Microsoft scouts for some abetment...

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…as Google further invades the online search & ad market!

Imagine an organisation like Microsoft being classified as a laggard by its competitors! As a first thought, it might look like another ‘dark horse at war’, but the fact is that Microsoft looks downright beaten, if not in full, then in parts. The Google advancement has been so detrimental to Microsoft that today the company has to look for partners to salvage the lost pride in the Internet search arena. One look at the latest Nielson/Net ratings for March and it becomes easy to understand the reason behind Steve Ballmer’s sleepless nights and relentless banter about Google. MSN, the Microsoft search engine, lags a distant third in the internet search space (with a meagre 10.1% share) behind Google (leading the pack with 53.7% market share) and Yahoo!, the number two.

Not that the erstwhile ‘unbeatable’ behemoth isn’t trying hard. Microsoft has recently acquired advertising firm aQuantive for $6 billion in cash. Stated Ballmer on the acquisition, “Microsoft is intensely committed to creating a thriving advertising business and to partnering closely with all key constituencies in this industry to help maximise the digital advertising opportunity for all.”

Even though Steve Ballmer appreciates Google’s ascent, he refuses to concede to the inevitable threat. “Everything else (Google produces) is sort of cute but Microsoft has shown itself to be a multi-trick pony when it comes to building new businesses,” exclaims Ballmer. This utter disdain only appears to conceal Ballmer’s worst fears, the fact is that increasing pressure from Google has compelled Microsoft to make the aQuantive acquisition and also make another attempt to acquire Yahoo! for a sum projected at $50 billion. In order to increase its ad revenue, Microsoft had also tried to take over Double Click – the $3.1 billion deal went to Google. As a result Google’s advertising revenue for first quarter 2007 has been sitting on a whopping $3.6 billion, growing at 63% annually. Considering the fact that Yahoo’s earning increased by 9% and Microsoft’s revenues by 6% (for the second quarter), Google seems to have the inevitable advantage.

“There’s too much overlap between Microsoft and Yahoo! and to try to merge the company cultures of two large companies like that in general is hard,” says David Hallerman, a senior analyst at the research group eMarketer. That way, aQuantive does give Microsoft a slight leg up. However, whether Microsoft goes for a big ticket merger or proceeds to acquires smaller fishes of online search and advertising, Microsoft still doesn’t seem to have credible answers to Google’s ‘cute’ blitzkrieg, as the latter has literally taken over the online advertising space with a market share of over 30%, expected to grow further on the DoubleClick acquisition.

Edit bureau: Devdeep Singh

For Complete IIPM Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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