Ray Ozzie’s vision is now Microsoft’s vision. That may be the most important message of the “leaked” Microsoft memos (I put “leaked” in quotes since it’s obvious, as John Battelle points out, that these documents were intended to be made public from the get-go). Bill Gates’s memo is just a cover note to Ozzie’s agenda-setting memo. It’s Ozzie’s letter, Gates writes, “which I feel sure we will look back on as being as critical as [my] Internet Tidal Wave memo was when it came out.” That’s the sound of a baton – a very heavy baton – being passed.
Gates’s desktop era is over. Ozzie’s internet era has begun. Up until now, Microsoft has looked at the internet through the desktop; now it’s looking at the desktop through the internet.
Ozzie’s memo is very good. If you want an introduction to what’s often called “Web 2.0,” you could do worse than start with this document – not least because it doesn’t use the term Web 2.0 at all. Three things leapt out at me:
First, Ozzie seems to truly believe that the advertising model may be as lucrative for the software business as the licensing model has been. “In some cases,” he writes, “it may be possible for one to obtain more revenue through the advertising model than through a traditional licensing model. Only in its earliest stages, no one yet knows the limits of what categories of hardware, software and services, in what markets, will ultimately be funded through this model. And no one yet knows how much of the world’s online advertising revenues should or will flow to large software and service providers, medium sized or tail providers, or even users themselves.” Shifting away from the licensing model represents an enormous risk for Microsoft – a risk that could, under a worst-case scenario, prove fatal. It’s a risk that Ozzie doesn’t seem to shy away from.
Second is Ozzie’s recognition that proprietary data formats, which have always been crucial to Microsoft’s success, may be turning into liabilities. He writes: “For all its tremendous innovation and its embracing of HTML and XML, Office is not yet the source of key web data formats – surely not to the level of PDF.” This, too, implies another fundamental break with Microsoft’s heritage.
Third, and related, Ozzie explicitly embraces a truly open platform: “We’ll design and license Windows and our services on terms that provide third parties with the same ability to benefit from the Windows platform that Microsoft’s services enjoy. Our services innovations will include tight integration with the Windows client via documented interfaces, so that competing services can plug into Windows in the same manner as Microsoft’s services.” Now, maybe this is just boilerplate to keep the lawyers happy. But I don’t think so. I think it’s another admission that the pillars of the old Microsoft are crumbling. They’ll hold for a bit longer, but in the meantime a new foundation needs to be poured.
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Nicholas:
I hope you’re right about Ozzie and his vision being in the ascendant. If so, then maybe the giant aircraft carrier that is Microsoft will be able to turn itself around and get back into battle — but I’m not holding my breath.
Mathew
Nick
PDF is a proprietary format and the way I read Ozzie, he is just unhappy than Microsoft doesn’t control it. That is why they are coming up with a PDF competitor.
Also I don’t read the third Ozzie point you quoted as an embrace of a truly open platform. It speaks of licenses and well documented interfaces, but no sign of truly open.
Maybe because I work for a (large) advertising and marketing company, I’m not dazzled by these ad-driven models. How many clicks would it take to provide the life-blood to a $300B company like Microsoft? Offering web services online for ads may work for low-margin, low-hanging fruit like consumer products — but anything that demands reliability and performance? Not for a long, long time.
There’s the strong whiff of Bubble 2.0 to all this. My company is only NOW rolling out Windows XP and Active Directory. Enterprise inertia will maintain the desktop culture for quite awhile.
I see these “leaked” memos as a sop to Wall Street, letting the analysts know that MS is aware of market conditions. But once Google’s stock price pops let’s see how much changes and how fast.
Mike: Yeah, I should probably have left off the “truly.” Damn adverbs.
bpr: I too have real doubts about how much can in the end be supported by the ad-driven model. Markets hate excess profits – and with everybody and his brother looking to climb aboard the ad train, things that look incredibly attractive now may be looking a lot uglier in pretty short order. Stay tuned. It should be fun to watch.
I’m not reading the memo as suggesting a move away for Microsoft from licensing towards advertising as you seem to do. It’s advertising together with Ozzie’s tenet # 2 (the effectiveness of a new delivery and adoption model) that strikes me as the main point:
“Limited trial use, ad-monetized or free reduced-function use, subscription-based use … are now entering the vocabulary of any developer building products that wish to successfully utilize the web as a channel.”
My reading of this is: software licensing and desktop software remains priority #1 for Microsoft, but all the different Web2.0 models can be used to drive adoption and to set standards by convincing as many people as possible in as short a time as possible to get hooked on Microsoft software.
The nice thing with the advertising model is that you don’t have to give away things for free to drive adoption (the Opera web browser model). So it’s a sort of marketing paying for itself.
Uh oh! I see the harbinger of doom that landed in ’99 on his way back! How many ‘business models’ were for internet companies that would develop a great site that other companies would ‘kill to advertise on’? How many of them are still here?
Being a professional in the Internet industry it worry’s me greatly that another boom and bust is on it’s way – if that happens it’ll sour people taste for web services, and the Internet will be set back another few years.
Can I call for a ‘realism check’ for entrepreneurs, SME’s and multi-nationals please? Very few businesses can rely SOLELY on advertising revenue, it’s generally a SUPPORTING mechanism.
And if this ad-crase takes off, we’ll see more and more ads, and then more and more users screening them out with ad-blockers – then what do these companies do?
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The Memo is …. “That’s the sound of a baton – a very heavy baton – being passed.” – Well said by Nicholas Carr in his blog post
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