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Wednesday, September 21, 2005

Microsoft vs. Google for AOL: The Heavyweight Fight of the Year

Guest-writer Terrence Gordon is a Search Engine Optimization professional and CEO of Performance SEO. Living in LA, he’s been involved in handling online revenues for companies such as Sony and

Now that Google has settled down comfortably in their new public lounge chair as champion search engine while staring inquisitively at the new $4 billion check from their recent stock dump, they must be thinking “what to do next"?

How about get up off the couch and start training to defend your title? There is no time to practice on amateur fighters – Google needs to be quick and ready for none other than the current heavy weight tech champ, Microsoft. The prize? AOL.

Yes, Bill Gates has had his eye on Google for a long time. But since Google declined their takeover bid in 2003, Microsoft’s age-old mentality of “if we can’t own them, we’ll beat them” kicked in, and they went to Plan B – developing their own search technology.

Currently MSN sits behind Google and Yahoo (respectively) as the #3 player and just ahead of #4 AOL in regards to market share. Prior to releasing their new search, MSN relied heavily on its distribution partners like Inktomi, a dwindling paid inclusion model, and Looksmart whose stock tanked after MSN dropped them earlier than expected for relevancy issues.

But MSN has come a long way in a short time with their “Neural” search technology. Some people say the relevancy of MSN’s results is catching up quick to Google’s. Personally, during my time at when Looksmart was our ticket to get clients MSN distribution, I saw some of the best clicks and conversions from MSN’s Paid Listings which proves that their users are serious people.

But by now we all know Bill, and we should all expect he’s never going to be happy as #3. He wants a shot at the search engine title belt, and the only way to get it is by one of three means: A) increase MSN’s market share, which compared to Google is not going to happen just by word of mouth or banner ads, B) take away Google’s market share, or C) both! Answer: C.

Currently Google relies on AOL to drive 12% of its Paid Listing revenue. Gaining AOL’s subscriber base would undeniably increase MSN’s market share, but more importantly take it away from Google. And while AOL struggles to plug a hole in their dwindling dial-up subscriber base, they probably could use the help. AOL has even started focusing efforts on branding its web property,, by offering its once subscriber-only web-based services for free in efforts to increase ad revenues.

But Google isn’t going to sit back quietly while these talks commence. They are nervous. And they have every right to be considering Microsoft’s record (think Netscape 2005). So Google is almost indefinitely thinking about a preemptive strike to acquire a share of AOL before Microsoft can.

So what are the odds makers predicting? Let’s take a look at the weigh-in, shall we? AOL has a right to be skeptical of MSN considering the anti-trust lawsuit brought on by AOL’s Netscape division resulting in a $750 million payout by Microsoft in 2003. And considering Google pays AOL handsomely (some say at around 80%) for distributing their Paid Listings which amounted to $380 million last year, why would AOL even bother considering replacing Google with MSN?

The battle is really for relevancy and end-users – oh, and getting to say you’re #1 which Microsoft likes. Currently AOL is a sinking ship resulting in heavy losses for Time Warner since the merger, which some say could be the worst merger in history. And if Google hasn’t been able to pull them out of the rising water yet, what would make AOL think they can do it now? Not to mention, I assume Google is quite content with keeping AOL at #4 while providing a nice stream of revenue for them. And AOL probably knows that Google isn’t interested in more competition.

Objectively, MSN and AOL have a lot more in common being underdogs together. But more importantly, rumor has it that MSN would be offering AOL 100% of their paid listing revenue (vs. Google’s 80%). So it may just simply boil down to money. But in reality, neither of them have a shot at the title individually, and Microsoft’s experience with heavyweight bouts makes for a nice tag team partner for AOL.

In the end, AOL is still not enough for MSN to overtake Google’s market share (although possibly Yahoo’s), and the real winner should be Time Warner with a nice chunk of change, a monkey off their back and most likely a continuous majority interest in AOL. Needless to say, I’m sitting front row for this fight.


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