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Gartner lays odds on Microsoft in ads over Google in enterprise

Gartner report says Microsoft can compete with Google better on online ads than Google can compete with Microsoft in the enterprise.

Microsoft can give Google a better fight in online ads than Google can compete against Redmond in enterprise software, a Gartner analyst concludes in a new research report.

In one corner is Microsoft, the leader in enterprise software and PC-centric applications. Microsoft's eye is on the prize--a bigger slice of the $75 billion in online ad revenue that is forecast by 2011.

Microsoft is looking for growth after failing to see big payoffs from investments in areas like mobile, games, and online services, says David Mitchell Smith, Gartner research vice president and fellow, who authored the "Google vs. Microsoft" report that will be presented at the Gartner Symposium/ITExpo 2008 in Las Vegas this week.

Microsoft's bid for Yahoo plays into this strategy, and would make the combined company the clear No. 2 in advertising, Smith says.

In the other corner is Google, the search engine that has turned pay-per-click ads into a cash cow. The company is looking to take advantage of (and promote) the move to cloud computing with its Google Apps, which are free for consumers but have a per-user yearly charge for the premier edition targeting businesses.

Smith says he's not convinced Google is trying to make much money off Google Apps, and he predicts that while the effort may be a distraction to Microsoft it won't seriously threaten Microsoft's enterprise business anytime soon.

"When you look at the likelihood that Microsoft is going to make their progress in advertising, we think that's higher than Google making inroads into the enterprise," he says.

"It doesn't mean that Google won't make some progress," Smith adds. "But the use we've seen thus far in businesses is almost exclusively bottom-up, end-user driven. There are not a lot of executives of enterprises who have made a strategic decision to use those products."

To play devil's advocate here, Google Apps could wind up being widely adopted within corporations just like instant messaging and Linux spread virally through workforces and engineering teams. And Google has been addressing the security concerns that are the primary concern for corporate execs, and adding offline access.

Then there's the fact that Google's got a huge head start in online ads over Microsoft and even if Microsoft acquires Yahoo the gap wouldn't close.

Not to mention that the future of the licensed software market, which is already flat, feels more at risk than the world of online advertising, despite the economic slowdown. It's really hard to argue with free.

But Google does need to figure out exactly how it's going to make money off cloud computing, especially in the short term as software-as-a-service gains momentum. They did it with search; they could do it with apps too.

And now, onto the next round.