• United States
by Elizabeth Montalbano

Microsoft eyeing Internet deal to rival Google-AOL

Dec 22, 20054 mins

Microsoft may be cooking up a major Internet partnership to rival Google’s newly bolstered relationship with AOL, according to a blog posting by a Microsoft manager.

Microsoft may be cooking up a major Internet partnership to rival Google’s newly bolstered relationship with  AOL, according to a blog posting by a Microsoft manager.

Ian McAllister, a program manager for Microsoft’s MSN division, said in a posting Wednesday that he had a meeting with “some senior players at another Tier 1 Internet company” who expressed interest in helping Microsoft compete with Google.

According to the posting, the company, which McAllister declined to name, spoke with Microsoft about the possibility of finding new ways to team with the Redmond, Wash., company to help advance its search and advertising business.

“At the end of the discussion one of the people I was meeting with threw out a blanket offer to brainstorm other ways in which our companies might work together,” McAllister wrote in the posting. “He then stated that his company was willing to entertain ideas for working with Microsoft that would help our search and/or advertising business, with one of the goals being to prevent Google from dominating those spaces even more than they are now.”

Essentially, the representative said the Internet company “would help Microsoft level the playing field with Google in search and advertising,” he said in the posting.

McAllister’s posting was noted late Wednesday in the Tales from the Web 2.0 Frontier blog of Richard MacManus, a Microsoft watcher and independent Web analyst in Wellington, New Zealand. He speculated that the company mentioned in the blog might be Yahoo, but neither Microsoft nor Yahoo has announced an expansion of their current partnership.

In his posting, McAllister said that he is “99 percent positive” that anyone reading his blog is a customer of the company with whom he spoke. This would hint that the company mulling the partnership may be an ISP or carrier, and not a Web portal and search provider such as Yahoo, says Joe Wilcox, senior analyst with Jupiter Research.

Comcast, which has seen its cable broadband Internet customers increase as AOL’s subscribers diminished, is the primary cable provider in the Seattle area, where Microsoft is based, he adds. McAllister lives and posts from Seattle, according to information on the blog where the post appeared.

Some analysts believe that after losing the AOL deal to Google, Microsoft may seek partnerships with large high-speed Internet connectivity providers such as Comcast or telecom company AT&T. Those providers have portals that are highly trafficked by their high-speed Internet customers, and partnerships to provide advertising-based search for those sites would be a big win for Microsoft.

“Microsoft would certainly benefit if say a Comcast or some other broadband providers with popular portals chose MSN as the default search,” Wilcox says. In fact, the portal aspect of AOL was the primary reason Microsoft courted a search partnership with the division of Time Warner, he adds.

On Tuesday, AOL and Google announced an expansion of their years-long technology and advertising partnership that ended offers from companies, including Microsoft, which was one of AOL’s most fervent suitors. Losing the deal to rival Google was a major blow to the software giant, and it would be no surprise if the company struck a similar competitive deal in retaliation, analysts say.

Further, Microsoft has become far less dependent on some of the technologies for which the company traditionally has partnered with Yahoo, such as search-algorithm technology, as it has begun to develop its own, Wilcox added.

Microsoft’s public relations firm Waggener Edstrom could not be reached for comment Thursday because the company is closed for the U.S. December holidays. A Microsoft spokesman and Comcast spokespeople also could not be reached for comment. A Yahoo spokeswoman said Thursday that the company does not comment on rumor and speculation.