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Forget browser wars, prepare for toolbar wars

Potential deal between Google, Dell highlights turf battle over choices PC users have when first booting up.

Fighting for icon space on the desktop is so 2001. The new frontier on a virgin PC is the browser, and Internet companies like Google are jostling for space on the browsers of new PCs.

Dell and Google are evaluating a partnership in which the Google Toolbar, Google Desktop Search and a Google-designed Dell home page are included on new Dell PCs, a Dell representative confirmed.

The Wall Street Journal reported Tuesday that the companies are mulling a three-year partnership that could bring as much as $1 billion in revenue to the PC maker for letting Google install its software on Dell machines. The Dell representative declined to comment on the future of the relationship between the two companies. A Google representative confirmed the two companies were testing the search giant's products on new Dell PCs, but declined to comment further.

The browser, not the desktop, has become the most sought-after piece of real estate on a new PC, said Roger Kay, president of Endpoint Technologies Associates. Five years ago, PC companies were giddy over the prospect of renting space on their boxes' desktops to the highest bidder, after Microsoft's antitrust settlement with the U.S. Justice Department forced it to open up the Windows desktop to increased competition.

Companies such as America Online and CompuServe rushed to get prominent placement for their dial-up services on new PCs, but the move didn't pay off as they had hoped. PC users simply ignored icons they didn't wish to use, or used cleanup programs to remove all icons from their desktops or start menus, Kay said. However, just about every PC user who's connected to the Internet uses the browser at least once a day, and browser toolbars that contain useful utilities such as Google's search engine will grab a user's attention, he said.

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These preloaded toolbars also give PC companies a way to supplement their revenue without any additional cost, said Stephen Baker, director of industry analysis with NPD Techworld. "Even two bucks is important to them," he said, noting the notoriously low margins of the PC industry.

Google already has partnerships with PC makers such as Hewlett-Packard, Sony, Apple Computer and Toshiba to distribute the Google Toolbar, according to a Google representative quoted by Reuters on Tuesday. Gateway said Tuesday that it's shipping the Google Toolbar with new PCs.

Google rivals such as AOL, Yahoo and MSN are likely perusing similar deals or negotiating for their own unique space on a new PC, the two analysts agreed. to supply an AOL-branded home page as the default start page on new Sony Vaio PCs.

"Everybody's nervous about Google to begin with. They're like that loaded shotgun that's just lying around--nobody's sure when it's going to go off," Baker said.

As software companies move toward the emerging model of delivering software as a service over the Internet, hooking PC users on one brand or another early on will become extremely important, Kay said. "They know half the people aren't going to switch the defaults" even if they are provided with choices, he said. Google announced the Google Pack, a collection of search and organization software, at the recent Consumer Electronics Show, and Dell Chairman Michael Dell expressed interest in possibly including the software on Dell PCs.

But Google might be disappointed with the returns it gets on its investment in browser real estate, Baker said. Google's brand is already so well known that investing a billion dollars in this type of preferred placement might be a very expensive way of marketing to PC customers who already use Google's products, he said.

CNET News.com's Ina Fried and Elinor Mills contributed to this report.