Why Google is worth more than Microsoft

Microsoft is now chasing a company that embodies the post-PC world but the software giant started losing its mojo well before Google was born.

Google has now joined Apple in being more valuable than Microsoft and it's hard to miss the symbolism of this. However, the reality is that Microsoft’s share price has been stuck in a rut for well over a decade, with the stock slowly losing value over the past 12 years. It was $US25 in December 2001 and is $US29 today. In the same time, Google started at $US102 in 2004 and is $US756 today. To a certain extent, Microsoft stopped being significant even before Google got started.

The PC had already hit the end of its evolutionary development, as had its operating system. The move to the mobile phone had not yet gathered momentum, due in large part to the botched versions of Windows that Microsoft tried to shoehorn into the smartphone precursor. It is not even that Microsoft didn’t understand the importance of the internet or web-based applications – it did. As far back as 2000, Microsoft was building development tools and infrastructure to support this new form of computing. Microsoft even tried to integrate its browser into the desktop. This proved unpopular and was subsequently dropped.

At the same time, Google tried to launch the idea of a browser-based operating system that would drive netbooks. In the end, Google Chrome was as unsuccessful as Microsoft’s Active Desktop.

But ultimately Google has done what Microsoft could not. It has dominated the heart of the internet by controlling search and it dominated the heart of the mobile world that is replacing the PC.

Google's trump card

Part of the reason that Google succeeded where Microsoft hasn’t is in its approach to products. Google’s simplicity in design is matched only by Microsoft’s complexity. Microsoft is singularly incapable of releasing products without inventing a new language to accompany it. And it does this with every version of that product. Google on the other hand have taken an approach that emphasised austere simplicity in the design and function of its products.

As a result, Google is perceived in the market as being the real innovator even though Microsoft has probably brought out significant changes in its products every few years. They went unnoticed because nobody could understand what they were supposed to do.

The other disadvantage Microsoft has is that nobody believes it really wants to give up on the PC even though the world is largely moving on to being in a post-PC phase. Everything that Microsoft does that is not directly related to the PC is seen as being token.

Even Windows 8 seeks to disguise the PC as a tablet or “large mobile phone”. It is easy to see why when Microsoft derives the majority of its revenue from the desktop operating system and its Office suite.

The post-PC world  is here

Google on the other hand is the embodiment of the post-PC world. Its emphasis on everything web and mobile has led its Android operating system to take 70 per cent of the mobile smartphone market. Its revenue from advertising is already larger than Microsoft’s revenue from Windows and Office and this is before it really has capitalised completely on the ever-growing ubiquity of the mobile platform.

The paths of companies are largely determined by the cultures that grow to dominate them. Once set, corporate cultures are difficult to shift especially when the culture is about preserving the dominant sources of revenue at all cost. Microsoft are destined to play around the edges and protect the PC platform until the bitter end.

Google on the other hand could quite happily move onto mobile and even the computing platforms of the future embedded in glasses, watches and other forms of wearable electronics. At the end of the day, this is why Google is now worth more than Microsoft; both to the market and society as a whole.

David Glance is a Director at the Centre for Software Practice at The University of Western Australia 

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