The world turns and things change… or do they? Forbes has an article here that asks the question, are we seeing a repeat of Netscape vs Microsoft, with Google replacing Netscape? With the additional question, is MS at the disadvantage this time around?

Brian Caulfield writes that where MS can tout its software expertise (Office, Photosynth, Silverlight) and afford to give a away a few hundred copies of Office in a promo, Google actually gives away the equivalent product for free to everyone. The point he’s making, of course, is that despite its seemingly endless resouces, MS is tied to a product-based model of revenue generation; whereas Google actually earns its dosh from clicks and the advertisers who pay for those clicks. Do you see the difference? Where Netscape gave it’s baby away for free and gained enormous marketshare, threatening MS and its web play, it didn’t really know how to convert that marketshare into cashflow. Google has nailed that one. As it adds to its suite of attractive online tools it builds both marketshare and revenue… it can afford to continue to try new products and beef up its existing ones as even the relative failures still build the brand, sustaining that Google momentum as the premier way to advertise on the Web.

Whereas MS is tied to selling you a copy of Office, or Vista, or whatever. Yes, that’s still a great business, but it’s getting undermined by Google with its Apps and by the entire LAMP/Open Source contingent. Open Source convert IBM – in particular – continues to grind away in the enterprise space, undermining at least one of the pillars that support the MS river of cash. Meanwhile MS is trying to catch up in the online advertising market but it faces a strong, dominant competitor with great cashflow: Google.
Which way will it go? Perhaps we’ll see a rebalancing of the market ending with a new equilibrium, one based on a split between online delivery of applications and the traditional shrinkwrap product. Or will it all fall towards the online app? Either way I’d bet that MS will be in there too – maybe late to the party, but definitely with its best frock on…