For years people have speculated that Google and Microsoft would ultimately faceoff in a death match.
Microsoft has not been taken very seriously in search until recently as they are rumored to be discussing an exclusive deal with News Corp that would leave Google on the sidelines, unable to index name brand websites like the Wall Street Journal. It’s my belief that this deal will lead to an arms race of exclusive content deals, forcing Google to give back some of their profits each year in the form of payouts to news content providers and presumably content providers of all shapes and sizes.
Additionally, TechCrunch just posted an article explaining how Google’s OS strategy is designed to hit Microsoft where it hurts. For the past 1-2 years Google has finally admitted publicly that a cash rich Microsoft can ultimately make life difficult for them. Even if it takes Microsoft dozens of iterations and huge acquisitions, they are likely to eventually be there to keep Google honest in search and with their other products…hopfully. I think when people look back, the year 2009 will represent a turning point when competition between Google and Microsoft became very direct and aggressive.
With Google diving into operating systems and online hosted office applications, and Microsoft continuing to make acquisitions, deals and improvements in the search space, it looks like each company is now directly pointing a figurative nuclear arsenal at each other, essentially saying, “I will do whatever it takes to hurt your core profit centers…unless you back off”. Does M.A.D. or Mutually Assured Destruction work between two companies, like it did during the coldwar?
Microsoft through cashback deals has shown a willingness to pay users to search. If they go through with the exclusive content deals, they would be paying websites to hide their content from Google. What’s next, paying advertisers to stop advertising? For Google’s sake, not even Microsoft has that much money.
Of course, Google is not taking these encroachments lying down, in the next year they will have a free competitor to the majority of Microsof’t’s current and future sources of revenue, including a free traditional OS (Chrome OS), a free mobile phone OS (Android), free hosted exchange alternative (Gmail for organizations + Google apps), free sharepoint alternatives (Google Sites), free speech recognition and somewhat advanced calling features (Google Talk) and last but not least free website hosting (App Engine) as an alternative to all of Microsoft’s expensive server solutions.
As a consumer, I hope they keep it up, and I also hope that they try to differentiate a little on factors other than price, such as “who can provide the greatest privacy”, or “who can create the most extensible platforms”. Is that wishful thinking on my part?
Since the newest addition to the Microsoft nuclear arsenal is the rumored exclusive content licensing deal with News Corp, I should point out that I think the potential Microsoft Bing and News Corp deal would be a total disaster for Microsoft and News Corp, but at least it represents some creative thinking and a willingness to take risks.