Microsoft throws more cash at search market

John Shinal · June 2, 2008 · Short URL:

I'm not sure if Microsoft has definitively decided to stop trying to acquire all or part of Yahoo or is just putting more pressure on CEO Jerry Yang to try and complete a deal.

But after spending the better part of four months pursuing a strategy that can be called, "sell to us or else, Jerry," Microsoft sure looks like it's implementing a Plan B in its pursuit of more search market share.

Microsoft today struck a deal with Hewlett-Packard to make LiveSearch the default consumer search engine on the desktops of HP PCs in 2009 -- thereby replacing Yahoo search.

Like its plan to pay people to buy things using the LiveSearch service, the HP deal is more evidence that Microsoft plans to dust off its old playbook and fight for market share using its huge cash hoard.

There was a time when Microsoft had to walk a fine line with this kind of agreement to get preferred status on a PC maker's desktop. That's because it did (and still does) have to adhere to the consent decree that a U.S. federal judge slapped on the company after it was found to have abused its Windows monopoly.

In fact, before it shipped Vista, Microsoft had to make some minor changes to the software to allay concerns that it would coerce new PC buyers into adopting its MSN service as the default search engine.

But given that Google keeps extending its dominance of the search market, while Microsoft's share is languishing, no judge is going to torpedo this kind of deal --  especially since Google signed a similar deal with Dell back in 2006.

Once again, the big loser is Yahoo, which is now faced with a situation where its two main search rivals have sewn up agreements with the two largest PC makers.

Back in October, Ballmer gave a great performance when he told a Web 2.0 audience that before Microsoft could catch Google, it would first have to catch the No. 2 player, meaning Yahoo.

Based on these last two moves, it looks like Ballmer has decided to turn up the heat on Yahoo and present them with a tough choice: sell to Microsoft, or face a relentless assault from its well-funded, persistent rival. 

That's not going to be a fun place for Yang, his board of directors, or anyone else at Yahoo. 

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