Google is Learning From Microsoft’s Mistakes (Premium)

While most people think of Google as the gateway to the Internet, I view the firm in a different light.

That is, I see Google as nothing less than the next Microsoft. And while Microsoft was hellbent on not becoming the next IBM, Google, in turn, is very happy to become the next Microsoft. With one difference: It is righting the mistakes that initiated Microsoft’s fall from the top.

And let’s be clear: Google is already much, much bigger than Microsoft. No, not from a financial perspective, although that is only a matter of time. What I mean is that Google is bigger than Microsoft: A bigger part of our collective lives.

It wasn’t that long ago that the notion of “a computer on every desk” was seen as visionary, and Microsoft’s Bill Gates rode that mantra to great success in the 1990s. But Microsoft and Gates can now more correctly be seen as far too conservative. And today, the notion of computers on desks is as antiquated as rotary phones or cassette tape players.

Google’s vision is far more vast, far more all-encompassing. And while I have no particular interest in the search engine and advertising juggernaut that drives all of Google’s other efforts, I am very much interested in what the search giant does with all that money.

Which is this: Create a growing family of online services aimed at both businesses and consumers, backed by high-quality mobile and web apps that run on all devices. When Microsoft ruled the world, it focused solely on its dominant role in the PC market. As Google has risen to displace Microsoft, it is focusing on a much bigger market: The entire world.

Microsoft has tried to follow Google by releasing and updating its own online services and mobile apps. And it still sees some ongoing success with businesses, in particular, though it’s unclear today whether that is mostly inertia or deserved.

But Google has moved more aggressively. And as interested as I am in the company’s unique consumer wares—and there are tons of it—I am even more focused on how it has pushed further and further into Microsoft’s core business markets. Google is like a cancer, and I mean that dispassionately. It simply cannot—will not—be stopped. It is what Microsoft was.

Remember that Microsoft?

Before I started my current career in the mid-1990s, I had determined that I needed to get out of my dead-end job and embrace my enthusiasm for technology. At that time, it was clear that this meant I would be a software developer, and given the times, that meant I should go back to school for formal training for this future.

The only question I faced was simple and easily answered: Would I embrace the PC, which I disdained for its lackluster MS-DOS and Windows 3.x environments of the day, or would I turn to the Mac, a failing platform for which I had far more respect?

I made the pragmatic choice, the right choice, and I embraced the PC. And that meant figuring out Windows and, worse, Microsoft.

But it was good timing: In my first year back at school, my wife worked at a computer training firm and she received early access to Word 6.0 and other Office applications then being tested. I was blown away: This, I thought, was superior to any office productivity software I’d used on any platform. Maybe Microsoft was getting it together.

Then my writing career began and diverted me from my presumed future as a developer. And I was introduced to Windows 4.0, which would be renamed to Windows 95, the first version of Windows I’d seen that looked great and seemed technologically competent. (That last bit was incorrect, but NT 4 soon followed and all was well in my world.)

Anyway, the point of all this is easily summarized: In the mid-1990s, anyone focused on technology, in particular personal technology, would be focused on Microsoft. They were the be-all and end-all of this market. And to be fair to the software giant, they deserved the attention: Through a shrewd combination of good products and an aggressive, competitive spirit, Microsoft ruled the industry.

But they were, perhaps, were too aggressive. Microsoft’s competitive spirit, as I just called it, got the firm into trouble with antitrust regulators, first in the United States with the Federal Trade Commission. And then, later, with the U.S. Department of Justice, the European Union’s European Commission, and elsewhere, like Russia and South Korea.

Here’s the thing. While most remember Microsoft’s losing battles with the DOJ and EU—long court appearances, massive fines, product bundling allegations, browser ballot screens, Windows “N” editions, and a lost decade among them—these things need never have happened. Few remember this, but Microsoft actually dodged an antitrust bullet fired first by the FTC, which deadlocked by a 2-2 vote in 1993 over whether to charge the software giant with abusing its monopoly power.

But the DOJ wouldn’t let the case die. So in August 1993, it opened its own investigation and, in mid-1994, just one year before the release of Windows 95, Microsoft consented to a settlement.

These were the terms: It would no longer bundle other products with Windows in order to illegally give them an advantage over the competition. But it retained the right to improve Windows with new features and functionality.

But then Microsoft bundled the Internet Explorer web browser in Windows to defeat Netscape and its web browser in what was seen (correctly) as the next big personal computing market, the web. Microsoft argued that IE was a feature, not a product. But the DOJ, and then the EC and other regulatory bodies, argued, correctly, that this was product bundling. Microsoft lost a decade fighting in court, while Google came to power and Apple, once broken and nearly bankrupt, surged anew.

Game, set, match.

Put more simply, what Microsoft did is what we saw of Apple during Steve Jobs’ last years, too: It behaved like a scrappy upstart at a time in which it was, in fact, dominant. Steve Jobs lost small—his illegal moves into ebooks were quickly shot down by regulators around the world—but Microsoft lost big. In fact, it lost big multiple times. And as noted, it lost a decade of time while doing so.

Other dominant firms, like Intel, Google, and Apple, have Microsoft’s experience to work off of. So I’ve always been very interested to see how they react to charges of product bundling or monopoly abuse. And for the most part, they appear to have learned the lessons that Microsoft stubbornly ignored.

Intel, for example, settled with the EU for $1.25 billion. And the climate has changed so much since then that it’s actually trying to have that and other fines overturned now. And Apple settled with the EU over those ebook charges (though it tried to fight in the US and lost).

And then there’s Google.

Google, like Microsoft in the early 2000s, faces multiple legal challenges at the same time. The major ones, however, are all in Europe, and the EC under Margrethe Vestager has proven to be particularly interested in reigning in Google and other US-based tech giants. So I’ve been watching. What will Google do? Will it pull a Microsoft and go into a self-inflicted death spiral? Or will it behave in its own self-interest? Do the right thing?

The early indications are that Google has learned Microsoft’s lessons.

In the first of three major antitrust cases with the EU, centered on online shopping, Google has agreed to settle the case and meet the EU’s demands. It will no longer artificially promote its own services over third-party party services in search results, which is the modern, cloud-based version of product bundling.

This is important because Google’s reach is basically the entire planet.

The PC market is either 1 to 1.5 billion users big, depending on which Microsoft number you choose to believe. But it’s shrinking. By comparison, there are well over 5 billion users on the web, and that market is growing. Google’s potential for abuse is dramatically bigger than anything Microsoft could have done 15 years ago.

Google’s next big fight, of course, is over Android. And while I believe that the search giant has a great argument to make there, I also see that giving away Android doesn’t shield it from complaints that it is flooding the market to harm competitors. So that one will be interesting too.

But we don’t need to wait for Ms. Vestager’s next legal slap down to see how Google will behave in the face of increased scrutiny. Because today, with virtually no legal prompting at all, Google announced that it will respond to complaints by publishers to stop forcing them to show paid articles for free when they are found in Google search. That is, Google will stop abusing its Internet gatekeeper status and let publishers actually charge for their work when they want to.

“We’ve been talking to news publishers about how to support their subscription businesses,” the Google announcement notes. “Our goal is to make subscriptions work seamlessly everywhere, for everyone.”

Actually, Google’s goal is to keep its business running and not get caught up in court. And that, right there, is the difference between Google today and Microsoft in the late 1990s and early 2000s: It is willing to bend and stop acting like an aggressive newcomer in markets in which it is, in fact, dominant. It’s working with competitors, governments, and regulators.

That doesn’t mean that Google won’t bluster or put up a fight when it feels it needs to. But when I look at Google, I see the new Microsoft. And, quite frankly, it is a better-run business than the old Microsoft.