Sterling believes that there are a couple of issues in play motivating the likes of Microsoft and Yahoo!, and much of it involves Google's ad sales success and its continuing innovation. He says these factors are forcing competitors to look to the Web for increased business opportunities. "There are two dynamics going on," says Sterling. "You've got a lot of change in the marketplace and big Internet brands are looking for opportunities to diversify and grab more consumer usage." (In other words, to provide new ways to increase ad inventory.) In addition, Sterling says, "you've also got a competitive dynamic that is unprecedented in American business. Product development cycles are so accelerated, they may well be ahead of consumers."
In fact, the Google Blog announced that Google introduced a mind-boggling 77 new products and services in 2005, or about 1.4 per week. Sterling points out that no other company has come close to this level of innovation. "No Fortune 500 company would announce a new product every single week, but it works for Google, and it's driving a frenzy where Microsoft is almost compelled by competitive logic to do these things or risk losing out. There is a lot of fear in not acting and not moving forward," he says.
In response, Microsoft introduced Windows Live in November and started a Web site, ideas.live.com, to introduce its own line of new online tools. "The premise behind Live is to give customers more ways to access information in a safe and secure way," says Karen Muskopf, an MSN product manager. O'Grady suggests that Microsoft's media-might works in mysterious ways, pointing to an October 28, 2005, Ray Ozzie memo stating that Microsoft has missed an opportunity to sell software as a service, a memo O'Grady believes was leaked to plant the idea of Microsoft selling software as a service into the minds of the general public.
O'Grady says that this shift in mindset to online services shows that Microsoft wants a piece of Google's ad model success, but he wonders what impact it will have on the desktop business. "Google's financial results show that the advertising model works and generates real money. Where Microsoft goes, I don't know. To me, technically speaking, they have the capability to give developers a very rich environment to build next-generation Web applications, but it may not be in their best interest, financially speaking, to do this. All these decades later, the primary source of their revenue is still Microsoft Windows and Office, both of which are at least somewhat threatened by the emergence of these types of Web-based applications." O'Grady says.
Make Money Online
Google's success with AdWords has garnered a great deal of attention, leading other companies to look for ways to move online and try to make money. This interest is far from limited to advertising-based approaches, of course. Glide Effortless, a consumer-oriented site from Transmedia that went live at the end of last year, provides services to store, publish, and share digital files. The company announced plans to add a business version and a mobile version scheduled to go live during the first quarter of this year (after this article went to press).
There are a number of viable models to monetize online applications, according to Transmedia CEO Donald Leka. "Google primarily uses an advertising model, but we will have a premium service with a subscription model. We also get sales commissions based on anything that gets sold in our services in an eBay-style model, and we will also use ads," Leka says. Microsoft plans a similar approach of trying various ways to make money, says Muskopf. "It definitely will be ad-funded, but we are looking for multiple ways to monetize. There are some paid services on Messenger such as buying emoticons and different features," Muskopf says.
Rich Internet Applications have the potential to change the way we think of computing, giving end users the ability to have virtually universal access to information and tools without being tethered to the desktop. These applications appeal to IT because they offer the promise of reduced operations costs by taking advantage of the Internet, while the big Internet brands believe they can offer online applications in exchange for displaying ads. As the Internet moves forward from its first generation fits and starts, and technology advances, these types of applications should become commonplace because users will increasingly demand the ability to access information from wherever they are.