Why Ballmer and Murdoch's attack on Google is doomed
Competitor-focused strategies fail, while customer-focused ones win. This comes to mind in thinking about a possible deal to take search advertising market share from Google (GOOG). It's now well known that Microsoft (MSFT) and News Corp. (NWS) are discussing teaming up in an effort to take out a rival (the competitor-focused strategy), whereas Google is on the side of creating competitively superior value for consumers and the advertisers seeking to reach them (the customer-focused strategy).
Google's approach is better because customers are the ones who are paying, and while Microsoft and News Corp. are busy trying to take a piece out of Google's hide -- with Microsoft paying News Corp. to remove its links from Google and put them on Bing -- their struggles to partner will distract them from serving customers. And that could give Google a chance to take search traffic away from Bing.
If the News Corp./Microsoft partnership ended up producing better value for consumers and advertisers than Google, then it might work. But since the object of their partnership seems to be to harm Google, the strategy is likely to backfire. Some numbers suggest the uphill battle that Microsoft and News Corp face. The Times notes that Google has 65% of all U.S. search inquiries, while Bing handles 9.9% of them.
Who Gets Hurt
If this deal goes through, it could make things very uncomfortable for the content providers that would lose a huge amount of traffic with the idea that they can make up some of the difference if Bing ends up dominating the market. The lost traffic would lead advertisers to pay the content providers less money.
One provider the deal would hurt is News Corp. BusinessWeek reports that Google accounts for 26.3% of the Web traffic to The Wall Street Journal alone. And it also points out that most of the newspapers in the Newspaper Association of America use Google for 30% of their online traffic. Even Microsoft's deal to handle Yahoo's (YHOO) 18% share of the search market would leave Microsoft with a mere half of Google's share.
Simply put, this deal is all about the egos of Steve Ballmer and Rupert Murdoch -- and not about creating a better value for customers. Ballmer is determined to crush the $22 billion behemoth Google, and Murdoch must prove that he can rescue the newspaper industry from the onslaught of the Web.
Both are on the wrong side of history.
Peter Cohan is a management consultant, Babson professor and author of nine books, including Capital Rising (due in June 2010). Follow him on Twitter. He has provided consulting services to News Corp.'s CEO and has no financial interest in the securities mentioned.