Marketing Memos

Is desperation the right word to apply to Microsoft?

I avoid using terms of human psychology to describe an entire corporation, but desperation may be accurate. If a person or organization ignores basic principles, and instead chases odd and tangent opportunities, they do so in order to fool themselves, avoiding painful realities and hard work.

Which explains why Microsoft wants to bribe you to use their search engine.

Having failed to produce a competitive solution against Google, Microsoft wants to pay people to use their search engine. In a scheme slightly more complex than the U.S. tax code, Microsoft will reward customers when they buy a product located through LiveSearch. Retailers benefit because they only have to cough-up money to Microsoft when something is actually sold to a consumer (pay per acquisition) and not for the mere lead (pay per click). The system is an affiliate program for sellers.

To make all this work, retailers need to contract with Microsoft. To their credit, Microsoft lined up an impressive array of top-shelf retailers like eBay, Barnes & Noble.com, Overstock.com, Sears, and others.

And it will succeed as well as the iWon search engine (what, you aren’t using iWon?).

Microsoft ignores why people use search engines to begin with, which is to intelligently discover things. When they search for products, these products fall into two broad categories: commodity and specialty. Microsoft’s scheme doesn’t work for specialty products because the customer is often searching for special features from (typically) small vendors.

This leaves commodity products, which creates a problem with Microsoft’s rebate plan. An iPod is exactly the same regardless of it you buy it from Circuit City, Best Buy, and Jersey Frank’s “fell of the back of a truck” Emporium. When the product is identical between retailers, there are only a few significant differentiators, namely price and trust in the retailer. Take it from me, don’t trust Frank.

Which is why a lot of people skip product searches and run straight to Amazon.com, a company that has a solid customer service history and regularly has the best price available.

There have been several studies of search habits for consumers. People use search to:

1. Learn more about the originally desired product.
2. Discover competing products.
3. Find the best deal for the selected product.

Quality of results drives all three items. The quality of search results will most rapidly educate a consumer about the product. A few extra keywords will lead a consumer to competing products and a wealth of comparison sites and customer reviews. And adding the phrase “price compare” after the product name will lead a customer to the best price, typically through many price comparison sites like Price Grabber.

Microsoft is ignoring the fundamental need of the customer. Applying what is essentially a rewards program to search does not improve search, where Google is the master. Instead of adding value where users need and want said value, Microsoft is desperately chasing nothing.

LiveSearch, the next iWon.

Share this on social sites:

Hide Sites

Carly Fiorina’s time at Hewlett Packard and Louis Gerstner time at IBM proved that decentralized management of product lines in a large company is the only sane management strategy.

Lou took an ailing and heavily centralized IBM, and saved it from extinction by decentralizing its product categories. Carly took a healthy, decentralized HP and tried to kill it through heavy centralization.

Now AOL, the perennial poster child for developmentally disabled technology, has seen the light and is decentralizing (while some of their executives face jail time) .

AOL — which lost the ISP wars by failing to add value in broadband, and whose Time Warner appendage lost the portal wars by failing to provide appetizing content — is now decentralizing their content components to the point of debranding — jettisoning the AOL name. Given the tarnished AOL brand image, debranding their targeted web properties is essential lest the fractured pieces of the empire carry the lingering stench of failure.

AOL is creating new — and re-branding old — web properties that are largely devoid of any reference to the centralized AOL moniker. By making each web property (product) a separately branded entity, each site can create its own identity and appeal to highly targeted markets. This amplifies the appeal of each, making the properties stronger.

(This is a lesson Yahoo may take to heart – weakness in one business may create a weak brand image for all other components. Hence Yahoo’s reluctance to be acquired by Microsoft lest Yahoo products suffer even more brand debasement.)

Herein is where branding in large organizations is problematic. If one or more products/divisions are strong, there is the potential for that brand strength to carry into the other divisions. For example, HP’s strength in printers has led many people to buy their often unreliable laptops.

But the reverse is true. I used to manage large HP data centers, and had problems with their proprietary MPE operating system — for a while it crashed too frequently for mission-critical work. During that period I rushed to visit a relative in intensive care, and I was not happy to see her hooked-up to a number of HP medical monitoring devices. The weakened MPE brand created in me a negative prejudice for their medical products.

In web properties — where the subject matters presented on a web site may be audience specific (say teenage boys vs. geriatric women) — decentralized branding is essential. Contrary to common belief, segregating the brands does not eliminate potential synergies.

Take SourceForce.com (formerly VA Software) who has a number of technology industry web sites, on which they sell a ton of advertising. They reap significant synergies from different web properties that have at best sporadic cross traffic. The branding needs for their IT manager’s web site is very different than their Linux junkie web site.

Take two of AOLs newly branded properties — Asylum, a site for young men, and WalletPop, a site devoted to personal finance (a topic with which young men are largely unfamiliar). Pulling both of those under the torn AOL umbrella would do neither property any favors. But allow each to tailor the entire brand to their members is favorable … and thus smart.

The marketing issue here is multifaceted. First, you must decide if there is any real cross-over between the product areas. If so, a unified brand might do you some good. If there is no cross-over, then odds are the unified branding will not help in the slightest and may actually hurt.

Second, does the parent brand offer any specific advantage? HP has a strong overall technology brand, and it generally helps all of their product categories. AOL does not, and thus the AOL brand may hurt the individual web products.

Finally, top management has to have the strength to let go. Decentralizing and allowing subordinates make both strategic and tactical decisions about the decentralized products and brands takes guts. But the bigger and more diverse your company is, the more important decentralising will become.

Share this on social sites:

Hide Sites

One problem with Linux is that nobody really knows how big it is. Like any other virus, you have no idea exactly how many bodies it has infected.

Ignore the sales numbers from Novell and Red Hat. They tell only part of the story, namely the demand by larger institutions who must ensure success and have support. These sales figures do not even come close gauging unsupported replications of subscribed distributions, hosted Linux (which often is self maintained), departmental servers, all the OpenSuse and Fedora installs, and the occasional renegade Linux laptop.

And those are the small markets.

I’ve been watching the embedded space more and more. Silicon Strategies Marketing has clients in the mobile phone business, the Linux business, and now in the embedded Linux space. We have been mapping where embedded Linux is finding traction, and some of the issues within that market.

The question is “where is embedded Linux not being used?”

• A relative of mine who works on Defense Department and “spook” contracts notes that Linux is the favorite platform for all military and intelligence embedded applications. As he phrased it “We can’t afford to reboot a spy satellite every few hours.”
• Linux is used in routers from a lot of different manufactures. Networking is a core Linux strength and with an embedded web server, it is easy to create user friendly interfaces.  And now everything needs to be network savvy.
• Phones are just starting to use Linux, but the open nature of the devices and the ability to plop new native applications on them is a strong differentiators. This is part of the reason Google went with Linux for G-phones.

Devices need to be smarter than in the past. This means they must have logic. It is far better to use an embedded operating system that has broad support. That really means Linux or Windows.

Linux wins mainly for two reasons:

1. It is more stable. Google wouldn’t run their entire product on Linux if it weren’t.
2. It is modular and tiny.

It is that last point that is perhaps most important. Much has been made of Window’s lack of modularity. WE (Windows Embedded) is considered by many to be a poor hack of XP, where fragility was induced by wholesale ripping apart of the operating system. I cannot comment directly, but this is the growing reputation. Some acquaintances of mine at Circuit City’s HQ said a WE deployment on cash registers was abandoned due to endless problems, which supposedly were induced by removing pieces of XP and seeing interwoven parts of the OS die.

Linux is by design module from top to tail. Much of Linux’s success has come by its ability to upgrade (or roll-back) discreet parts of the total package without disrupting other parts. This also means you can remove big chunks of unneeded functionality without much work or fear, creating custom versions of the OS.

This is why Linux will own the embedded space. When whittled down, the Linux kernel can be nearly 10oKB small, which is tiny. Total RAM requirements can be less than 4 MB. This makes putting Linux into nearly any device possible. Add the ability to customize all upper-level packages to operate well within small-device space, and you have something with which Microsoft cannot compete and simultaneously chase dreams of acquiring/integrating Yahoo.

Here’s the kicker: more smart devices are hitting the market all the time. Your dashboard (which soon will have integrated GPS navigation DVD player, Bluetooth interfaces, and more) is embedded. Your cell phone is embedded. Your home network is built on embedded devices. Your oven might require embedded logic to keep you from burning dinner … again. MP3 players need embedded OSs.

The list is endless and growing. The question then is “How do I profit from this?” That’s my secret for now.

Share this on social sites:

Hide Sites

Has Microsoft lost its bearings?

This is more than idle speculation. Their recent failures, when placed side-by-side, showing an interesting pattern and a prescription for peril.

The two mistakes are Vista and Yahoo, and together they show a company that has forsaken its core missions and failing to defend their position, in part by chasing things other than what made them great (well … big) to begin with.

Microsoft’s mission was to make the end-user computing experience standard and bearable. It doesn’t matter if we are discussing MS-DOS, Windows, Office, or Internet Explorer. Long ago Microsoft rightly concluded that the user was important, that computing power was going personal, and that they should dominate the market.

They also were once a paranoid pack of profiteers and found ways of beating competition back to the point that various governments around the world intervened to prevent a desktop monopoly.  They have lost that edge.

In recent years, Microsoft has been chasing other dreams. MP3 players, web properties, cell phones, cash registers (POS terminals), advertising, game boxes, and more. It could be argued that each of these is an end-user computing point. But each is a detachment from where Microsoft’s buttered bread — the desktop.

Resources and attention diverted to other products caused a lack of attention to be paid to the desktop arena. While Microsoft was failing to deliver with Vista, it was also failing to see how Linux would become the de facto operating system for the next generation of users in developing countries. Microsoft created nothing new or  useful for the established market while forfeiting the emerging market.

They were too busy chasing Jerry.

Dismayed by their own lackluster performance in the portal and search arenas, Microsoft sought to buy position through buying Yahoo. Though there may be interesting, undisclosed synergies in the MicroHoo marriage, the mere transfer of assets added nothing to their market, that being the desktop.

Imagine for a moment that instead of birthing the bloated Vista, Microsoft had worked diligently on making XP more Internet aware — that their operating system knew how to make the most of a global network of computers without the need to muck-about in a web browser … that all web 2.0 technologies became an active part of the desktop experience, delivering intelligence to any/all desktop application — Microsoft’s or anyone else’s — providing that those applications ran on Windows.

This would be sticking to their vision, which is now walleyed.

It is too late to salvage Vista’s reputation, and it might well be worth working on XP+. It is too late to salvage the Yahoo deal (unless Jerry buckles) and might well be worth making the cellphone, Xbox, and PC collaborate. It might well be worth getting legal copies of XP onto every laptop flooding into Asia, Russia, and Latin America.

It might be better for Balmer to stick to his knitting.

Share this on social sites:

Hide Sites