Microsoft Outspending Google to Gain Share

Some see irony in Microsoft's unsuccessful attempts to compete with the new tech bully on the block, Google. But for the software giant, beating Google isn't just a matter of pride, it's about survival. So with consumers picking Google's search technologies over Microsoft by a factor of 6 to 1, Microsoft has only one choice: It must outspend Google in a bid to regain lost share.

This strategy, such as it is, takes many forms. The most infamous of these, perhaps, are the company's consumer pay-back programs for Live Search, which reward users for choosing Microsoft's search service instead of Google. There are two such programs, Live Search Cashback which literally pays shoppers to search for products using Live Search, and Live Search Perks, which awards virtual "tickets" for each Live Search-based search. Users can then redeem these tickets for prizes that range from free music downloads to air miles.

Microsoft has also outspent Google when it comes to lobbying, an activity that the software giant is much more familiar with now, thanks to its decade-long antitrust trial. Microsoft spent over $2 million in the third quarter of 2008; this sum is roughly the same Google spent on lobbying in the first 9 months of the year. Microsoft spent $7 million lobbying in the first 9 months of 2008 and $9 million in 2007. Google spent just $1.5 million in all of 2007.

What Microsoft's lobbying efforts have accomplished is indisputable: The US Department of Justice (DOJ) scuttled a Google plan to rescue rival Yahoo! on the grounds of, yes, antitrust concerns. Compare that result to the antitrust non-event that occurred a year earlier when Google purchased DoubleClick, sealing its dominance of online advertising.

In a similar vein, Microsoft has also outspent Google when it comes to political spending. Google contributed $282,000 during the 2008 presidential campaign, a sum that was easily dwarfed by Microsoft's $1.7 million. Guess which company is more likely to have the ear of policy makers going forward?

Finally, Microsoft has outspent Google in attempts, usually successful, to wrest deals away from the Internet giant. When the US wireless carrier Verizon announced its intention to work with Google on a wireless Web search agreement, Microsoft swooped in. It offered Verizon double the guaranteed payments that Google was willing to offer, a deal that will see Verizon earn up to $650 million over the next five years. In addition, Microsoft is working to see the number of Windows Mobile phones sold through the carrier increase over this time period as well. Reports suggest that Microsoft is essentially giving away the Windows Mobile software in order to secure the deal.

Will these and other tactics help Microsoft regain lost share in the Web search market? So far, nothing else has worked. And the company needs to buy some time while it readies its Azure cloud computing platform for general use. As Microsoft noted in a recent briefing, that's where the action really is. Internet search is responsible for just 3 percent of the time people spend online, Microsoft tells me. So while the company will continue working on search, it also feels that the other 97 percent is important as well.

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