Q&A: McAndrews on Google vs. Microsoft, and surviving a downturn
techflash.com
By John Cook on January 23, 2009 at 2:23 PST
Former aQuantive Chief Executive and outgoing Microsoft senior vice president Brian McAndrews said he wouldn't rule out starting a new company in online advertising -- even in today's rocky climate -- but he has no serious plans to do so at the moment.
"I'd really like to stay here and find a role in another company, a growth opportunity, and I imagine in the technology sector, so if you hear of things, please let me know," said McAndrews, the keynote speaker at the inaugural TechFlash Live event last night in Seattle.
McAndrews also explained how aQuantive survived the last downturn and discussed Microsoft's long-term prospects against Google. A partial transcript of the Q&A follows:
John Cook: Brian, I think a lot of people in this room know you as the CEO of aQuantive, a company that was sold to Microsoft for $6 billion. But aQuantive wasn't always in good shape. It was troubled at times. The stock was below a dollar at one point if I remember correctly, in the 2002 period. I think you even got a delisting notice at one point.
McAndrews: We did.
JC: I think a lot of people in this audience would like to hear from you. How did you manage during that period, and what tips do you have for people in this audience in terms of managing through bad times?
What I think got us through the challenging times at aQuantive was, one, that we had a vision we believed in as a company, and we had values that we ran the company by, and those stayed consistent even through the downturn. We still continued to believe that we were on the right path even if had to make changes to our execution or even tweaks to our strategy. We believed overall that we were on the right path and people continued to believe in that. ...We also had a core set of values that we stuck to and the reason I think that was critical is it helped us retain a lot of talented and capable people who could have easily bailed out during tough times, but they continued to believe. That was the key thing.
Second thing, we did have a relatively senior team. During the dot-com bubble, as you know, a lot of companies were founded by very young, talented people, and some of them had young teams. That doesn't mean that they wouldn't succeed, but we had the benefit of having people who had been through downturns before, myself included. Not that it's ever easy, or a formula, but we had some sense of the kinds of hard decisions you have to make.
And then I think, within those decisions, a key is -- and I think it forces you to do what you should be doing anyway -- which is to prioritize and make hard trade-offs about what you ought to be doing as a company. One of the biggest challenges a lot of companies have is they want to do more than they really should be doing. You need to focus, and this forces you to make those hard trade-offs, to cut back on your expenses and to, in many cases, unfortunately, eliminate people and focus them on the right priorities. That's critically important and obviously at times like this you want to focus on, what are the things that are going to make us profitable or keep us profitable during this downturn. And take some comfort in knowing your competitors are all going through the exact same thing. But the one positive is it does force you to focus.
Todd Bishop: Brian, you're obviously a neutral industry observer at this point, having left Microsoft, so I want to ask you, in that neutral role, what's it going to take for Microsoft to catch Google over the next decade? Let's give them a decade.
McAndrews: He said I'm a neutral observer, but Brad Smith, the general counsel of Microsoft is in the audience. I have a feeling he's here just to make sure I say the right thing. (Laughter.)
Microsoft and Google are both trying to build an ad platform, and I think both of them have roughly the right set of assets today. Obviously that will change over time to do that. An ad platform that helps advertisers buy more efficiently on the Web, and publishers sell more efficiently and make more money. And through the acquisition of aQuantive in the case of Microsoft, and the acquisition of DoubleClick in the case of Google, and investments organically in emerging media and other areas, and assets that Microsoft and Google already had, I think both players really have all the assets for an ad platform.
Google is obviously stronger in some areas, namely search. Microsoft is stronger than Google in some areas, such as display, and I think has made some more investments through acquisitions in some emerging media areas like mobile and gaming. Over time, Microsoft's made some significant investments in television, as well.
So I think the key is going to be, clearly scale matters in the whole business, and Microsoft needs to get more scale in its search business, there's no question about that. And that's either through acquisition or organic or both. And I think Microsoft is clearly making a bet there, and clearly investing, obviously bringing in Xi Lu from Yahoo with all the search experience that he has, is a big bet in that direction, and you've got to make significant investments there.
That's key, and then I think also not losing site of display, which I think is also critically important. It's suffering now more during the downturn, but I think it's a strength that Microsoft has that's stronger than Google right now, and Microsoft needs to exploit that. I think over time there will be two major players in terms of ad platform. There will be other players. Yahoo will exist. AOL will exist. But they will not, in my view, have all the components that you will need for a full ad platform. They will play in parts of that world. I think Microsoft and Google both will, and I think there'll be two players. I wouldn't predict 10 years from now who will be No. 1 and who will be No. 2, but even if Microsoft is No. 2 at that point, it would still be a very healthy business.
JC: You're quite a tennis player, I've heard, and so, just to boil that down, if it were a tennis match right now between Microsoft and Google in the search business, would it be 40-Love, 40-15, Deuce, where's it at? (Laughter)
McAndrews: Certainly Google is ahead. It is early. I don't know if it's early in the first game. It's certainly early in the first set. And in terms of search, Google is clearly ahead. But again, Microsoft has shown an ability to invest and come from behind in different business areas, and from Steve on down, the commitment is clearly there.
But Google has a significant advantage, they've built a better mousetrap, and it is a wonderful business for them in terms of the network effect that makes it hard for a second player to get in. The things that Google does feed on itself, and the fact that Google has become a verb is real advantage and Microsoft needs to create a brand that stands for something in search, where people say, I'm not going to go Google this time, I'm going to go to 'x', and the reason I'm going to go to 'x' is Cashback or some other advantage. Microsoft has done Cashback, which I think is a great asset, but I think Microsoft would also agree, it hasn't marketed it strongly yet. A lot of people don't even know it exists. But it's a real benefit. You get money back on buying things. So Microsoft needs to have a brand that stands for something, that's differentiated, and then invest behind it.
JC: I wanted to ask the crowd just for a second, how many entrepreneurs out there have some sort of online ad revenue built into their business. Dave Schappell, I see you, I know you guys do. ... So there's several entrepreneurs out here obviously that are wondering what's going to happen in 2009 with the ad market. What's your outlook on what's going to happen there? Excluding, of course, niche online technology publications, like TechFlash, which we think are going to be an enormous success.
McAndrews: Obviously we all have crystal balls, and do the best we can to predict. the analysts have everything from flat to slightly up to slightly down. It's clearly going to be a challenging year in 2009. I think obviously the economy is the primary driver of that, which hurts all advertising. I think the other thing is the fact that a lot of the players hurt in advertising are financial sector and autos, which of course are big spenders, or have been, on the Internet.
And even when finance comes back, there will be fewer players, so I think that impact will be felt longer. The other trend that I think slows things down a little bit online is that a lot of the growth in usage online is coming in social networks and video, which in the long run is a great thing -- people are online more, and it will be monetized, but in the short run those are undermonetized areas, so I think all those things are negative factors for the online space in the short run.
On the other hand on the positive side, online will continue to steal share from offline and I think over time, more sophisticated targeting -- which is what Microsoft and Google and others are investing in significantly -- that will make CPMs go up again. They're going down now but they could go up again with better targeting. Video, once people figure out that model, is a huge opportunity, and emerging media in general -- moving into digital media and television. Long term still looks very good. 2009, I think is going to be very challenging.
TB: Brian, there are a lot of venture capitalists in the audience who will be very interested in the answer to this question: You've now left Microsoft. You haven't yet said what you plan to do. Can you give us a hint? Or actually can you give us an announcement, that would be even better. (Laughter).
McAndrews: No, no announcement. Basically, I figure coming here and talking to you is one big job interview, so I hope I'm making a good impression. I do want to take a little bit of time off, I haven't really done that before in my career. Rich Barton has advised me to take a whole lot of time off, and leave the country. I don't know if that's as a friend or he wants me out of the country for other reasons. Probably won't do that, but take some time off, and then we are as a family committed to the Seattle area for the foreseeable future, and so I'd really like to stay here and find a role in another company, a growth opportunity, and I imagine in the technology sector, so if you hear of things, please let me know.
JC: Would you consider starting a new company?
McAndrews: With the right idea, I would, with the right partners, I would, yes. I don't personally currently have an idea that I think is compelling enough, but for the right idea, I would never say never, but that's not probably my first guess at what I would do.
TB: If you were to start a new company, would you base it on an advertising model?
McAndrews: I certainly wouldn't be averse to doing that at all. But again, I've had a career that's been varied. I started in packaged goods at General Mills. I worked in media at ABC. I obviously ran an online advertising business, now spent some time at Microsoft. So I'm not wed to any particular model. I get excited about different kinds of businesses that I find interesting, where I feel I can personally contribute, learn and grow in the job. |
