Microsoft’s Real Problem: Facebook is the New Outlook, and Other ways that Redmond is not Listening to Generation Y

Via Tech Crunch

from *TechCrunch* by Dan Kimerling

Microsoft, for all its problems, is a great software company. Its core products, the Windows operating system and the Office productivity suite, still dominate their respective markets and, while they are continually facing more capable competition and hence have declining market share, Windows and Office remain strong product offerings.

Yet, it is clear that something is rotten in the State of Redmond. A reading of Microsoft’s Annual Report only strengthens this conviction. For those that do not want to read the entire thing Brier Dudley’s blog offers an excellent summation, focusing on the issues that keep Ballmer up at night.

However, it does not seem to be the competitive landscape which has changed the consumer orientation towards Microsoft. What has really thrown Microsoft off, is that other companies have shown those consumers both most willing to try new technologies and most willing to open their wallets for technology, the consumers of Generation-Y, that they do not need Microsoft. Companies like Facebook, Apple, and Google, have changed the way that young consumers consume, and therefore purchase, technology. And that is a very dangerous position for a software company to be in, especially one that is not known for being nimble on its feet.

Facebook is perhaps the clearest example of this. While Mark Zuckerberg and others, brand Facebook a Social Utility, for young people, who really only care about functionality, Facebook succeeds because it is the killer web application for communications and personal information management. Facebook Mail is not without its problems, but the combination of Facebook Mail, Facebook Chat, and what is functionally an auto updating address book, makes Facebook into the new Outlook not only for those who are inside of Silicon Valley, but for anyone of the millions of people who use Facebook as either their sole or their primary digital identity. LinkedIn, is even more explicit than FaceBook is, in trying to become a person’s primary stop for vital, in this case professional, communications, as it is functionally a digital Rolodex.

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