When Amazon.com chief executive Jeff Bezos got word of a project at Google to scan and digitise product catalogs a decade ago, the seeds of a burgeoning rivalry were planted.
The news was a wake-up call to Bezos, an early investor in Google. He saw it as a warning that the web search engine could encroach upon his online retail empire, according to a former Amazon executive.
"He realised that scanning catalogs was interesting for Google, but the real win for Google would be to get all the books scanned and digitised" and then sell electronic editions, the former executive said.
Thus began a rivalry that will escalate in 2013 as the two companies' areas of rivalry grow, spanning online advertising and retail to mobile gadgets and cloud computing.
It could upend the last remaining areas of cooperation between the two companies. For instance, Amazon's decision to use a stripped down version of Google's Android system in its new Kindle Fire tablet, coupled with Google's ambitious plans for its Motorola mobile devices unit, will only add to tensions.
The confrontation marks the latest front in a tech industry war in which many combatants are crowding onto each others' turf. Lurking in the shadows for both Google and Amazon is Facebook with its own search and advertising ambitions.
"Amazon wants to be the one place where you buy everything. Google wants to be the one place where you find everything, of which buying things is a subset," said Chi-Hua Chien, a partner at venture capital firm Kleiner Perkins Caufield & Byers. "So when you marry those facts I think you're going to see a natural collision."
Both companies have a lot at stake. Google's market capitalisation of $US235 billion ($226 billion) is about double Amazon's, largely because Google makes massive net earnings, expected by analysts to be $US13.2 billion ($12.7 billion) this year, based on a huge 32 per cent net profit margin, according to Thomson Reuters I/B/E/S. By contrast, Amazon is seen reporting a small loss this year.
Amazon shareholders have been patient as the company has invested for growth but it will have to start producing strong earnings at some stage - more likely if it grows in higher margin areas such as advertising. Google's share price, on the other hand, is vulnerable to signs of slowing margin growth.
Not long after Bezos learned of Google's catalog plans, Amazon began scanning books and providing searchable digital excerpts. Its Kindle e-reader, launched a few years later, owes much of its inspiration to the catalog news, the executive said.
Now, Amazon is pushing its online ad efforts, threatening to siphon revenue and users from Google's main search website.
Amazon's fledgling ad business is still a fraction of Google's, with Robert W. Baird & Co. estimating Amazon is on track to generate about $US500 million ($482 million) in annual advertising revenue - tiny, given it recorded $US48 billion ($46 billion) of overall revenue in 2011. By contrast, 96 per cent of Google's $US38 billion ($36 billion) in 2011 sales came from advertising.
But Amazon's newly developed "DSP" technology, which taps into the company's vast store of consumer purchase history to help marketers target ads at specific groups of people on Amazon.com and on other websites, could change all that.
"From a client's perspective, the data that Amazon owns is actually better than what Google has," said Mark Grether, the chief operating officer of Xaxis, an audience buying company that works with major advertisers. "They know what you just bought, and they also know what you are right now trying to buy."
Amazon is discussing a partnership with Xaxis in which the company would help Amazon sell ads for the service, Grether noted.
Amazon did not respond to an email seeking a comment.
Amazon can bring in higher-margin revenue by selling advertising than it can from its retail operations. By showing ads for products that it may not actually sell on its own website, Amazon establishes itself as a starting point for consumers looking to buy something on the Web.
Research firm Forrester reported that 30 per cent of US online shoppers in the third quarter began researching their purchase on Amazon.com, compared with 13 percent who started on a search engine such as Google - a reversal from two years earlier when search engines were more popular starting points.
Amazon now sells ads that show up to the side of product search results on its website. There were 6.7 billion display ad impressions on Amazon.com in the third quarter, more than triple the number in the same period of 2011, according to comScore.
That early success is a "huge concern" for Google, whose business relies heavily on product searches and product search ads, said Macquarie Research analyst Ben Schachter.
Partly in response, Google recently revamped its product search service, Google Shopping, by charging retailers and other online sellers a fee to be listed in results.
Founded four years apart in the late 1990s, Bezos has long worried about Amazon's reliance on Google for traffic, according to people close to the company, while also being dubious about Google's high market valuation.
"He'd say: 'This is the first time in the history of the world where the map maker is worth more than the territory that it's mapping,'" recalled the former Amazon executive of Bezos' comments about Google's popular online mapping service.
Google's Android system is thriving but still has not cracked the nut of how to make money from mobile search ads and sales of digital goods like games, apps, music and video.
"If they can figure out mobile ads, that would truly be Google's second act," said Forrester analyst Sucharita Mulpuru.
But Amazon launched a broadside against Google in 2011 with the creation of its own version of Android for its Kindle Fire tablets that replaces key Google money-making services, such as a digital music and application storefront, with its own.
Not unlike Apple, "Amazon wants to control the experience on their devices," said Oren Etzioni, a University of Washington computer science professor. "That doesn't make Google happy."
Amazon started its cloud business more than six years ago, providing data storage, computing power and other from remote locations. Google only launched its cloud computing business this year, but the market is growing so quickly there is still room to grab share, Etzioni said.
"I would not write Google off," he added. "Amazon has the early lead but it's very early."
Still, mobile gadgets and cloud computing are currently tiny businesses compared with the multibillion-dollar opportunity presented by advertising and online commerce.
Google recently acquired BufferBox, a company with a network of lockers that shoppers can use to receive packages. It is also testing same-day delivery in San Francisco, hinting at growing interest in a larger role in online retail.
It is not talking about its full plans for retail, but some analysts think features such as same-day delivery or "pick-up" lockers, are valuable features it can use to enhance its existing online ad business. An ad for shoes, for example, might also make the shoes available for pick-up in a locker nearby, said Needham & Co analyst Kerry Rice.
If Google can own the search and the delivery, it will be able to provide the same experience as Amazon, with no inventory - "a higher margin, more efficient model," Chien said.
Earlier this year, Google launched a new certification service highlighting merchants that ship quickly and reliably and backing it with up to $US1000 in "purchase protection."
Google could create a database of products and send shoppers to a page that has a way to buy quickly through the company's payments service Google Wallet, Forrester's Mulpuru said.
Google could then send that transaction to the retailer who would ship the product to the consumer. That ability is critical, according to Schachter, who said if consumers lack the ability to purchase items through Google it will lag Amazon and eBay.
The online cloud-based collaboration services market is heating up. Established software vendors -- think Google, Microsoft and IBM, as well as new entrants to the space -- are building impressive client lists that include large enterprises across the vertical spectrum.
This isn't just vendors trying to one-up each other -- there's a real and growing market demand for these tools. A recent Forrester survey found that more than 56% of software decision-makers are using or would use software-as-a-service (SaaS) offerings to replace or complement their existing collaboration technology.
Why are online collaboration services so appealing? Because SaaS gives business leaders the following three advantages:
1. Tools that make the business more agile and responsive.As Gap and Netflix recently demonstrated, customers who are informed and empowered with easy-to-access information can force a company to quickly change a strategic decision. To respond effectively, businesses need tools that allow employees to share information among themselves as well as with partners and customers. Online collaboration tools provide a centralized workspace that allows all participants in a company's ecosystem -- suppliers, partners and customers -- to work and innovate collectively.
2. Features and functions that evolve as the business world changes. Business leaders often tell Forrester that their business' communication and collaboration technology is sorely outdated and that they can no longer afford to remain stuck in the world of three-to-five-year refresh cycles. Online services can solve this problem. In fact, 60% of business leaders who currently use SaaS tout faster delivery of features and new functions as its greatest benefit.
3. Technology that easily supports a mobile and remote workforce. With 66% of information workers in North America and Europe working remotely, working outside of a corporate office is the new norm. IT leaders must be prepared to equip these employees with tools that keep them connected and productive on PCs, smartphones, tablets and more.
It's no secret that online collaboration services vendors, large and small, seek to provide robust toolsets that address either a specific need or set of business scenarios. The bulk of these vendors, however, simply aren't seeking to deliver a comprehensive set of collaboration services such as email, document workspaces, real-time technologies and social tools. Rather, they are building a set of interconnected services which prominently feature file sharing as a way for businesses to interact with internal and external constituents. Forrester refers to this as a "cloud collaboration ecosystem."
Unsurprisingly, these offerings intrigue IT leaders while raising many questions that aren't simply about which vendor has the right feature set or collaboration scenarios -- like activity streams -- but are more fundamental questions about the viability of these offerings, such as:
1. Are these services enterprise-ready? Regardless of the size of the vendor, Forrester often hears from clients that they're not sure if a given offering is "ready for prime time." These IT leaders are unsure if online service offerings have sufficient support services and contractual terms for enterprise clients, infrastructure to scale to large deployments, and the policies and procedures that allow an enterprise to remain compliant.
2. How secure are these services? Many legal and security professionals working with IT pros are skeptical about security in the cloud, including data encryption, authentication models and identity or access controls. They also raise questions about the physical security of data centers and how vendors will address removing client data from retired servers.
3. Do these services integrate into my environment? Today, on-premises collaboration platforms are deeply intertwined with the computing infrastructure of many enterprises. Fundamental questions for Forrester clients include: Are the services customizable, integrated with legacy applications, localized into multiple languages for a multilingual workforce and accessible on the various PCs and mobile devices that workers use?
4. Are these vendors even committed to online services? Before deciding to make a service a part of their collaboration strategy, many leaders want to know if the vendor (or its offerings) will be around for the long haul. When it comes to large, established vendors, IT leaders also want to know if the vendor is serious about its online service -- or simply treating it as an "experimental" or "one-off" project.
Forrester has been discussing the immediate need for business leaders to get in front of their mobile, always addressable workforce for a while now. What we haven't stressed as much is the need to build collaborative frameworks to include the rest of a business' ecosystem in the conversation: channel partners, suppliers and customers. That means IT leaders must find ways to get information to and allow interactions between groups of people who are spending time beyond the corporate firewall. That's a great argument for the cloud, right?
Our survey data indicates many agree: The majority of decision-makers at organizations deploying collaboration software indicate they either currently or plan to use collaboration SaaS within the next two years. So, here's the pressure point on vendors that will be critical to the success or failure of online collaboration software: From a fundamental standpoint -- security, compliance, customization and integration -- are these vendors ready to handle this swelling demand?
Storage price slashing continues as Microsoft meets cuts Google and Amazon traded last week. There’s method in this madness — lots of businesses have yet to test the cloud, and cheap storage is a way to attract those newbies. And once they’re hooked, watch out!
Okay, the analogy is imperfect, but, it is becoming clear that storage is the easiest way to get new customers into a given cloud. And, once they’re there, Amazon, Google, Microsoft can woo them with fancier (and pricier) higher-end services. The thinking is: Get them started with cheap storage, move them to compute and right on up the stack to data warehousing and analysis. Then you really have them hooked.
Microsoft is the latest cloud vendor to cut storage prices — less than a week after Amazon andGoogle cut prices three times between them — those cuts conveniently timed for the AWS: Reinventshow. Microsoft’s move, which takes effect December 12, cuts Azure storage prices by as much as 28 percent depending on volume, according to a blog post by Steve Martin, general manager of Windows Azure. The company last cut its storage prices 12 percent in March. With this latest cut, all three players are at the $0.095 mark for the first 1TB per month with some options and variability.
The new Microsoft price list:
And here’s the latest from Google, as of November 29. (DRA is a new Durable Reduced Availability storage option that lets users trade some data availability for lower price. Google positions it against Amazon’s reduced redundancy storage.)
And last but certainly not least, here’s the Amazon Web Services’ S3 status quo (also as of November 29.):
Crack analogy is wack
Tier 1 Research analyst Carl Brooks throws a bit of wet blanket on the crack analogy (thanks a lot, Carl) saying that all this price posturing is more about marketing than actual market forces — that few enterprises will be swayed by these incremental changes. But even if it’s PR, news of the cuts — which get wide coverage — might get some companies to look at cloud storage as an option — especially for disaster recovery and backup.
On the other hand, Andres Rodriguez, CEO of Nasuni, a storage management service provider, loves all this action because he thinks it will boost cloud storage adoption.
“Cloud storage may be a commodity component but it is by far the stickiest part of the full cloud stack. Once you get companies like Dropbox to put their storage with you, they will be using lots of compute and bandwidth and even applications (analytics, etc) to go with it. Amazon, Microsoft and Google are using storage as their loss leader to get the rest of the value stack,” he said via email.
Netting it out
Nobody’s going to pick up and move their digital stuff from one cloud to another at every price cut, but new customers looking for storage in the sky might be intrigued by these offers. And once they check into a given cloud, these vendors all bet it’ll be hard to quit.
Tier 1′s Brooks thinks we’re not even close to the bottom when it comes to cloud storage pricing, so stay tuned for more action from the big vendors.
It has been a very busy season for the tablet business. In the summer of 2012, Google launched the Google Nexus 7 device.
In September, Amazon launched three new tablets, including a high end model with LTE, and two e-readers, moving Amazon into the Apple iPad end of the market (larger screen) for the first time.
In October, Apple is expected to launch its first “seven-inch” device, while Google is also expected to launch a 3G version of the Nexus 7 in October as well.
It’s been a cool summer in Redmond, and we’ve been working hard preparing some pleasant surprises for the next quarterly release of Office 365, developing features to improve enterprise productivity. Looking back, I recall Google’s Senior...(read more)...
As part of the Real World Microsoft Online Services series, we spoke to Christian Kuttler, Director of Information and Communication Technology at Center Parcs, about replacing Google Apps with the Microsoft Business Productivity Online Standard Suite. Here's what he had to say:
Q: Tell us about the Center Parcs business model.
Kuttler: Center Parcs popularized the concept of a "short break" vacation experience. Each of our resorts provides an all-in-one getaway, combining luxury lodging with unique indoor and outdoor activities—set in the midst of beautiful forest acreage. From their rustic private cottages nestled in the woods, guests can explore nearby hiking trails and lakes, or stroll to first-class spas, restaurants, and shopping venues.
Q: What were the biggest challenges Center Parcs faced with Google Apps?
Kuttler: We welcome 36,000 guests each week to our resorts, so we need to provide employees with effective communication and collaboration tools. We initiated a proof-of-concept deployment of Google Apps to 250 of our employees. We found that a significant number of employees spent considerable time learning the Google Apps interface or compensating for deficiencies in the tools, which meant they had less time to create documents and manage projects.
Google Apps worked well for small teams creating documents that required simple formatting. But when our finance group needed to collaborate on a complex budget document, for example, Google Spreadsheets lacked the sophistication we needed, including all of the formatting shortcuts and analytics capabilities that we were accustomed to in Microsoft Office Excel. With Google Spreadsheets, the more complex the document, the more unstable it became.
Q: Why did you switch from Google Apps to Microsoft Online Services?
Kuttler: Given our direct experience in experimenting with it for more than a year, it was clear that Google Apps is simply not yet ready to be used as an enterprise solution. It lived up to the promise of discounted costs in the beginning, but it didn't deliver on long-term value; in fact, the cost in terms of lost productivity consumed any up-front savings we achieved by moving to Google Apps. After taking a closer look at the hosted solution from Microsoft, we recognized that it offered true value and gave us a stable, reliable platform for growth.
Q: What kinds of benefits have you seen since Center Parcs started using Microsoft Online Services?
Kuttler: When we used Google Apps, I had employees standing in my office saying that they'd given up, that they could not use the applications to complete certain tasks. Now that we've moved to Microsoft Online Services, I don't have that problem anymore. Through our use of the Microsoft Business Productivity Online Standard Suite, we've increased employee productivity by a minimum of 20 percent; we've achieved this by giving employees access to high-performance, on-demand tools so that they can work together to meet the needs of our guests.
You can read the full story online and we invite you to join our upcoming TechRepublic Webinar on October 14th to hear from other customer's like Center Parcs who found Microsoft a better fit for their business than Google Apps.
For more success stories like Christian Kuttler's at Center Parcs, read other real-world testimonials on our whymicrosoft website.
Over the last several weeks, I've been proud to highlight why customers of all sizes, geographies and industries have picked Microsoft over Google Apps. Some have left Google after realizing 'it's more pony than horse', others gave it a test drive and found out quickly it was 'more showroom than track ready'. (Sorry, I couldn't resist) . Despite the hype machines running overtime at the GooglePlex in Mountain View, customers are voting with their feet to pick Microsoft.
This is why I am excited to highlight two more customers who have decided to share their reasons why Microsoft has become their trusted software vendor. As always, if you want more customer examples or content that outlines how our solutions differ to Google, you can always visit this website.
Leaving Google. Why Even Free Google Apps Wasn't Worth It
Jared Morgan from Bradshaw and Weil in Paducah, KY has written a guest post over on the MS Online blog about their experience leaving Google Apps Standard Edition for MS Online. Standard edition is a free offering from Google that is limited to 50 users. They see the tremendous value in BPOS to now pay for the suite of services. Jared shares why as a small business the cloud offers a cost effective way to remain agile while gaining access to technology previously out of reach due to cost and on site company support. My favorite part about Jared's post is his singling out of SharePoint Online as a key benefit of the BPOS Suite, "What I thought I was getting as a simple throw-in with BPOS, SharePoint Online has turned out to be as valuable as Exchange Online, if not more so."
SharePoint is the fastest growing product in the history of Microsoft. It's received numerous accolades from industry analysts including top placement in all related Gartner Magic Quadrants. Imagine being a small business with under 50 employees and having access to such a product via the cloud? It's no surprise why SharePoint is a winner for Bradshaw and Weil and 'Why Microsoft' is an affirmative statement and not question at all.
Future Proofing Your Business - Cloud on Your Terms with Microsoft
On the Exchange Blog, David Aird, Head of IT for MITIE, a strategic outsourcing and asset management company, shares his insights into why they selected Exchange over Google Apps. He explains how Microsoft provides flexibility they need and how Google is an ultimatum full of hidden costs. We are the only company in the industry that allows you to run your solutions on prem, in the cloud, hosted with a partner or a hybrid. That means that companies like Bradshaw and Weil who are 'All In' can embrace the cloud immediately and for companies like MITIE, they can still run the systems themselves but by being on Microsoft, they have a product that is 'future proofed' because it allows them an 'on ramp' to go to the cloud on their terms.
"We looked at Google. They were competitively priced but with only three years in the productivity space, they lacked maturity and seemed like a risky investment… Ultimately, we choose Exchange 2007 for its manageability, reliability and enterprise class support. Despite all the recent focus on the cloud, we're not quite ready to move our data outside of our immediate control. When we do, we'll do it on our terms rather than being forced into a fit that's not right for our business." (see post for full transcript. I pulled from two paragraphs)
Stay tuned for more customer stories in the coming weeks as we continue to highlight 'Why Microsoft'.