This has to be salt in the wounds of Microsoft, who has had suffered several missteps and has seen the mythical Windows Mobile 7 get dealayed over 2 years. Windows Mobile 6.5 launched earlier this month to little fan fair. People are not considering Windows Mobile 6.5 a real competitor to the iPhone. Microsoft is not really in the converation now and Google has to be celebrating. Motorola’s Droid is certainly going head to head with the iPhone.

I was recently at Web 2.0 and I heard Ev’s conversation with John Battelle. Not much has changed. He seemed very coy about his plans to figure out a business model or solve Twitter’s scalability issues. Even during his talk I could see several people in the audience getting the Twitter Fail Whale trying the access Twitter. But one of Ev’s problems might be solved sooner rather than later. The two search titans Microsoft and Google struck deals with Twitter to get access to its valuable real time data. Both Microsoft and Google most certainly had to pay for it. Sheryl Sandberg made it a point to say she didnt believe in charging for data. Early this year Ev closed another round of financing putting the total at $100 million with a whopping $1 billion valuation. With all this hype Twitter is seeing their growth plateau  and they are getting more and more competition from Facebook.

Google said, “We’ve identified and fixed a bug which may have caused you to share some of your documents without your knowledge. This inadvertent sharing was limited to people with whom you, or a collaborator with sharing rights, had previously shared a document.”

This is a huge debacle for Google and they seem to be less than transparent about the impact. Google responded to a TechCrunch inquiry, by saying that it was an isolated incident affecting less than .05% of all documents. The damage may not be widespread, but it’s still an unsettling lapse in security.  

Google has a tendacy to keep these types of things very quite. Like when Gmail goes down it takes them forever to admit something is wrong. There have been several mishaps in the last year that should call into question Google’s coding and testing practices.

Gmail which is still in beta after more than 5 years has been having a huge growth spurt. Over the last year Gmail has grown over 43% and with offline access I am sure the growth will continue. Gmail is one of Google’s only success stories out of their core search business. If I was Yahoo or Microsoft I would be more concerned than ever about Google taking more market share and more effectively monetizing those new users.

In the last few months, we’ve been taking a long, hard look at all the things we are doing to ensure we are investing our resources in the projects that will have the biggest impact for our users and partners. While we hoped that Print Ads would create a new revenue stream for newspapers and produce more relevant advertising for consumers, the product has not created the impact that we – or our partners – wanted. As a result, we will stop offering Print Ads on February 28. For advertisers who have campaigns already booked, we will place their ads through March 31.

I am sure this is the start of a bigger trend to re-focus and prioritize engineering resources across the company. Some of the lavish perks I am sure will also be on the chopping block as Google positions itself to weather the tough economic storm ahead. Google’s quarter looks to be under pressure according to Piper Jaffray analyst Gene Munster, who said in a research note that “Google’s paid clicks are tracking down in December, and that may put pressure on the fourth quarter.”

Regardless of what happens anyone who is in the advertising bsuiness will suffer in this economic down turn. The easiest thing for a CEO to cut in tough times is the marketing budget.

Early in December photos leaked on the OPhone and it was rumored to be built on Google’s Android platform. This would be a big step up from Google’s G1 device in many ways. Lenovo and China Mobile could have a legitimate iPhone killer on their hands. Time will tell but if this is build on Android, Google is quickly closing the gap on Apple.

For the past two years they have been trying every strategy in the book to try and get traction in the market. First it was consumer free then it was an enterprise paid model. With all the P/R hype, all the data points to Google Apps being an utter failure. According to Compete, Google only gets 4M unique vistors to their Google Docs & Spreadsheets Web sites. Still the irony is while jouranlists were busy predicting web based apps would make Microsoft Office obsolete, they were busy typing away using Microsoft Word. Google even got on the feature treadmill and started banging out must have features like “print” and “charting”. Still no one is showing up to their party.

Microsoft has not been sitting still. They launched Office Live Workspace in March 2008 and later in October announced Office Web apps at their professional developer conference. People have also not been shy about buying Microsoft Office 2007, it doubled sales over the 2003 version. Even still Microsoft Office 2007 is a hot product this holiday season topping #2 on Amazon’s best seller list. Who says paying for software is a dead business?

With all the hoopla about Google Apps so far its really not been a threat to Microsoft Office. The future also does not look bright. Microsoft has a history of being a fast follower and closing the gap quickly. Once people have both a rich client and a web based version of Office at an affordable price, Google really has no chance. It seems like Microsoft finally got their act together just in time to suck the wind out of Google’s sails.