Redmond Back on Offense

The Wild West era of the Internet has been slowly winding down in recent years. The seminal event may have been the beat-down the music industry played on Napster. But the past several weeks have been even more interesting. It turns out that Murdoch and Microsoft are planning something quite innovative – that frankly represents a classic disruptive approach to the Internet. As pretty much everyone has learned, the plan is to limit access to Murdoch’s news content to searches conducted through Microsoft’s Bing search engine. We assume Microsoft will pay Murdoch an unspecified royalty for that content, or for the number of users accessing it, or employ another similar usage-based payment schedule. What does that mean?

Well, it potentially redefines the search engine market. It suggests that content-flavored brands of search engines are a business opportunity for existing and new search engine market entrants. It means that the hegemony of Google as a universal search engine is being challenged in a fundamental way. It changes the Internet user’s decision on search. That decision today is simply “Google it.”  With the balkanization of the Internet via content exclusivity deals, the user may be compelled to make a decision on which search engine is the preferred one, or to choose the right search engine for that particular search. What’s setting up is another era of innovation on the web. The “free for all” is getting reined in, and the web is about to become a real, broadly-based business platform. For media companies and search engine entrepreneurs, this is where the rubber meets the road.

If you think I’m going overboard, consider this: For the first time in memory Google has responded defensively to a Microsoft initiative by announcing this week that it would begin to offer newspapers the ability to limit the amount of their content available through Google – perhaps setting up a pay-for-access model where more thorough or more complete information from the newspaper site requires an online purchase or subscription. In my view, this will prove to be a lame band-aid from the get-go. The appeal of the Microsoft-Murdoch alliance is that the content will be fully available within Bing to users at no fee, which Microsoft will monetize via advertising revenue reinvested in the purchase of quality content from Murdoch. At least that is the way I understand the arrangement. If that is the case, Google has a compelling reason to re-think its model … now. Microsoft is sitting on a ton of cash and has the unique ability to buy market share in the search market through this approach. Much of the money that was made in the desktop market over the past 20 years is sitting at the ready to build Microsoft 2.0 – Microsoft, the disrupter. It’s enough to make you wax sentimental about a nerdy young Bill Gates and the incredible company he built while the IT titans dithered.

You have to love this stuff. We’re living in really interesting times that offer incredible new opportunities. For my peers on the content side of the business, the media side, it’s time to drop the Prozac prescription ,get busy aligning your content with the right search engine and go back to creating the kind of content that really draws interest. As for Google – we are going to find out just how agile this company really is now. The initial shot back at Microsoft was quick, but shallow and defensive in a telling way. Remember: the best defense is a good offense, and Redmond is on the offense again with this move.

P.S. – With the budget deficits looming at the state and federal level, tax-free Internet shopping may well be a casualty in the wake of the incredible surge in Internet buying taking place this holiday season. Happy holidays.

Thomas J. Wilson, President, Unisphere Media