Google to Microsoft: Bring It On

Google CEO Eric Schmidt fired an exquisitely crafted shot across Microsoft's bow yesterday in response to rumors that the software company may still team up with Yahoo and challenge Google for supremacy in the search business. At San Francisco's Morgan Stanley Technology Conference, Schmidt announced that if the two companies gang up on his little service, "[W]e wish them the best of luck."

Schmidt had just one minor concern: that Microsoft is a grasping, voracious monopoly bent on world domination. "The problem has to do with Microsoft's ability to use its Windows monopoly to restrict consumer choice," Schmidt said, according to AFP. "Anything that Microsoft would do that would eliminate consumer choice with respect to search engines, Internet browsers, distribution, for which it was previously found guilty, are of concern and there's a history of that. So that's what we worry about." Oh, that's all?

Yahoo CEO Carol Bartz also showed up at the Morgan Stanley conference, and she was only a little less hostile to Microsoft. If the two companies did begin negotiating a deal, she declared, those negotiations would be strictly private, a not-so-thinly veiled reference to Microsoft's $47.5 billion hostile takeover bid last year. In addition, Bartz said that any deal that merged search operations would have to include preserving Yahoo's access to search data, so the company could continue to refine its search operation and more accurately match ads with search users. "We would never debone the company," she declared.

Bartz has been hard at work reformatting the company since taking over from Jerry Yang, the Yahoo founder who blew the deal of a lifetime when he turned down Microsoft's original offer. She has streamlined the company's management structure and focused on its news, finance, and e-mail sites, reversing a trend in which Yahoo struggled to figure out whether it was a search engine or a news and e-mail portal. But Bartz has no intention, she said, of abandoning search, and Yahoo will have to be an equal partner in any Microsoft deal.

Meanwhile, Microsoft has been quietly developing a new search service in hopes of outmatching Google's search capabilities. Dubbed Kumo, which is Japanese for both cloud and spider, the service is presently being tested inside the company to work out the bugs and improve service before Microsoft unveils it to the public. (Tech reporter Kara Swisher has an internal memo about the service from Satya Nadella, Microsoft's head of search, as well as three screen shots of the search page.)

But even if Kumo takes off, Financial Times tech reporter Richard Waters doubts that Microsoft could use it to dramatically erode Google's share of the market. Although search is still somewhat imprecise, and users still have to root around a lot of irrelevant pages before they find what they're looking for, any improvement to search will be incremental and piecemeal, Waters writes. Google's achievement was a quantum leap forward at a time when its competitors were largely ignoring search, and it established Google's brand firmly in the minds of consumers. No one will be able to accomplish that again, and Google is likely to stay the search engine of choice for a long time.