Google loses two key search deals to Microsoft

Maybe Microsoft's Steve Ballmer was really serious when he said Microsoft intended to truly compete with Google in the search arena. As the Wall St. Journal reported a couple of months ago and then confirmed during this week's Consumer Electronics Show (CES), Verizon did indeed choose Microsoft over Google (and Yahoo) as its primary search vendor. While that move was at least hinted at, CNET reports that Google received another bout of bad news when Dell also announced at CES that it was dumping Google in favor of Microsoft Live Search on all its PCs shipping after Feb 1.

The Verizon deal is key, since Verizon is currently poised to surpass AT&T as the No. 1 wireless carrier in the U.S., once its $28 billion purchase of Alltel finalizes on Friday. Getting the default search position on all those cell phones and smart phones could provide Microsoft Live Search with a key boost in market share, since presumably phone users are more likely to just use the default search engine that comes with the phone, vs. navigating around to get to Google. As more phones such as the iPhone, G1 and Blackberry Storm become more computer-like, however, that advantage may begin to fade away. (PCs often ship with Microsoft as the default search page, but few users fail to simply switch to Google anyway.)

Which brings up the Dell deal. While it's bad news that Dell has dumped Google for Microsoft on its PCs, it will be interesting to see if that makes a dent in Google's search market share. Today, Google enjoys a big lead in mobile search, with 60% of the market vs. Yahoo's 36% and Microsoft's 10%, according to comScore. And the overall search market is even more telling, as Nielsen Online reports Google's share of searches rose 21.7% in November to 64.1% overall, while Microsoft's dropped 16.7%, leaving it with just 9.1%. (Yahoo's share dropped also, falling 1.4% for a 16.1% share.)

While Microsoft is making big inroads with these deals, it's also reportedly paying a pretty penny to do them. (The Wall St. Journal estimates Microsoft is paying Verizon $550 million to $650 million over 5 years, or twice what Google offered.) What if Microsoft pays all that cash, only to find that consumers are savvy enough to actually bookmark or set Google as their default search engine anyway? It will be interesting to see if Microsoft gets its money's worth.

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