Inside Microsoft’s War Against Google

It’s April, and Microsoft’s top U. S. salesman for online advertising, Keith Lorizio, is visiting clients in New York City. In a midtown office tower, he sits down with Nicholas Utton, the gregarious chief marketing officer at online broker E*Trade. Utton is plenty impressed with Microsoft’s technology, and he’s a big advertiser on the company’s MSN Money site. But when it comes to Internet search sites, the largest and most lucrative advertising market online, Utton makes it clear that Microsoft is, as he sees it, way behind front-runner Google. “They’re not getting much of our search dollars,” he says.Lorizio’s pitch just got even tougher. On May 3, Microsoft CEO Steven A. Ballmer withdrew his offer for Web giant Yahoo!, the No. 2 power in online ads, after the two sides failed to agree on a price. Ballmer had said that the proposed acquisition, which valued Yahoo at $47.5 billion, was the best way for Microsoft to gain the scale necessary to compete against Google for online advertising dollars. Now, after three months of talks, it looks as though Microsoft and Yahoo will be left trying to catch Google on their own, at least for now. And their prospects are grim. “We think Google’s the winner,” says Clayton F. Moran, analyst with the financial-services firm Stanford Group. “Its two main competitors are separate and floundering.”

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