I realized last week that somehow inexplicably, Microsoft has become the underdog. Want proof? The US Justice Department *and* the EU approved the search deal with Yahoo! That the United States approved the deal is not really news because Justice has rarely met a deal it didn't like no matter how bad it might have looked, but the words it used suggested that this deal was necessary to check Google's growing power in consumer internet search.
The question is how did we get here and how did Microsoft, a company with more than $40 billion in the bank suddenly find itself in second (or even third place) in the on-going battle for technology dominance?
Mac World reported on the Justice Department's statement:
The Commission said its investigation shows that market participants expect the Microsoft-Yahoo deal “to increase competition in Internet search and search advertising by allowing Microsoft to become a stronger competitor to Google.”
So Bing is suddenly the big hope against Google's growing dominance? What's interesting to me is that if you look at data from Comscore, Google search traffic has basically held steady, while Bing's has increased slightly and Yahoo's has decreased slightly. What does that mean? It means that Bing is capturing traffic, but not from its rival. It's taking traffic from its partner.
With Bing running its backend, it also makes you wonder, exactly why anyone would use Yahoo! moving forward. One of Bing's strengths is its attractive interface. Yahoo! doesn't really have much to differentiate itself after this deal goes through, so how does this help Yahoo! or Bing?
Regardless, Microsoft is back in the pack looking up at a market leader, and search is not the only place where you're seeing this.
Windows Phone 7
Last Week, Microsoft released Windows Phone 7. It has XBox games and Zune music services. It has access to Office and SharePoint, and it's pretty, but does it matter? It won't actually be appearing on phones until sometime in the Fall, an eternity in the cell phone market in which Microsoft finds itself hopelessly behind the market leaders. Microsoft seems to have become an afterthought in search and in mobile. How did this company that once dominated reach this point?
Google and Apple are Looking Uglier All the Time
Meanwhile, Google hasn't been making a lot of friends lately with its botched release of Google Buzz, and Apple is looking dicatorial with its militant anti-Flash rhetoric and its decision to remove all pornographic material from the App Store. Yet these companies have lurched ahead of Microsoft in mobile and search.
Microsoft can take heart though because it has that big cash reserve, which gives it years to find its way back. Combine that with a fickle consuming public and (as they are well aware) things can change fast.