I therefor appreciate the 'Social Media Frequently Asked Questions' series by Jeremiah Owyang. It answers in the first 2 episodes already 2 of the key questions I've to answer frequently.
Today I run into an interesting blog post on the subject: Microsoft's Colossal Strategic Mistake: "We Need to Be in Advertising". The part about the transition to cloud computing is the most interesting... this is something that is definitely playing in many other companies too.
Microsoft's Misconception: "Cloud Computing" = Software Supported By Advertising
The problem is the way Microsoft has always framed the "cloud computing" transition:
- paid desktop software licenses giving way to
- free web-based software supported by advertising.
This framing is wrong. It has also led Microsoft to believe it has no choice but to compete with Google in search and to buy Yahoo, aQuantive, et al, to beef up its advertising platform.
A better way of thinking about the "cloud computing" transition, in our opinion, is:
- paid desktop licenses giving way to
- paid web-based licenses
In this framework, today's stark differentiation between the "Corporate" and "Consumer" markets doesn't change. "Advertising," moreover, has nothing to do with it--except on the Consumer side, which is far less important a market to Microsoft than it is to Google and Yahoo.
Microsoft is not the only one making this mistake. I already got confronted with the same issue, people asking me about the required number of users necessary to make equal advertisement revenue as today on software licenses. It's understandable, because there is more attention for the growing online advertisement market and companies successfully exploiting this than there is attention for companies with a successful business model on pay cloud services.
Still the question doesn't make sense, because the current software license market is much larger than the online advertisement market. The online advertisement market is growing faster, but won't pass he market value for software licenses in the next decade..
We just need to be aware of this.... and let Microsoft make this mistake....
Many of the things I've been working on are related to community and social computing in a business environment. The success of Social networking in the consumer space is evident, but many, me inclusive, are still searching how this can be beneficial in business software.
Lets put it like this... Social Networking makes the web more social... and thus a better place... Business Software will transform to Business Services, preferably hosted in the social and better web...
... I will more regularly update on the topic..