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Will Microsoft go ahead with its plans to buy Google? Colin Selfridge is worried that a deal could erode the ethos that has made...

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Will Microsoft go ahead with its plans to buy Google? Colin Selfridge is worried that a deal could erode the ethos that has made the search engine so popular, and at worst lead to another dotcom bust.

 



Microsoft's statement that it might be interested in either buying or merging with Google follows in the wake of the latter's announcement that it is considering floating on the stock market.

Microsoft has an established track record of either bidding for a successful company within a particular market, or for developing a rival version of a product with a view to carving out a significant market share.

Google has meanwhile caused some consternation within the financial community through its adoption of a "Dutch style" float, whereby bankers are by-passed and stocks are offered directly to the public.

Established in the late 1990s by two Stanford University students, at the end of its first year Google's turnover was £600,000. Two years later turnover was £14.7m. Today, its turnover is in the region of £1.2bn and it is valued at £6bn to £9bn.

As it is not yet publicly listed, commentators can only speculate about Google's profitability, with estimates ranging from £30m to £177m. Google currently boasts about 67 million users worldwide and performs about 150 million searches a day.

At its launch, Google could perform a basic search in about four seconds. It can now scan three billion web pages in about 0.2 seconds. The reason Google has been so successful, and where it differs from competing search engines, is that rather than ranking results according to payment, they are ranked according to relevance.

Google generates revenue from two main sources: advertising revenue and by licensing its search technology to third parties, including search engines such as Yahoo. Just as its results are ranked according to relevance, so its on-screen adverts are linked to web searches, making them more relevant than adverts on competing search engines.

Would Google's intuitive, rank-based search engine alter in the wake of a successful bid from Microsoft? Might Microsoft be tempted to attach a higher priority to its own products and adverts than its competitors, thereby pushing them up the ranks in the search results? Would a rebranded Google (Microogle?) become mired in a multitude of links to other Microsoft products and services?

Cynics and Microsoft's many critics might not hesitate to answer in the affirmative, but were Microsoft to do so, it would be threatening the one feature that has made Google a success.

An aspect of Google that may appeal to Microsoft is that, as the former continually develops its product and launches offshoots - such as price comparison engine Froogle - it remains a search engine. In contrast, Microsoft offers a diverse range of products requiring significant investment in research and development over a range of sectors.

But as Microsoft's interest in Google raises various anti-trust issues, it seems that any bid will be subject to scrutiny by the US Federal Trade Commission.

Meanwhile, given the degree of uncertainty about Google's profitability, the stock exchange and the IT industry have already expressed concern that any deal between Microsoft and Google might not so much fuel a new IT or dotcom boom, but lead instead to a new dotcom bust.

Could we be set to return to the mid to late 1990s, when internet companies were grossly overvalued as a consequence of the popularity of their shares? Certainly, the memory of many financiers and investors is short, and history has a tendency of repeating itself.

What do you think?

Would you approve of Microsoft buying Google?  Tell us in an e-mail >>  ComputerWeekly.com reserves the right to edit and publish answers on the website. Please state if your answer is not for publication.

Colin Selfridge is senior IT manager at French Duncan chartered accountants

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