Analysts: Microsoft's after Google's ad business

Conference attendees say the software giant is playing catch-up to search firm in high-tech power struggle.

SAN FRANCISCO--Microsoft may be older and bigger than Google, but it's Microsoft nipping at Google's heels and not the other way around, according to two Gartner analysts who closely follow the moves of the companies.

By offering free Web-based productivity applications, Google is looking for an additional vehicle for advertising revenue and trying to distract Microsoft from focusing on its own core search advertising business rather than hoping to grab Microsoft's big corporate IT dollars, David Smith, a vice president and Gartner Fellow at research firm Gartner, said during a session at the Gartner Symposium ITXPO conference here on Wednesday.

Despite reports to the contrary, Google isn't going after Microsoft as much as Microsoft is gunning for Google, he said.

"Microsoft is clearly going after the advertising world" and has pledged to invest $2 billion to do so, he said. But he said the company is at a "critical point."

"The days of the most influence of Microsoft are in the past...they are no longer a company that everyone is afraid of," Smith said, adding that the software giant is now often seen as the underdog. But the battle for dominance isn't over yet. "Microsoft tends to perform at its best when it's under attack by a competitor," he said.

While Google moves onto Microsoft's corporate turf, Microsoft is struggling with its own Live Web services that compete with Google products, Smith said. Microsoft has "not delivered as much as any one would have hoped (with Live), and I think they would agree with that," because they were focused on getting Vista and Office shipped, he said. "They've had real challenges in marketing around Live and how it relates to MSN and Windows" as well as with .

"The No. 1 threat to Microsoft is decreased relevance of its core products," from things like Web 2.0 technologies and the Ajax Web development technique, Smith said.

Beyond its core Windows and Office businesses, Microsoft has not been able to put the pieces of its media business together, said Allen Weiner, a managing vice president at Gartner. "They have a ton of piece-parts and they're looking for a cohesive strategy to come together," and they're playing catch-up to Google on Web search, he said.

Google is "a bit of a chameleon," Weiner said, even though it's clear that search advertising is the fundamental business for Google, representing 99 percent of its revenue or $10.5 billion.

Google isn't directly targeting Microsoft's corporate accounts, but planning to enter the enterprise market from the ground up, Weiner said.

"Google's concept is empowering the consumer...and the consumerization of IT" in which individuals bring the technology they use at home to the workplace and thus accelerate corporate adoption of consumer technologies, such as with Gmail, he said.

Meantime, Google has announced deals to deliver ads on Clear Channel radio stations and on EchoStar's Dish satellite TV networks, but has yet to announce a clear plan for monetizing video, Weiner said. Sometime this year, Google will announce a relationship with a major provider of TV or TV-like content to consumers that incorporates Google search and ads, he predicted.

Google also has not made great strides in social search or search of rich media such as video or audio, Weiner said. Nor does Google understand the media market, as evidenced by its heated relationship with content providers and copyright lawsuits involving Google News and Book Search, as well as

Google's proposed $3.1 billion acquisition of DoubleClick will give it the brand advertising business it is currently weak in, Weiner said. But, Google has been known for its unobtrusive ads and when it starts "being associated with big banner ads, there could be a backlash," predicted Smith.

As far as the power struggle between Google and Microsoft, there will be no clear winner or loser, Weiner and Smith predicted.

Google is, however, claiming extremely high brand recognition and other victories. This week a market researcher named Google the most influential global brand whose "brand value" beat those of General Electric, Microsoft and Coca-Cola, in that order. The search company also , according to the latest figures from Web traffic tracker comScore. And in January, in the U.S.

Asked by a member of the audience about the fate of Yahoo, which trails Google in search and lags both Google and Microsoft in overall popularity of Web properties, Weiner said: "Yahoo is on the precipice." The company should partner with a telecommunications service provider like Verizon or AT&T, he said. "Big traffic numbers don't cut it anymore."

Featured Video
This content is rated TV-MA, and is for viewers 18 years or older. Are you of age?
Sorry, you are not old enough to view this content.

The WRT1900ACS is Linksys' new best Wi-Fi router to date

CNET editor Dong Ngo compares the new WRT1900ACS and the old WRT1900AC Wi-Fi routers from Linksys. Find out which one is better!

by Dong Ngo