Microsoft has been suspiciously absent from the whole social networking game. That is very much unlike them. There are several trends that should drive Microsoft to drastic steps in establishing strong presence in social networking space... fast.
1. Windows OS is becoming less and less essential with the emergence of Apple, tablets, and smartphones. More and more businesses are using MacBooks instead of PCs; Apple is winning in the tablet space; Windows is way behind in mobile devices, dominated by iPhone and Android.
2. Office is becoming less relevant too with the emergence of Google Docs and similar free or low cost cloud-based services. Yes, many of these services lack all fancy Office features, but majority of people never use them anyway.
3. Internet users are becoming less aware of Microsoft too. IE is being pushed by Firefox, Chrome and Safari. Bing is interesting, but not dominant. Microsoft created a lot of hype on its cloud, but Azure or their other offerings are not dominant - neither in business space, not in consumer.
4. "VOS". Daily communications are steadily moving to social networks, both on personal and business levels. Email is moving to the cloud. A lot of personal applications are moving to mobile devices and social networks - consumers complete micro-purchases on AppStore, Android Market, Facebook credits for games, etc. Business apps are moving to the cloud, making the client OS unimportant.
To summarize, Social Networks are becoming the center of consumer computing experience, sort of a "virtual consumer OS." And all they require are a computing hardware, a browser and an Internet connection. Microsoft is not dominant in any of these areas.
Google is steadily taking over the "Virtual OS" space. This has to be a mortal threat to Microsoft. It has to worry Microsoft. The questions is, "what is Microsoft doing about it?" Well, for starters there was recently a "leak" on that subject.
But Microsoft today is not the same fighting machine it used to be. During the last two decades, Microsoft was a staple of computing. Competing against them was never a good experience. It got quite a few companies and industries destroyed. However, Microsoft went from being an innovator that revolutionized computing to a competition destruction machine to a somewhat civilized corporation to a huge company that is becoming too slow, unfocused, decentralized and stuck in the past.
On the other side, it still has lots of money, really good talent (I know quite a few amazing professionals there) and a huge presence both in the consumer and business space. I would use that as entry point for its social platforms.
DISCLAIMER! Back seat driver perspective. I would start with Outlook. Why not create a native and rich Web UI for Outlook that would integrate really nicely with Facebook, LinkedIn and Google+? It would transform into a web app that provides business users with an integrated and seamless communication experience that includes email, social networks and documents creation / cloud storage / sharing. Since many corporate users still "have to" use Outlook, this would benefit them in a way of simplicity - they wouldn't need to switch between applications and services. It would also benefit Microsoft by making Outlook "stickier" and increasing the usage of IE and Office.
Microsoft could also create a light version of it for consumers. Do I dare to say a "free," or a "freemium" version for less technology-savvy consumers (that don't buy MS Office anyway, so not much will be cannibalized.) This would become a gateway to social / cloud experience. Maybe even as a part of Windows UI in the future. Having lots of interesting components, Microsoft could offer certain nice to have components as upgrades. For example, from a free cloud word processor or a MS Word in the cloud.
Then I would grow the business by M&A. LinkedIn could be an interesting target to build on the business space.
Of course, this is me thinking out loud. There are many smart folks at Microsoft that may be working on similar functionality as I am writing this. It is never that easy for a large corporation to switch gears in a dramatic way. But soon Microsoft will have to make a drastic move or risk becoming a dinosaur.
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