Is Microsoft's Web war lost?

Former internet analyst Henry Blodget slams Microsoft's faltering efforts to compete with Google. An excerpt:

I agree that the "Live" brand is confusing and that Microsoft has not clearly explained what it is trying to accomplish.

What I disagree with is the implicit idea that Microsoft KNOWS what it's trying to accomplish on the web (short of somehow miraculously vanquishing Google)--and that it has any reasonable chance of achieving it.

I argued a year ago that the web war was over and Microsoft lost. This seems even clearer with every passing day.

The only question in my mind is whether Microsoft can build enough of a wall around its crown jewels--Office and Windows--to survive over the long haul.

Microsoft's confusing Live branding clearly is a mistake. As Henry says, it is one of the more glaring examples of Microsoft's lack of focus with their internet strategy.

Henry calls the Web war lost at this point. I would not be so quick to dismiss the Redmond giant.

Some opportunities may have past. For example, I think Microsoft could have competed with Google on technical innovation if they had started in 2003, but that seems less likely to work at this late date.

In 2007, with Google so far ahead, I think Microsoft will have to use its market power to win. They will have to lock up web advertising deals to starve Google's revenue growth. They will have to exploit their control of the experience on the Windows PC desktop and eliminate opportunities to go elsewhere.

The steep drop of MSN Search market share appears to be due to the weakness of the MSN/Live brand and strength of the Google brand, losing the position as the default search engine for many users (Firefox users, people with Adobe Acrobat or Java installed who opt-in, Google Toolbar users, people with Dell computers), and the failure of MSN Search to be differentiated in any positive way (by quality or by features) from Google.

All three of those have gotten worse over the last four years. The situation is so bad that some are saying the battle is lost.

I think Microsoft still has a fighting chance, but the delays have not made the battles ahead any easier. Microsoft must fix their branding issues, control the search experience in Windows, attack Google's advertising profits, and make the MSN home page and MSN Search at least "good enough".

I think Microsoft can do these things. But, the track record of the last four years has not been good. If Microsoft keeps going as they have been, Henry may be right that the Web war is lost.

See also my previous post, "MSN Search and beating Google".

See also Henry Blodget's other writings on Google vs. Microsoft.

Update: John Battelle posts that Microsoft CEO Steve Ballmer is refocusing Microsoft on countering "advertising funded business models". John says, "The order has come from the bridge of the aircraft carrier: Turn toward search and advertising models, full steam ahead!"