Microsoft CEO Satya Nadella on Monday harshly criticized
tech rivals Google and Amazon in an interview, saying the
two companies are "fantastic at being able to rig
transactions" — and took a jab at the way internet
advertisements are priced.
is in a fierce battle with Amazon and Google for
cloud-computing supremacy. Big companies, including
retailers, are deciding which of these giants they are going
to choose to host their applications in the cloud, which
amounts to paying millions of dollars for computing time.
reporter asked Nadella about how
some companies deal with conflicts of interest when Amazon
competes with them, for instance, retailers using Amazon's
cloud, or grocery stores now that Amazon owns Whole Foods.
response was unsparing — not just to Amazon, which was the
subject of the question, but he went out of his way to call
out Google, too.
the exchange [emphasis added]:
I'm reading between the lines here. I hear stories about
retailers coming to Microsoft because, hey, Amazon's all in
grocery now, with Whole Foods. Retailers are looking over
their shoulder, wondering, 'Amazon's got a good platform,
but at the same time, are they going to come at the core of
my business model?'
Yeah, it's not even just Amazon, by the way. You've got to
and Google both are fantastic at being able to rig
transactions. It's not that,
you know, Google is somehow more friendly to retailers.
have a nice two-sided market that they can subsidize one to
advantage [the other] and also, by the way, the advertising
business is just so funky, which is sort of second priced
auction. I've never seen business models where [when]
there's more demand, there are higher prices.
I feel like any customer who is essentially subsidizing
their own tax increase should think through exactly how
that's going to work out in the long run. So that's where I
feel like long-run business model trust is going to be so
Nadella was saying that Amazon's AWS product isn't
trustworthy for many companies because no one can predict
what industry it's going to move into next, with groceries
as the top example after it bought Whole Foods last year. In
other words, it could suddenly up and become a become a
serious competitor to its cloud customer.
he's not giving Google a pass, either. He's pointing out
that a company that might be tempted to spend millions on
Google Cloud needs to keep in mind that its business model
gives it two ways to dig into the pockets of its customers.
They may have to pay to reach customers through Google ads,
even as they are paying Google to keep its website or app
running as well, if it were a Google Cloud customer.
then suggested that anyone paying Google Cloud was
"subsidizing their own tax increase" then. If demand in its
core market increases, so too will the prices of the ads it
has to pay.
is a very careful speaker, and he rarely calls out his
competitors by name. So this suggests a new attack vector
for Microsoft Azure as it competes for big cloud-computing