Daniel Steinberg kindly pointed me at Tim O’Reilly’s comments on Phil Wainewright’s piece about Google and Microsoft occupying different spaces:

Google’s turf is the Internet. It’s not interested in devices that don’t connect to it – Microsoft is welcome to that market. It simply wants to extend its reach to any device that does go online.

…Microsoft’s business model depends on everyone upgrading their computing environment every two to three years. Google’s depends on everyone exploring what’s new in their computing environment every day.

This illustrates my original point very well. Google isn’t trying to compete with Microsoft at all (although Microsoft may be trying to compete with Google…)