A looming threat to Google's search business is Microsoft's next release of its Internet Explorer browser. Why? Because Microsoft could build search into the browser in a convenient and compelling way, just as it's built into Firefox and Safari. In light of that, Joseph Nocera's NY Times article adds an important factor to the mix:
Mr Nocera discusses the impact and aftermath of the Microsoft (ticker: MSFT) anti-trust trial five years ago. The entire article (free subscription required) is well worth reading, but two points stand out:
- Since the trial, Microsoft has been far more cautious about leveraging its operating system and office productivity software dominance into other markets. In the words of Bradford Smith, Microsoft's General Counsel: "Every single decision the company makes with respect to Windows is made with a level of antitrust legal advice".
- The issue at the core of the litigation - that Microsoft should not have been allowed to "innovate" in ways that extended the operating system into new markets - was never resolved.
I've argued that the next release of Internet Explorer is sure to damage Google's (ticker: GOOG) search business. (That's why Google's contextual advertising business is potentially more valuable than its search business.) But Mr Nocera's article raises the possibility that despite the fact that both Firefox and Safari select a single provider as the default in-browser search option (in both cases Google), Microsoft might - perhaps - be reluctant to do the same thing.
Although Mr Nocera specifically addressed the threat to Google from Microsoft, Yahoo (ticker: YHOO) is equally exposed. Yahoo presents itself as a diversified company, but a disproportionate amount of its profits and growth come from paid search.