There was no let-up this week in the continual jostling for position among the world’s internet giants - with two big deals being struck involving three of the biggest players and dragging in a PC manufacturer for good measure.

Google and Dell

In a move that directly challenges Microsoft’s hegemony in factory-installed computer software, Google’s search technology will come free with all of number one computer maker Dell’s new PCs.

And the new relationship won’t end there…

“We are partnering on the advertising and there’s more to come,” said Eric Schmidt, Google chief executive.

Under the terms of the deal, Google could pay Dell up to $1bn for the privilege of mounting its software - including Google Toolbar and Google Desktop Search - on PCs, while online advertising revenues will be shared between the two companies.

Google already has a Personalized Google Dell Start Page, while Dell UK already bundles Firefox with new Dell computers.

“Computer users often don’t switch from the pre-loaded programs after they boot up a new computer, making this a lucrative market,” commented Amit Agarwal on his Digital Inspiration blog.

However, Mr Agarwal warned this could harm competition and innovation in the desktop search industry.

“If Google Desktop Search comes preloaded with a new Dell computer, users are highly unlikely to try new desktop search software like Copernic or X1 or Windows Live and will stick with GDS. Probably, they will miss the innovations from other desktop search companies,” he added. He also warned of implications for Microsoft whose software would exist on Dell computers but only be seen if users changed their default settings - “So it may be time for Microsoft to run to the Department of Justice”.

Alas, Microsoft’s new arch-nemesis has proven yet again to be one step ahead of Bill & friends,” added an unsympathetic James R Stoup on Apple Matters.

“By getting Dell to bundle their software they ensure that 33% of the market gets instant access to a Google product…This move will also serve to further the distance between Google and Yahoo/MSN/everyone else. Score one for Google!,” he said.

Mr Stoup went on to say that it was also one of the biggest signs yet that Microsoft’s domination of the IT world was slipping “but most important of all is the precedent this sets. If Google can do this with Dell then they can do it with anybody. Soon we may see every new PC pre-bundled with Google applications, not just their search utility”.

However, Infoweek quoted an analyst as saying that in the short term the Google/Dell link-up could benefit Microsoft because of its ongoing antitrust battle in the European Union.

”Initially this works in Microsoft’s favor, because they’re trying to showcase that there is no lock-in on the desktop…Right now, a couple of the big [hardware] guys going with Google is a good thing,” said Rob Enderle of the Enderle Group.

Yahoo and eBay

Meanwhile, Yahoo! was also bulking up its business this week, announcing it would provide graphical advertisements on eBay’s massive website, in a move which further reduces the number of potential distribution partners for Microsoft.

As Microsoft moves away from using Yahoo!-powered ads on its MSN search engine Yahoo! needs to make up the shortfall, especially after turning down a formal search partnership approach from its erstwhile customer.

As part of the eBay deal, Yahoo! will also provide “click-to-call” ads, which eBay signalled it would move into after buying Skype last year, and some search advertisements.

The limited search ads are probably because eBay does not want to detract visitors from the eBay products and auctions, which is logical,” wrote Danny Sullivan at Search Engine Watch.

Ebay said there had been no talks about furthering the partnership.

It’s tempting to say Google loses here, and while I am sure the company would love to have eBay’s site amongst its syndicated partners (like AOL and Ask), I am not surprised in the least that Yahoo won this round,” wrote John Battelle, search blogger and author of a book about Google. “The market tends to balance itself, and this is a major proof point.”

Get alerts on Alphabet Inc when a new story is published

Copyright The Financial Times Limited 2020. All rights reserved.
Reuse this content (opens in new window)

Comments have not been enabled for this article.

Follow the topics in this article