Microsoft’s newest rebranding of its search engine (is this the 3rd?) is coupled with an $80 million marketing campaign and an assortment of TV ads.  These TV ads follow the conventional marketing tactic: define a problem and present a solution.  Problem: Search doesn’t work, offering the wrong results for your query. Solution: Bing, the first decision engine.

But that problem doesn’t exist.

Microsoft’s incredibly annoying ads (and I liked the weird Seinfeld ads) are better suited for the late 1990s when search really didn’t know what words went together or how to best serve results. Now, search works pretty well.

If I search for breakfast or lcd vs. plasma, I get results for breakfast food and which kind of TV to buy (even without putting TV in the search query). This is the same on Google, Yahoo, and yes, Bing, and has been true for about a decade.  So Microsoft’s trying to solve a problem that doesn’t exist.

Mostly, Microsoft’s massive marketing campaign did more to impress the press and investors, who did their part to claim Bing was winning or posing a real threat to Google, which has been shown not to be the case. At best Bing is just a more publicized version of Windows Live. Let’s remember, Google became Google with no marketing at all (and only started advertising a little last year). Having good products helps.

Two Domino’s Pizza employees posted a video of themselves spitting on food, putting cheese up their noses,, and violating several health codes while preparing people’s food.  The video, posted on YouTube, became a sensation with more than one million views, spreading discussion to blogs and Twitter.  The New York Times today even profiled the threat social media plays for Domino’s and other companies.

I’ll still buy from Domino’s. Hopefully this is an example of two really bad actors and not reflective on the company. But this is a huge PR nightmare where even if Domino’s isn’t directly at fault (legally or morally, that we know of), it is still responsible to remedy this tragedy, making amends to the public for what it’s employees did.

Social media was used to damage Domino’s brand. Domino’s can use social media to repair the damage.

First, admit fault. With a press conference posted to YouTube and news outlets. Admit employees were not properly supervised, incentivized, and educated, and then outline how all these things will be fixed for the future.  Also publically compliment the rest of the Domino’s sales staff. We know Domino’s hiring is not the most rigorous, so oversight is important.

To repair its brand, Domino’s would best be served by opening up it’s serving practices to the world – through YouTube. I don’t mean hidden cameras showing you don’t trust your employees (that will only invite more trouble). Instead, show how much you value your employees by encouraging each store to make it’s own YouTube video about their favorite pizza creation.  So every Domino’s outlet will have the chance to create a special pizza, which customers can buy, and see online how the staff came up with and made that pizza.  This shows Domino’s trusts its employees to serve its customers’ best interests, and it gives something special to customers in the form of unique and special pizzas, customized for their location.  Domino’s can collect all these videos onto a YouTube channel and even make a U.S. map with links to the videos of locations closest to you.

The lesson to learn – social media can be a dangerous weapon in the wrong hands. But in the right hands, social media can be used for just as much good.  Embracing open communication builds and rebuilds brands.

The big news has been the $165 million bonuses AIG gave its executives after receiving $170 billion in taxpayer bailouts. It’s disgusting, outrageous, and shows how short-sighted these bailouts have been.

The government has claimed AIG and other financial and car companies are just too big too fail, so we have to give them money. But this rewards companies that expand, even if unsustainable. If a company gets big enough, no matter their mistakes, the government and taxpayers will save them. AIG just makes mistake after mistake because free money doesn’t teach anyone a lesson on how to run a better business.

Mike Masnick proposed my favorite idea that bailed out companies should be broken up so they are small enough to fail.  The new, smaller companies have less baggage and can focus on a fresh start.  James Moore points out, even with $170 billion, AIG is closer to death than a fresh start.  Moore writes:

AIG’s predicament will be studied for years to come in marketing and communications classes. When the company decided to pay out millions of dollars in retention bonuses after seeking billions in bailouts from taxpayers, there was probably nothing the greatest crisis communications expert in history might have ever done to manage the situation. AIG’s first step was to insist that it had contractual obligations to pay and this is factually correct. The company had signed deals to keep critical employees in the competitive financial products division. However, the people getting these bonuses are precisely the same individuals who created the nonsensical derivatives that turned America’s economy into a stick of butter in a microwave.

Financial mistakes are one thing. A company can reclaim the public’s trust even after bankruptcy or other major missteps. But AIG has harmed the public’s good faith so much, it’s impossible to see a realistic scenario where AIG becomes a force for good business in the United States and the world.  So with $170 billion of taxpayer’s money, what is AIG to do next?

There isn’t much. One argument could be the government is bailing out AIG just so companies can get their insurance payouts and not default themselves. After everyone’s paid, AIG can collapse under its own incompetence. But can AIG remain? I don’t think a name change will be enough to build back trust. The company name and image is so tainted and untrustworthy, Moore says “AIG is dead.” We, the taxpayers, own a dead company – a company with no viable future.

Trust for a company or person is one of their most valuable commodities. Without trust, products, services, and marketing are ignored because no one can believe them. AIG could make every reform possible, and there would be questions about what are they hiding.

I’m a believer (and practicer) of the magic of community-building and know Americans have a high capacity for forgiveness (we haven’t lynched anyone…yet). But at some point, we have to cut our losses and realize these too big to fail companies eventually have to be successful on their own. How do we accomplish that? Rewarding incompetency or outright manipulation don’t seem like winning strategies. Companies, from banking to insurance to cars have to rebuild trust in their brands, otherwise we’re just bailing out lost causes.

The hardest part of debating intellectual property is the widespread misconceptions people have.  Many people I talk to who don’t even realize they are copyright holders (of their doodles and term papers) fall into thinking people should own ideas so they can make money without considering why.  Ideas don’t happen in a vacuum. They build on many ideas before.

I became more frustrated by Forbes’ magazine’s praising of Activision Blizzard CEO Bobby Kotick, exacerbating the misconceptions .  Kotick has become a business press darling overseeing the merger of the largest video game company with an obvious eye on profits (to the chagrin of video game fans). Forbes writer Peter Beller explains “EA also teamed with MTV to sell Rock Band, a shameless knockoff of Guitar Hero that added drums, bass and a microphone to the world of make-believe rock stars.”

First, Guitar Hero wasn’t an original idea unto itself. It built on many, many ideas before it from people who enjoy air guitaring to the many previous versions of plastic musical instruments. I had a toy piano when I was a baby only a short, few years ago.  Did Activision shamelessly knock-off all these ideas too?

Second, why not look at what Rock Band did differently. The interface is very similar and even the controller instruments look alike, but Rock Band added many features, namely singing and drums. That’s building on someone else’s idea, just like Guitar Hero did.  Rock Band improved the idea so much, Guitar Hero shamelessly knocked them off with its new edition, featuring singing and drums.

Everyone copies everyone. It’s natural and a major part of how innovation happens – people see what works and make it better. This is why copying is good thing. Everyone does it and it makes everyone else better. The sincerest form of flattery is imitation. Don’t be scared of stealing ideas. Just be scared of not making them better.

Arriving late to the internet revolution, Microsoft seems more interested in blocking the competition rather than building a long term business.  The software giant has already spent months paying people to use its search engine rather than convince them its a better product. But more payoffs are on the way.

Microsoft is paying or offering free software to developing countries to use its products rather than free alternatives like Linux (though Microsoft denies specific examples).  Microsoft is discovering the high price it charges for Windows and Office are pushing poor countries toward free and cheap alternatives. Instead of realizing the long term implications, Microsoft is hoping to lock in these customers with big payoffs now hoping they’ll pay in the future (even though they still won’t be able to afford Microsoft’s prices).  This is not a new business model, but it’s a nice way to blow millions of dollars (don’t need that research and development money anyway).

Further, to stave off Google’s free cell phone operating system, Android, Microsoft is looking to payoff cellular providers to use its expensive alternative. Steven Ballmer showed (once again) how disconnected he is from the realities of the software world when he said about Google’s Android “I don’t really understand their strategy. Maybe somebody else does.” I do: Google’s investing in a long term strategy, increasing the value of Google search and other Google products. It’s a way to make more money (even if that money is not from Android licenses).

The truth is Microsoft is still relevant and obviously has a place in the market.  The Xbox brand, with all its foibles, is a refreshing example of Microsoft’s innovation and willingness to take risks.  Even Xbox has relied on massive payoffs to game developers to push its way into the market – but that’s not a bad thing when it’s part of a long-term strategy. Microsoft wants Xbox to be profitable on its own merits, something that’s harder to say about Windows and its other products.

Even Microsoft’s branding strategy failed because of a lack of a long term plan – one that the company had faith in.  After three commercials, Microsoft pulls its controversial Seinfeld ads because bloggers didn’t like them.  But they were talking about them! People watched them over and over again to try to understand them.  But that understand would have come later on.  Instead, the new “I’m a PC” commercials reveal Microsoft’s lack of faith in their own branding and instead let their adversary, Apple, dictate the conversation (just ask McCain how well “change” worked for him).

I’m still an avid Microsoft customer (I’m writing this post on Live Writer).  But the company needs to realign itself with the new technology realities.  Branding, reminding customers how much we’ve trusted MIcrosoft all these years (even though they were fun to hate), shows they can still be relevant in our lives, for business and fun.  Paying off customers, buying also badly run companies (Yahoo), and criticizing successful competitors you don’t understand are not recipes for success.  Long term planning and real investment are.

Microsoft ruled desktop computers but now can barely get people to visit its website without paying them. Tim O’Reilly effectively sums up Microsoft’s problem:

Microsoft was once motivated by its own Big Hairy Audacious Goal: “a computer on every desk and in every home.” They achieved that goal, and ever since, they’ve drifted. Now their only goal seems to be to stay on top of the heap. They need to stop focusing on eating other people’s lunch and start thinking deeply about what kind of goals might stretch the company once again.

This past month has show Microsoft’s tunnel vision when it comes to the web. The company failed to acquire Yahoo (which was probably a good thing for both companies). Then, Microsoft offered cash back to users of its product search, feebly thinking this would steal customers away from Google. Microsoft ignored the fact that its product search is inferior to Google and didn’t offer enough money to make the step down worth it.

More subtly, Microsoft announced it was ending its book scanning project, leaving the endeavor to Google. Alex Chitu explains:

In other words, the book search engine didn’t make enough money and Microsoft decided it’s better to focus on areas that are more profitable. Instead of improving their search engine with valuable content from books and offering better search results, Microsoft chose to make decisions based on the short-term profits.

But that’s not all. Microsoft also decided to remove several games from its Xbox Live store because people couldn’t find the games they wanted. Apparently, Microsoft’s never been to Amazon.com or it would realize the benefits of the Long Tail and maybe fixed its user interface instead of depriving itself of additional revenue.

This is a lot of mistakes for one company to make. None of these seem like poor ideas over the short term, but they show Microsoft can’t look past its next earning’s report. Google, in comparison, lets its ad service support a research factory of innovation where products are unleashed with the idea for monetizing a distant thought for the future. Google News, Docs, Apps, Notepad, and Reader all have no advertising.

O’Reilly suggests Microsoft needs to define its long term goal, something that doesn’t put it in direct competition with Google, even outsourcing search. I don’t agree Microsoft should give up on search, mostly because I don’t want Google to have a monopoly on search (competition good, remember). But it’s true Google’s already doing well with the “Organize all the world’s information” goal.

Microsoft needs something new, that doesn’t rely on the walled gardens that made it the powerhouse it is. The next stage in computing won’t allow Microsoft to live off overpriced software like Windows and Office; not when free, open-source and online alternatives offer compelling alternatives. Buying Yahoo or Facebook isn’t a strategy unto itself, but needs to be part of a long term goal that recognizes both short term and long term benefits. Microsoft itself needs to change, and that change will happen over the long term.

Video game fans know it sucks to invest hundreds of dollars in consoles, accessories, and games only to do the whole thing over again in five years. We do it, but we hate it. Sony’s PS2 is showing the console lifecycle might be lengthening, with awesome games still being releases for the seven year old system. The PS2 even outsells the state-of-the-art PS3 meaning people seem willing to invest a couple years in the aged platform.

But Sony’s PSP handheld is a different beast. John Koller, senior marketing manager for Sony’s PSP told IGN he believes the handheld has a 10-year lifecycle similar to the PS2 and PS3. Using firmware updated and some hardware revisions, they can milk the life out of the PSP. But this is a bad idea and an example when starting fresh is better in a few years.

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Microsoft’s Xbox brand has been facing an up Mount. Fuji battle since its launch. And while the 360 has faired better than the original Xbox, some recent numbers shown by Famitsu (translated by NeoGAF) shows the Xbox might be farther down the mountain than originally thought.

Famitsu tracks the top 50 best selling Xbox 360 games with the top game not even selling a quarter million units. As Destructoid points out, when you add the total sales of all 50 games, only 1.8 million units have sold - as much November sales of Mario Galaxy and Guitar Hero III in the U.S.

The surprise in these numbers is how even games that attracted huge headlines for first week sales dropped of. Ace Combat 6 helped the 360 console outsell the PS3 in Japan for the first time, selling 77,000 units in its first week. A month later, Ace Combat 6 has only sold 6,000 more copies.

Even games that Japan loves are having trouble expanding the 360’s user base. This will make the 360 Devil May Cry 4 sales numbers versus the PS3’s all the more interesting. Check out the full top 50 after the jump.

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