The Internet is rapidly evolving from a communications medium to a full-fledged computing medium. It remains unclear how much computing will ultimately migrate onto the Web. Targeted advertising has emerged as the monetization vehicle of choice for Internet-based services.
The Internet is rapidly evolving from a communications medium to a full-fledged computing medium. It remains unclear how much computing will ultimately migrate onto the Web. Targeted advertising has emerged as the monetization vehicle of choice for Internet-based services.
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Attribution Non-Commercial (BY-NC)
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The Internet is rapidly evolving from a communications medium to a full-fledged computing medium. It remains unclear how much computing will ultimately migrate onto the Web. Targeted advertising has emerged as the monetization vehicle of choice for Internet-based services.
Direitos autorais:
Attribution Non-Commercial (BY-NC)
Formatos disponíveis
Baixe no formato PDF, TXT ou leia online no Scribd
ENTERPRISE SOFTWARE: MICROSOFT’S HYBRID SERVICES PLATFORM — THE HORIZON 1
BEYOND VISTA
Portfolio Manager’s Summary
The Internet is rapidly evolving from a communications medium for things such as delivering Web pages and ordering books, into a full-fledged com- puting medium with software functionality, in the form of services, found, accessed and run in the Internet “cloud.” While this shift has clearly begun, it remains unclear how much computing will ultimately migrate onto the Web, what roles client-side and datacenter computing and traditional software vendors will play in the evolving world, and how sustainable business mod- els will be shaped in an increasingly distributed computing paradigm. On the business front, targeted advertising has emerged as the monetiza- tion vehicle of choice for Internet-based services and content. While client- and server-side computing has traditionally been monetized through licenses or subscriptions, use of an online service is likely to be too fragmented and dispersed, with each discrete use too small, for that mode to be practicable. So, as with broadcast TV, providers of Internet services and content are look- ing to monetize their offerings by selling access to a community of users in the form of advertising. On the technological front, pure-play Internet vendors such as Google and Salesforce.com are betting that computing will overwhelmingly move onto the Web, which could have a devastating impact on traditional soft- ware vendors. We believe, though, that the Internet, while powerful, is not all-powerful. A pure, Internet-only architecture suffers from nagging ques- tions of latency and persistence as well as from inefficiencies related to the relative costs and constraints of bandwidth and processing. To our mind, the principles of service orientation open the door to a blending of client- side, server-side and Internet-based computing into a hybrid platform op- timizing computing efficiency and costs across all three media. Thus, just as advertising enables the Internet as an economically viable computing plat- form, service orientation makes it increasingly technologically viable. Spanning all three computing media, Microsoft is perhaps uniquely po- sitioned to offer the type of hybrid client-server-Internet platform that we consider to be best-suited to the service-oriented computing paradigm. In- deed, the vision of a coherent, multi-pronged platform is essentially what .NET is. To our mind, Microsoft’s increased investment in new traditional products and, more notably, in its online franchises has less to do with cap- turing existing revenue streams and more to do with fleshing out and bol- stering this platform. To some extent, this is defensive — a move to protect the existing core franchises from being sapped by more pure-Internet ser- vice-oriented visions. On the other hand, this platform vision also repre- sents a substantial, real economic upside opportunity for Microsoft if they can execute on it — a chance to exploit network effects to move well be- yond the PC and datacenter and into a more ubiquitous position within the emerging computing paradigm. We rate Microsoft outperform, with a $35 target share price.
Charles J. Di Bona II charles.dibona@bernstein.com +1-212-756-4070
Jennifer Swanson, CFA jennifer.swanson@bernstein.com +1-212-407-5895 January 3, 2007