The power of Google

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Just as we were about to hit the presses, Internet search engine aristocrat Google fixed its price of sale for its forthcoming IPO. It was set at a staggering €29.8 billion — greater than the current market valuations of old economy giants Ford or McDonalds.

The fact that Google is taking the unprecedented step of using an auction to sell its shares means that it might get an amount of cash in line with the inflated hype and expectation, and not with that of the substance of the financial model. While Google’s share price post-IPO may fall and disappoint many investors, it has succeeded in providing Microsoft’s search engine business with some serious
competition in the post-antitrust era. Google now owns 40 per cent of the search market, compared with 30 per cent for Microsoft’s MSN technology. With Google’s ad-driven search technology maturing more quickly than expected, surely it is only a matter of time before Microsoft launches a rival product from within the Windows environment?

Maybe not. Every strategic movement from Microsoft is under the spotlight in the wake of the 2002 anti-trust case in the US, and ongoing and intense scrutiny from the European Commission. Indeed, the EC declared in mid-2003 that it might force Microsoft to remove its Windows Media Player from the Windows XP operating system because Media Player allegedly competes unfairly with players from RealNetworks, Apple and others. As a result of pressure, Microsoft has already agreed to change a Windows Media Player music-shopping feature that persisted in launching Windows’ Internet Explorer browser, even when the user had set another program as the default browser.

As for fears that Microsoft might try to monopolise Internet search, internal sources at the company claim that plans for upcoming version of Windows focus on improving local PC searching, rather than on developing an Internet search product to rival Google. Let us hope that the powers that be — the US Department of Justice and the European Commission — can keep Microsoft in check so that Google’s innovative search engine doesn’t become another Netscape Navigator — effectively annihilated by the launch of a rival product embedded within the Windows OS.

11/10/04

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