Google Envy? You Bet.

Phill Wainewright’s post on ZDNet about Microsoft going after Google’s ad business definately makes some interesting points.

I just happen to disagree with all of them.

According to Wainewright, while Microsoft seems to be chasing Google in the ad space, both companies have been ignoring better opportunities to go up against Amazon and Ebay which operate in much larger trading markets. He goes on to cite many sources predicting that the estimated 500 billion dollar online advertising market may begin to shrink as it matures - some putting it as low as 150 billion.

Well, let’s examine that first - so as internet traffic increases, ads become more targeted, and therefore ROI on these ads increases - the total market is going to decrease? Why?

That’s completely backwards thinking - if a corporation sees a larger ROI on its ad budget - they’ll be willing to spend more on advertising, not less - show me the evidence to refute that.

He’s also completely ignoring new markets like mobile, location-driven ads, TV on the web (and internet enabled TV) and those implications. These aren’t part of a 1:1 transfer from old media - these are totally new markets. Not to mention that the only explanation for the size of Google’s revenues without an equal decline in old media advertising is the the long tail - and it’s long enough to make the online ad space far larger than old media ever was.

That said, his other basic notion is sound, I guess - the online trading/retail market is huge. Sure, (corporate identity, focus, and strategy aside) there’s no reason Microsoft couldn’t launch a service to rival Ebay - anybody could. Google even flirted with the idea of taking on Amazon with Book Search for awhile (and wisely decided against it), but all of that is missing the point.

The reason MS is chasing Google like crazy in search and advertising, is because they have to. They realize that software-as-a-product is out and ad-supported software-as-a-service is in. They need to build an ad network to rival Google’s, before Google builds a free browser, office suite, and maybe even an OS to rival Windows.

Still think they’re wasting their time?

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