Ballmer is Running Scared, Spewing FUD with every Step

How can you not love Microsoft CEO Steve Ballmer? Microsoft may seem troubled of late with the red rings of death on the Xbox, the failure of the Zune to do substantial damage to the iPod's market share, the massive flop that is Vista, the abortive attempts to acquire Yahoo… the list goes on as long as you'd like it to. Even with all that news Steve Ballmer is always good for a quote especially when predicting how Microsoft's competitors will fare.

You remember the moment that Ballmer laughed out loud at the iPhone, how he predicted the iPhone would never go anywhere and you would think he would've learned a lesson. You's be mistaken. Ballmer's most recent display of naked hubris? His derision at the prospects of the Android OS developed by Google for mobile devices. So just what nugget of wisdom did Steve lay on the tech world lately:

'I don't really understand their strategy. Maybe somebody else does. If I went to my shareholder meeting, my analyst meeting, and said, 'hey, we've just launched a new product that has no revenue model!'...I'm not sure that my investors would take that very well. But that's kind of what Google's telling their investors about Android,'

You have to give it to Ballmer here. He has successfully discovered the weakness in Google's business model. The Android software is open source and it might be attractive to developers or to the company that makes the next great mobile device but Google is just giving away the software. This confounds Steve Ballmer. Where is the revenue stream to be gained by giving something away? Is Google populated by a bunch of good feeling, tree hugging hippies? There's no revenue to pay for those Birkenstocks!

And the point is a good one. Businesses are all about making money. The iPhone used to cost too much (and now presumably doesn't) but the revenue stream is clear. The G1 is the anti-iPhone, where Apple is making dough by packaging slick software with nice hardware Google doesn't seem to be making a dime off the G1. Worse yet, the software is free, any schmuck can go and download the source and play with it. Any one with a decent grasp of programming can tweak it. Any company can meld it to their device for gratis. How can that possibly make money?

Time to illustrate Google's position with some absurdity. Imagine that computing was taking a turn. Instead of the tasks they usually did, word processing, spreadsheets and layout, envision a world where computers were connected to a large network. A network where you could wander around and discover all types of information. That would be pretty cool. Maybe when we get flying cars and knife fighting monkeys or something.

Anyway further imagine that browsing wasn't hard but was made much easier when the people on this king sized series of tubes had a dedicated program to access the information. Some kind of Navigator or something. If you were behind this Navigator program you'd probably wan t to get paid, maybe twenty bucks. This is a fantastic opportunity for users and your company. In exchange for a few bucks, your customers can use the nifty tube navigation application you wrote. A win, win situation,

In this completely alien world a company that controls the OS might feel a little threatened by this navigating thing. That company might feel compelled to create a program that explored these same tubes looking for information. Now the tube navigator thing might have a head start on the tube explorer thing and that might worry the OS company. The company might envision a day when the OS took a back seat to the tube navigator. To ensure control of the situation the OS company would likely make the tube explorer program free.

One also supposes that you would bundle this Explorer program with the OS and dominate the browser market for years to come. Think of the control you've gained even though the Explorer program didn't generate any direct revenue. Business wise giving away something for free that someone else wanted to charge for was a savvy move.

None of that applies here. In the fictional account it is an established company versus a start up and new tech all around. But Google is already established and so is Microsoft. For the imaginary model to work you'd have to imagine that Google sees Microsoft as a competitor. You'd further have to believe that by getting into this market Google hopes to reap rewards down the road. Better ad targeting, more compliant mobile browsers etc. Suddenly Android makes all the sense in the world. If you don't know what is going to be the next great thing you can maximize the chances your software is powering the device when it rolls out.

Of course Ballmer knows exactly what Google is doing and why. So why bother bashing Android at all? Let's reread the quote:

'I don't really understand their strategy. Maybe somebody else does. If I went to my shareholder meeting, my analyst meeting, and said, 'hey, we've just launched a new product that has no revenue model!'...I'm not sure that my investors would take that very well. But that's kind of what Google's telling their investors about Android,'

What the statement is really about is sowing doubt. Doubt in the minds of developers that Android will actually stick around. You don't want to waste your time developing for a platform that Google could completely ignore as soon as Bob from accounting reports his that it isn't generating a cent of direct revenue would you?

The bright side is that the plan won't work. People get why giving away something for free can be a great idea. People trust Google much more than Microsoft. Sorry Ballmer, you'll have to try a little harder next time. People are getting tired of eating FUD.