“Trust, not just in the technology, the ethics around A.I., privacy, security — all that also matters —[but] trust in [the] business model,” Nadella told CNBC in an interview published Monday.
Core business models of tech firms have come under heightened scrutiny in recent weeks, amid growing concerns about user privacy and revelations of just how much data companies like Facebook and Alphabet’s Google collects on it users.
Microsoft doesn’t have any “targeting business that is at large” on its platforms, Nadella said. The company leverages subscriptions with limited ad-supported businesses to help customers “get more out of their data, more out of their time.”
“I think people are going to put more value on their data. Even individual consumers are going to wake up to the fact that there’s nothing free,” Nadella said. “It’s not to say that there isn’t room for someone to say, ‘Yeah, this is a good trade, where I’m using a free service in exchange for some data.’ But there’s nothing free about it.”
The Microsoft chief pegged Amazon as his most direct competitor in the increasingly important cloud space — with Google a close third.
The tech giants have all been ramping up investment in cloud computing in recent years, as the so-called Internet of Things and ever-growing pool of connected devices demands greater computing power and storage capability.
But Google and Amazon, he said, use revenue from advertising and retail to support their cloud businesses and other ventures — which might run counter to the interests of their business customers.
“Amazon and Google both are fantastic at being able to rig transactions. So it’s not that Google is somehow more friendly to retailers,” Nadella said. “They have a nice two-sided market that they can subsidize one to advantage [the other].”
Nadella called the advertising business “funky,” with its auction-based pricing model that raises prices as more retailers buy in.
“I’ve never seen business models where, [when] there’s more demand, there are higher prices,” he said. “So 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.”