The numbers game: reading beyond the headlines

It wasn’t so much different for Benjamin Disraeli over a hundred years ago when he complained about three kinds of lies: lies, damned lies, and statistics.  We’ve seen lots of numbers thrown about in recent weeks.  We’ve been following the news (and rumors) of Microsoft layoffs, Apple OS installs, and Adobe AIR downloads, all seemingly spun enough to make us dizzy.  As our mainstream media falls apart at the seams it’s hard to know who to believe.  Our tendency to take a number and run with it has been exponentially increased (in volume, if not in importance) by the sheer number of blogs and “citizen journalists”.

Microsoft of course plays a mean numbers game.  The layoffs are a good example, for while MS certainly made a number of cost cutting moves, it also used the opportunity to ax well-loved but dead-end programs (Aces Studio) and re-align the Entertainment & Devices Division to prepare for the likes of Zune Mobile and Project Pink, even as far as to “lay off” one exec, to replace him with another a few days later.  Cutting Aces Studio under the guise of a poor economy saved the hassle of dealing with a small but angry mob.  So while the blogs ran with “Microsoft cuts 5,000”, a closer look seems to reveal a lot more than just bottom line cuts.  That headline number didn’t tell the whole story.

Another set of numbers swirling around Microsoft recently concerns Zune: the 2nd quarter results dropped the bomb that Zune sales were down 54%  and the blogs were off and running.  Kill the Zune, they cried, even as Adam Sohn practically begged them to read between the lines.  Zune isn’t only about hardware sales, in fact, there’s some evidence that it never was.  A brown Zune?  Of course no one is going to buy a fat brown Zune, but lots of people talked about it, Microsoft established a base on which to build a platform, and now the big bet is on a Zune ecosystem.  Will opening up a platform to new Zune and 3rd party devices, even phones, and the introduction of Zune Mobile be able to compete?  That remains to be seen, but Zune isn’t dead, regardless of the headlines.

For Live Search, there really aren’t enough ways to spin a set of statistics to make good news out of the current situation, but Microsoft seems more committed to search than ever.  And yet for all of Google’s lead in search market share, only a very small portion of that share makes them any money, and Microsoft’s strategy seems to be to go after that most lucrative market first.  Live Search cashback has been a successful proof of concept, and we’re seeing hints that the cashback program may become a bit more engaging.  Search advertising, however, depends on spin: advertisers go where they think they’ll get the biggest bang for the buck, they love front runners. 

Which may be why a Microsoft-Yahoo! search is still so important to Microsoft.  The problem is that it may be far more important to Microsoft than it is to Yahoo! at this point.  Yahoo!, which took a nose dive after the failed bid last year, seems to have sunk as low as it will go, and may just survive with new leadership now in place.  In this case, the spin is all about “Yahoo! needs to make a deal with MS”, but really, it may be the other way around.

The layoffs were real, and painful.  Microsoft faces challenges that go well beyond the economy.  Consumers drift toward netbooks and away from powerful desktops perfectly suited for Software + Services, cash cows like Office, and even the not inconsequential installation of Windows Live Essentials.  Yet the numbers in the headlines don’t tell the whole story.  We’re going to have to dig a little deeper for that.