For some reason, Sergey Brin and Larry Page of Google never got the memo explaining how everyone is supposed to be terrified of Microsoft. This drives Microsoft CEO Steve Ballmer nuts. Ballmer, the blustery baldy who gleefully plays the role of technology's biggest villain and relishes his company's status as the world's most powerful software shop, has vowed for years that he will kill Google. But Google just keeps getting stronger. It's like they're taunting him! (Click here to follow Dan Lyons).
So now Ballmer is making a radical move: he's offered to pay Rupert Murdoch's News Corp. to remove all its content from Google, which includes newspapers like The Wall Street Journal, the New York Post, and The Times of London. Presumably, if people could not find News Corp. content when they did a Google search, they'd be more inclined to use Microsoft's search engine, Bing, instead. Supposedly, Microsoft has been offering the same deal to other publishers too.
At first blush, this approach to buying market share sounds appalling. It's like Ford sending people to stand outside Toyota dealers and say, "Look, we'll give you $1,000 not to go in there." But what else can Microsoft do? It's tried for years to compete with Google the old-fashioned way. But Google still has 65 percent of the search market, compared with 10 percent for Microsoft.
It's easy to see why Murdoch might like Ballmer's proposal. Murdoch has been grumbling for a while now about Google getting a free ride on his content. Google creates snippets* of news articles, places ads next to them, and keeps all the money. Google insists this lopsided arrangement is fair because some readers click on the snippets and get directed to the original article. Nevertheless, media companies are struggling, while Google has earned $5 billion in profit on $22 billion in sales over the past year. Neither News Corp. nor Microsoft would comment on the talks. Google wouldn't either, but said in a statement that publishers are free to remove their content from Google's index at any time.
This battle over news and search engines is only part of a much larger war between Google and Microsoft, one in which Google appears to be gaining ground by making knockoffs of Microsoft products and giving them away. Google's latest attack involves an operating system called ChromeOS, which it intends to give away starting late next year. ChromeOS is intended to run on low-cost netbooks that business travelers might use to check e-mail and browse the Web. But eventually it could run on laptops and PCs too.
Microsoft scoffs at the idea of Google becoming a serious rival in operating systems. But the price tag on ChromeOS is going to appeal to hardware makers. Those guys are trying to make money on devices that cost $300 or less. If they can save a few bucks by not having to pay a license fee to Microsoft, that's a big deal.
For a preview of what might happen, look at mobile phones. Once upon a time, Microsoft's Windows Mobile operating system had 13 percent of this market. Today its share is less than 8 percent, according to Gartner, a research firm. Handset makers that used to license Windows Mobile are now embracing a free operating system called Android—made by Google.
If you're thinking that all this competition must be great for customers, well, yes and no. The World According to Microsoft has plenty of flaws, but I'm not sure The World According to Google will be any better. The reason Google makes software and gives it away is that its business model is all about advertising. It just wants to get more people onto the Internet and show them more ads.
I'm afraid we may be headed toward a world where some devices will be free or really cheap, but when you use them you'll be bombarded by ads—or pay a premium to escape them. Apple recently applied for a patent for a technology that not only shows you ads but also forces you to watch by freezing your device until you comply.
The sad truth is that Google and Microsoft care less about making cool products than they do about hurting each other. Their fighting has little to do with helping customers and a lot to do with helping themselves to a bigger slice of the money we all spend to buy computers and surf the Internet. Microsoft wants to ruin Google's search business. Google wants to ruin Microsoft's OS business. At the end of the day, they both seem like overgrown nerdy schoolboys fighting over each other's toys.