, hip things we give away for free so please continue to use our core platform" will go away and the shareholders will all run for the hills.

Microsoft is a company that has a history of making money - something that shareholders find oddly attractive.

Buying a company such as Opalis Software that according to online articles had a revenue stream (although no indication of whether it was profitable) to bolster a Microsoft product that also makes money seems like a decent strategy despite the lack of an assault on Google as part of the play.

The thought of Yelp ever selling out to Microsoft is equivalent to a democratic country selling out to a fascist country. Blood money.

Great and fun post Clint, thanks!

Microsoft is dead, long live Google! Or is it?

It's two opposed business models (client vs server), although both want to rule the world. Microsoft once did, Google does / will

I'm interested in how Google can stay Google while already a giant's size. Is it culture? Organisation? Bloodthirst for world domination?

And the most important: does it exist because of Microsoft, or can it survive without?

The underlying problem here is that Microsoft at its core is a company that believes that the things it creates (and forces upon the marketplace--that's what's in their DNA) are superior to marketplace and consumer-produced content. This arrogance sits in the CEO's office (current and former) and lies at the heart of the company's thinking, and strategic actions.
Google at its core believes and operates to deliver access to content and applications, etc. produced by the global community of internet users (what more is search but a window on others' content?).
This is why Google can be nimble and smart in a world where content created by the masses (as well as professional and not-so-professional news organizations) has much more power than a corporate-generated notion of what people want.

So some of us have been around long enough to see the big picture. Where was Google when Windows 95 created the onramp for the consumer Internet (first free TCP/IP stack)? Then Internet Explorer, love it or leave it, conquered the browser market for more than a decade. Oh right, we are all supposed to switch to Chrome this week?!? Does Google have a leading consumer device like the XBOX which has by far the best web services in the gaming world? And how about web servers? Does Google have something like IIS that runs close to half of all web sites on the planet? And Hotmail combined with Exchange lead the industry on emails sent? As for company purchases, Microsoft bought FAST last year as the linchpin for corporate search inside SharePoint, the best and most used corporate social networking tool. How could you possibly equate web leadership to companies that dabble in social networking? That is such a small and frivolous portion of what the web does. When Google can produce products witht he quality of Windows 2008 R2, Windows 7, Office 2010, SharePoint, Exchange, Active Directory, SQL Server, Visual Studio, .NET, Systems Center, then we can talk...

Most of Bill's points overlook the fact that we've been force-fed these products by Microsoft. Microsoft has come to dominance not by building a better mousetrap, but by using every possible "technique" to destroy any competition so that they are viewed by many as the only choice. So many MS products I see in people's homes are a mess. They only work correctly if you know how to run defraggers, registry cleaners, troubleshoot blue screens, delete temp files, format HD's to routinely re-install the OS, etc. Surely these are beyond the scope of the average user. It's no wonder people gravitate towards products that just work with little or no intervention. MS reminds me of GM in the 60's- they didn't start building a decent product until the likes of Toyota (et al) showed up. When people try Google web-based offerings or a Mac or Linux, they realize this is what MS should have been doing all along. I don't think MS gets it. Perfect example- how could the largest software manufacturer in the world, with almost unlimited resources (talent and money!!) actually release Vista as their flagship product?? It still continues to be junk. It's no wonder so much of the computing done in the world is such a mess. More people are jumping off the MS ship than they realize. Google just gets it.

Internet access is becoming a commodity item (heck we have 3-4 neighbors who blast their wireless access points on full open and do so on purpose...), and this is a generally a good thing. Software, like information and news in the 90's is becoming a valueless commodity (e.g. free) and to survive you must provide value-added somewhere now. Some of this winds of change are blowing from free software, cheaper and cheaper hardware, OLPC (and mesh networking, which big cable I'm sure is dreading...), ham hobbyists, and so forth. This paradigm shift is occurring rapidly. Google get's that and MS's does not. Apple I think sense's the change but is fighting to preserve the status quo, like virtual all Big Corps. (except Google). Google is truly different in that it has become a Big Corp., while still preserving that culture inside of a Small Startup and if one reviews the history of innovation we can see that perhaps 80-85% (my guesstimate) of all major technological leaps forward where made by Small Businesses (either startups, or once-small now Big Corps.)

Bill, Vista. No wait, Bill, Vista.

Bill you have your head in the sand. Microsoft makes old people products- my grandma boots her computer once a month and then calls my nephew because it just sits there and won't work. What I hear the most is- I need to buy a new computer because mine is now so slow. It used to work fine (typical XP user). I've heard about the culture at M$- Ballmer swearing at everyone to get results, pressure to be creative! He really doesn't get it. Predictions are that he will be gone in 2010. He really is the face of M$. The average user who doesn't want to do anything but have the OS work is screwed using a M$ product. Got grandma on Linux and she couldn't be happier. Oh my gosh it just works!! M$ never thought of that!! So many bright people; too bad mgmt won't give them the freedom to come up with something decent. Ding dong the wicked witch is dead!

The pace of Google's move into Microsoft's turf has taken flight. Microsoft will wake up some day (soon) to realize that Google has stolen it's Office and Windows operating system business. The days of expensive bloated software is over and internet everywhere will be the final nail.

The author's points are well taken. But the real issue is simply management scope of control - the ratio of managers to individual contributors.

Microsoft - 1:4
Google - 1:20

Microsoft aspires to be a company of managers. Google aspires to be a company of engineers. Engineers are empowered at Google. Engineers are managed at Microsoft.

Profits come from intellectual property. IP comes from creativity. Creativity comes from empowered engineers.

Microsoft knows its bureaucracy will never produce innovation, so it acquires it instead.

Google is so ignorant, versus Bing, that they continue to give UK listings for ALL requests about IRELAND!! IRELAND IS NOT PART OF THE UK!! Even when you go to Google.ie, they STILL list UK findings...duh...Microsoft beats Google EVERY TIME, which is why I no longer use Google..not worth the frustration of people who are totally ignorant about basic geography!!