Microsoft needs help to survive with its Search
Now that Yahoo CEO Terry Semel has put paid to the rumours that Microsoft was looking to acquire its search business, three things are clear. One is that Microsoft felt a need to ramp up its search business fast. Secondly, the next couple of years are going to bear witness to a three-way battle royale for internet dominance. Thirdly, Google has Microsoft scared to death.
Depending on whose figures you believe, Microsoft has about 13% of the search market, compared to Yahoo's 28% and Google with about 43%. Some pundits point to the fact that Microsoft has come from behind in the past to overtake and displace more established rivals. However, Google is not like the other rivals that Microsoft has encountered. It is very profitable; it is growing at a great rate; it well funded with deep pockets; and it has proven itself to be highly a innovative web player. It is not a case of Google defending its space against Microsoft but in fact the reverse.
Microsoft put paid to Netscape's ambitions by simply obtaining a similar browser and embedding it in its desktop operating system. It can't do that to Google, a company with a market capitalisation of around $113 billion and which, based on its first quarter and its growth rate, looks like having annual revenues this year approaching $10 billion and a net profit of about $2.5 billion from its search advertising business. Neither can Microsoft simply get rid of Yahoo, which has a well-established diversified and highly trafficked web portal business.
A problem for Microsoft is that it is saddled with two legacy desktop software businesses that are barely growing, one of which, Microsoft Office, looks very vulnerable now that there is a compatible open source look-alike that can be downloaded for free. Microsoft realises this and, faced with the market slashing the company's value, it has struck out to try and win share in Google's space. The first serious foray was an attempt to buy its way in through Yahoo.
Although it has been rebuffed by Yahoo and is a distant third placed runner in search, Microsoft is by no means out of the game. It still has 85% of the web browser market, through which it can (under the watchful eyes of regulators) promote its search business, something which Google has been publicly vocal about.
However, aside from Google's presence on the growing rival browser Firefox, the search leader is trying to make the browser less relevant to the search experience by developing and promoting desktop search products. Microsoft could try to do the same of course but any attempt to embed a Microsoft desktop search into Windows would once again raise the ire of antitrust regulators.
In order to increase its search marketshare, Microsoft has struck out on its own and intends to invest money in creating new markets. Part of this is tied up with its Xbox games business, where with the recent purchase of Massive, Microsoft intends to create an in-games ad placement market. In addition, Microsoft, like Google and Yahoo, is busy doing deals in the mobile devices market space to have its search, instant messaging and email products embedded in devices.
It is clear that Google's aggressive push into search and web services has changed the rules of the game going forward. There is no doubt that Microsoft will retain its dominance of the desktop for many years to come. However, as each day goes by, the internet is making the desktop less relevant to users. This is why Microsoft, a company whose foundations are built on the desktop, is rattled and currently engaged in a mad scramble to find new online businesses.
Now that Yahoo CEO Terry Semel has put paid to the rumours that Microsoft was looking to acquire its search business, three things are clear. One is that Microsoft felt a need to ramp up its search business fast. Secondly, the next couple of years are going to bear witness to a three-way battle royale for internet dominance. Thirdly, Google has Microsoft scared to death.
Depending on whose figures you believe, Microsoft has about 13% of the search market, compared to Yahoo's 28% and Google with about 43%. Some pundits point to the fact that Microsoft has come from behind in the past to overtake and displace more established rivals. However, Google is not like the other rivals that Microsoft has encountered. It is very profitable; it is growing at a great rate; it well funded with deep pockets; and it has proven itself to be highly a innovative web player. It is not a case of Google defending its space against Microsoft but in fact the reverse.
Microsoft put paid to Netscape's ambitions by simply obtaining a similar browser and embedding it in its desktop operating system. It can't do that to Google, a company with a market capitalisation of around $113 billion and which, based on its first quarter and its growth rate, looks like having annual revenues this year approaching $10 billion and a net profit of about $2.5 billion from its search advertising business. Neither can Microsoft simply get rid of Yahoo, which has a well-established diversified and highly trafficked web portal business.
A problem for Microsoft is that it is saddled with two legacy desktop software businesses that are barely growing, one of which, Microsoft Office, looks very vulnerable now that there is a compatible open source look-alike that can be downloaded for free. Microsoft realises this and, faced with the market slashing the company's value, it has struck out to try and win share in Google's space. The first serious foray was an attempt to buy its way in through Yahoo.
Although it has been rebuffed by Yahoo and is a distant third placed runner in search, Microsoft is by no means out of the game. It still has 85% of the web browser market, through which it can (under the watchful eyes of regulators) promote its search business, something which Google has been publicly vocal about.
However, aside from Google's presence on the growing rival browser Firefox, the search leader is trying to make the browser less relevant to the search experience by developing and promoting desktop search products. Microsoft could try to do the same of course but any attempt to embed a Microsoft desktop search into Windows would once again raise the ire of antitrust regulators.
In order to increase its search marketshare, Microsoft has struck out on its own and intends to invest money in creating new markets. Part of this is tied up with its Xbox games business, where with the recent purchase of Massive, Microsoft intends to create an in-games ad placement market. In addition, Microsoft, like Google and Yahoo, is busy doing deals in the mobile devices market space to have its search, instant messaging and email products embedded in devices.
It is clear that Google's aggressive push into search and web services has changed the rules of the game going forward. There is no doubt that Microsoft will retain its dominance of the desktop for many years to come. However, as each day goes by, the internet is making the desktop less relevant to users. This is why Microsoft, a company whose foundations are built on the desktop, is rattled and currently engaged in a mad scramble to find new online businesses.
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