ON GOOGLE GETTING INTO ANALYTICS AND MICROSOFT ECHOES, PART TWO

CAN WE TALK?

My preceding post was an expanded version of a comment I'd posted on John Battelle's initial "Service to Application" post.  That elicited a detailed and thoughtful reply by Doug McClure a commenter there, which I thought should be highlighted in post itself.

As a result, I'm posting his comment here, followed by my response to his comment.  Hopefully the threaded conversation provides some backdrop to Part one of this subject of Google and Microsoft's approach to vertical application opportunities.

My initial comment to John's post:

"Good post, John...and very deja vu of the 1980s when emerging Microsoft developers (Lotus, Wordperfect, etc.) were saying that Microsoft didn't do Applications very well."

Response comment by Doug McClure:

"Michael: actually, Microsoft *is* the one company of the big 3 GYM portals that does applications pretty well. 

but in general, even Microsoft in the 80's & 90's didn't compete at the "vertical" level -- they built a very broad class of HORIZONTAL desktop productivity apps (Office) & NT Server Back Office apps (SQL Server, Exchange), then left most of the vertical apps (healthcare, insurance, financials, manufacturing, etc) for their partners to build out on top of the Windows/Office, & NT/BackOffice platforms.

in fact, during the 90's Microsoft built a fairly big & friendly ecosystem for many downstream channel partners by making their OS platforms great APPLICATION PLATFORMS for other folks to leverage. the small consulting company i started in '94 was a Microsoft Solution Provider in this mold, and we basically built our business by developing Internet, Intranet, & E-Commerce solutions on top of the Windows NT platform. many other larger ISVs created multi-million dollar businesses on the Microsoft desktop & server platforms.

only recently has Microsoft finally started buying / competing in some of the more mature channels (such as financials & ERP systems), but their standard game plan was always to work with [multiple] vertical market partners to develop various apps on top of Microsoft platforms.

what is interesting is that here in 2005, Google can effectively do this whole strategy all over again with Google Search (& perhaps GoogleBase) as a *hosted* platform for others to build on. this certainly appears to be the strategy for things like GoogleMaps and Gmail, although they have yet to announce any formal plan or strategy to address the various vertical markets. curious that they haven't clarified this better, because they certainly could step on the gas more in that space. if they wait too long, Microsoft will figure out & could again use their apps expertise to do a better partner platform strategy.

perhaps the best example of someone combining a Web 2.0 services offering with a great platform partner evangelism program these days is Yahoo, with their Yahoo! Developer program:
  http://developer.yahoo.net/

folks like Jeremy Zawodny, Jeffrey McManus, Russell Beattie & others @ Yahoo are doing a great job taking Microsoft's old traditional developer program evangelism playbook and re-energizing it for today's Web 2.0 Internet services. (Jeff Barr @ Amazon and my former colleagues at Ebay / PayPal also do a decent job on evangelizing more specific developer platforms for product catalog & payment solutions).

all 3 companies have opportunities, but i would say if they're smart they'll focus on building a hosted platform with a rich set of Web 2.0 services for other startups to complement, rather than competing with potential partners by trying to take on every vertical.

- dave mcclure
  http://www.SimplyHired.com/

ps - for more on vertical search & vertical applications, check out "Top 10 Rules for Vertical Revolutionaries" from the June 2005 SDForum conference on Vertical Search:
  http://500hats.typepad.com/files/top10rules_vertical.ppt"

My response to Doug's comment:

"Dave,
Great summary of the Microsoft strategy, now being executed by Google.

I totally agree that Microsoft didn't extinguish the various vertical markets. They only focused on the ones that they thought would have the broadest appeal (read market and money), and went after it.

A lot of verticals were safe and ok, as long as
1.  their markets were huge enough to attract microsoft's interest.
2.  or microsoft needed them as customers/evangelists/resellers for their broader product offerings.

To paraphrase Esther Dyson, vertical competition by the biggies doesn't destroy the growth in those markets, it just erodes it.

Thanks."

Vertical application markets can be very large and lucrative for several companies for several years.  The risk is ofcourse, that the company controlling the environment that vertical thrives in, decides to enter the market for financial and/or other reasons, then all bets are off.

As a result, vertical companies (and their investors, private or public), need to be consistently paranoid on this front.

The discussion continues.  Any comments?

Comments

[Dave McClure]

Michael -

nice summary. with your clarification above, i think we're now in violent agreement :)

[except that my name is *DAVE McClure*, not Doug -- Doug McClure was an actor who is now dead, famous for 'The Land That Time Forgot' and a few other semi-notable B-movies... not to be confused with Troy McClure, his alter-ego from the Simpsons. if you do confuse me with someone else, i'd prefer it be Troy, rather than Doug... thanks.]