Microsoft has bashed both Samsung and Apple in its ads this year but there is a very good reason why Microsoft fears Google above all other rivals. It basically boils down to this: Google is willing to practically give away hardware for Android-based and Chrome-based devices just to ensure they get into as many users’ hands as possible. How can the company afford to do this, you ask? Well consider the following chart posted recently by Enders Analysis analyst Ian Maude.
As you can see, Google makes more than three times the amount of advertising revenue per user than any other big-name web property in the world. When you realize just how dominant Google is in monetizing its user base then it’s easy to see why the company is willing to sell a high-end smartphone like the Nexus 5 for only $350 off-contract: It figures that it will make up for its losses in hardware with the added revenue it generates with each new Android user.
If you’re a software platform developer how can you possibly hope to combat this? There are two ways: First, you can get down into the muck with Google by making your software free to use and by pushing out dirt-cheap hardware. This only seems to work, though, if you’re as good at making money off your users as Google is. The other option is to go the Apple route: Create an incredibly loyal user base by making a tightly controlled set of devices that deliver smooth integration between hardware and software.
Microsoft seems to have picked the latter option since it’s making more of its own hardware and is rebranding itself as a devices and services company. However, the company also seems willing to keep all options on the table, which is why it’s been reluctant to sell off its infamously unprofitable Bing search engine. If Microsoft finds that the Apple route isn’t working out for it, then it will want the option to switch to more of a Google-like model if it has to.