Microsoft plans Google assault

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Time Warner has chosen Google as the most suitable partner for its America Online Internet unit — but the game isn't over for jilted suitor Microsoft.

The software giant plans to use its desktop market dominance to compete with Google on search and advertising, analysts said on Wednesday.

After spending much of this year wooing AOL in an attempt to get its search business, Microsoft lost out to Google. Google and AOL announced Tuesday that Google will invest $1bn (£572m) for a 5 percent stake in AOL under a broad partnership that expands their existing search engine deal to include collaboration on advertising, instant messaging and video.

Google also is offering a $300m credit that AOL can use to buy keyword-based ads from Google, and AOL will be able to sell all types of ads on Google sites and its publisher sites that display ads powered by the search giant. In addition, Google will help AOL better expose its content to Google's Web crawler.

But given that AOL and Google have had a search engine agreement for three years, "at the end of the day, nothing much has really changed" for Microsoft, said Michael Gartenberg, an analyst at JupiterResearch. "From Microsoft's perspective, the ability to do a deal with AOL would have been a good thing, but it was not a critical thing."

Microsoft plans to integrate desktop search into the upcoming version of Windows, code-named Vista, and eventually extend that to the Internet, Gartenberg said. "When search becomes an integrated part of the Windows experience, that will put Google on the defensive," he said.

Microsoft also is expected to gain traction with its AdCenter pay-per-click advertising service, which is still in the testing phase, and its year-old search engine, said Rob Helm, director of research at independent research firm Directions on Microsoft.

"It is definitely a lost opportunity for Microsoft, but also Microsoft is looking at this as a long-term process and still has assets to deploy" such as integrated search in Vista, Helm said. "So Microsoft, in a sense, hasn't really started the competition yet."

Adam Sohn, an MSN director, said the fact that the search business is still in its infancy and online ad spending is booming means it is anybody's game going forward.

"Yeah, it would have been nice to bootstrap that (AOL) ad network, sure. But, do we need it? No," he said. "This is a long-term strategic bet for us, and we're going to continue on with the plan we have today."

Sohn did not dismiss the possibility of striking a deal in the future. "That being said, we would never preclude ourselves from a partnership that makes sense," he said.

Microsoft could bundle different Internet advertising types and pricing together to try to compete with Google's ad business, said Charles Di Bona, an analyst at Bernstein Research. It also could offer minimum revenue guarantees or more favorable revenue-sharing terms, he said.

Microsoft "remains in a better position to sell a bundled Internet advertising offering, including display and search, which could be appealing to advertisers as they expand their nontraditional spending and, frankly, feel their way through the issues of mix and methodology in approaching the Internet medium," Di Bona wrote in a research note.

"We continue to view (Microsoft's competition with Google) to be a prolonged, multi-move game, and while (Microsoft) has slipped in the first few rounds, we expect the company to move into the next round relatively swiftly and most certainly aggressively," he wrote.

Talkback

Leverage makes no sense. It is a buzzword an nothing more, please stop using it.

via Facebook 22 December, 2005 12:45
Reply

slips now..and again..and with the launch of XBOX..in Japan..and suit of $300 million..

A giant making giant mistakes..leveraging would be dedicating..one expertise area to one area at a time..its competing with a bunch of different..brands coming in from every corner of the world..

Reminds me of Empire Earth..and i have 8 enemies and i'm alone..defending from one attacking one and 6 others rooting us out...no chance for microsoft..though it would command share but like adidas is versus nike and reebok today..

via Facebook 22 December, 2005 13:33
Reply

Microsoft is not hot anymore. The things they sell is plain garbage and so is Vista. All the innovations comes from companyes that dares to be different. Companys that dares to take risks. Microsofts only thing that keeps them alive is the monopoly on the desktop. So yea make another try to tie the costomer to MSN , messenger and so on. That will all fail in the end.
Microsoft is yesterday news and they will die sooner or later.

via Facebook 23 December, 2005 00:43
Reply

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