Microsoft eyes Google — the John Markoff version

This lovely illustration…

Image (c) the New York Times

… caught my eye. Here’s an extract from John Markoff’s article:

Later this year, Microsoft is expected to unveil its own search technology, which Mr. Gates says will help Microsoft catch up with Google. Last week, Microsoft released a test version of a special set of software buttons for its browser designed to direct users to its MSN search and related services. For Google, though, the greater threat is that Microsoft will decide that Internet search, like the Web browser before it, should be an integral part of future versions of the Windows operating system.

For the moment, though, Google’s lead seems formidable. Last year, Rick Rashid, a Microsoft vice president in charge of the company’s research division, came to its outpost in Silicon Valley to give a demonstration of an experimental Microsoft Research search engine. Shortly afterward, however, Mike Burrows, one of the original pioneers of Internet search at Digital Equipment who later helped design Microsoft’s experimental search engine, quietly defected. He joined Google.

But even if it can protect its technological lead, will Google still succumb to Microsoft’s marketing muscle?

Google shares the intense Silicon Valley work ethic that characterized companies like Netscape. Its new headquarters, on a spacious campus once occupied by SGI, a computer maker, are just across the freeway from Netscape’s original base.

But many veteran Silicon Valley executives are skeptical about Google’s ability to hold its corporate culture together once it goes public later this year. The initial public offering, much anticipated, is expected to create hundreds of instant multimillionaires among its regular employees, but will leave many others hired as contractors without significant gains. As a result, some people fret that Google is fostering a class society in its ranks.

So far, though, the disaffection is limited largely to the company’s Adwords business, which is aimed at creating and placing its focused search advertising. That operation has grown rapidly with temporary workers. “The Adwords environment is brutal,” one Google executive said.

Clearly, though, keeping its ebullient esprit de corps so robust after the I.P.O. will be difficult, say those who have gone through similar roller-coaster rides in Silicon Valley.

“The challenge Google faces is figuring out how to retain a high rate of innovation” in the face of a disruptive event like the I.P.O., said a former Netscape executive, who also worries that the two young founders, for all their brilliance, may not fit well into the kind of management team needed to run Google as a fast-growing public company.

Although Google has clear vulnerabilities, Microsoft is seen in Silicon Valley as a powerful but not particularly creative competitor. Beyond its core business in Office and Windows, Microsoft has no major recent successes to point to – but it has a growing list of disappointments. These include its Xbox video game player and Ultimate TV set-top box.

In other words, rivals have fought Microsoft and lived to tell about it. “At TiVo, we managed to stare down that $40 billion barrel,” said Stewart Alsop, a venture capitalist who helped finance the creation of TiVo’s digital video recorder, which allows TV viewers to easily record hours of video programming for viewing at other times. “We dodged that particular bullet,” Mr. Alsop said, when Microsoft “shut down Ultimate TV and got out of the business.”

Other executives who compete with Microsoft said Google’s position might be more defensible than Microsoft executives believe.

“The good news for Google is that what they do has many branches,” said Rob Glaser, the chief executive of RealNetworks, which competes with Microsoft in the software for playing video and digital audio on personal computers. “It’s not easily replicable in one step.”

The two big questions, it seems to me, are: (1) Will Google lose its innovative ethos after its IPO? and (2) will it become the next Netscape (and would legislators allow that to happen)?