April 25, 2007 6:40 PM PDT

Analysts: Microsoft's after Google's ad business

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 reorganizations and personnel issues.

"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 YouTube, he said. "They are viewed as a bully," he added.

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 became the world's top Web property, according to the latest figures from Web traffic tracker comScore. And in January, Fortune ranked Google the best place to work 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."

See more CNET content tagged:
David Smith, Gartner Inc., Google Inc., Internet search advertising, vice president

7 comments

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Gartner= B.S. !!!
<eom>
Posted by anarchyreigns (299 comments )
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Stunning logic!
No doubt what caused you to waste your money on Zune and Vista LOL!
Posted by expatincebu (156 comments )
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Windows Live Stillborn
Zune and Vista were just really bad development programs with predictable conclusions. No one is surprised at MSFT's slack-jawed, drooling incompetence.

Live was supposed to be MSFT's response to the Web making all its core products irrelevant. It's a living confession of MSFT's complete miscomprehensive of the Web.

If there was one conclusive indicator of MSFT's doom, it is Windows Live.

If you haven't shorted MSFT's now, you may be too late.
Posted by Sumatra-Bosch (526 comments )
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Remember Baby "Moses" In The Basket!
"If you haven't shorted MSFT's now, you may be too late."; are you kidding or what, perhaps you are forgetting there is the Golden "Ray" at MSFT to chart the course for the Redmond Ship which may just be on a slow GROOVE that is making "Windows Live" looks like a "Stillborn"!
Posted by Commander_Spock (3123 comments )
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Never a shortage of Opinions
You may want to first review MSFT latest quarterly results announced today = record revenue and profit....
Posted by Shakingmy head (48 comments )
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Never a shortage of Opinions
You may want to first review MSFT latest quarterly results announced today = record revenue and profit....
Posted by Shakingmy head (48 comments )
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