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Google and Microsoft appear to want many of the same things. Two years ago, when Microsoft saw that Google was threatening to dominate the Internet in much the same way Microsoft dominated the desktop, Microsoft began to move mountains to get into the search field. Since MSN released its own search tool earlier this year, the two firms have viewed the other as its chief rival and the competition between them has been tremendous. This summer, Google and Microsoft have been waging multiple battles across several fields from the courting of business in China to the courtrooms of King County. This week, a new battleground may be opening, this time in the Manhattan offices of Time Warner, the owner of AOL.

A September 15 New York Post article fueled speculation that Microsoft might be interested in acquiring a part of AOL and integrating it into MSN search. Today, rumours are circulating that Google is working to either block or outspend Microsoft’s bid. Compared with the other battles being waged between the two firms, the fight to own AOL could be a turning point for both companies.

It has been nearly six years since AOL purchased the Time Warner media empire for billions worth of stock certificates and just over five years since the bottom fell out of those stocks. Since that time, AOL has been the poor cousin in what had become the AOL Time Warner chain, performing so badly that the board of directors voted last year to remove the letters AOL from the corporate name.

In many ways, AOL has been synonymous with “second ran” for much of its existence. Its proprietary web browser, Netscape was all but destroyed by Microsoft almost ten years ago. Its user base, while still enormous, has been shrinking for several years. As an Internet Service Provider, most long-term web users liken AOL to training wheels for new-users. AOL has had few major successes in the past five years. The most obvious is the development of Firefox by the Mozilla Foundation, which AOL fostered but spun off two years ago. Another success, the reach of AOL’s advertising arm, is seen as the real prize being fought over by Microsoft and Google.

AOL provides Internet services to over 27-million people around the world. One of those services is a search-service and like most modern search services, AOL’s includes sponsored or paid advertising. Google provides search results and sponsored ads to AOL in an arrangement that supports about 12% of Google’s annual revenues. Google has long benefited from their partnership with AOL and will likely do whatever it takes to keep it.

Microsoft is very worried about the growth of Google and is determined to do whatever it can to emulate its success while hindering, slowing or stopping Google’s progress in key areas. A purchase of AOL would provide Microsoft’s MSN search division with two very powerful assets, the first being their own proprietary contextual advertising network, the second being a partnership of some sort with Time Warner (the world’s largest media conglomerate). The added bonus is the destabilizing effect of losing AOL on Google’s bottom line.

MSN needs to bulk up on its users if it is to be successful in paid-search. Gaining access to 27-million AOL members, along with millions of ICQ subscribers, CompuServe clients and AIM users, is a good way to very quickly increase an auditable user-base to serve paid-advertising to. Being able to tell potential advertisers that their ads might be viewed in the online editions of some of the world’s most popular print-magazines is a good way to boost advertising sales. Eating your competition’s lunch in the process is a priceless component to the deal that has obvious value in the long run.

In what might appear to be one of the highest stakes games of Monopoly ever played, AOL represents one of the few remaining high-power areas in which deals can be made, at least in the current configuration of the search game-board. Both Google and Microsoft would both see great benefits from an acquisition of AOL, including the virtual hobbling of the other.

This was a truly interesting week. On top of the Search Engine Strategies Conference in San Jose, the past five days provided search marketers a front-row view of international economic development, the growth of a media empire, the internal disruptive influence of corporate culture shifts, and a colligate game of “mine is bigger than yours.” While a happy family obligation kept me away from San Jose, the week had several profoundly powerful sleeper stories that show how serious, ironic and silly the world of search is. Read more…

Microsoft was successful in obtaining a temporary injunction preventing Dr. Kai-Fu Lee from taking over as the head of Google’s new research center in China. The ruling, issued by Kings County Superior Court Judge Steven Gonzalez forbids Lee from working on Google projects or research relating to search technologies, natural language processing or speech technologies, and business strategies that would be “competitive” with fields he studied while at Microsoft. Part of Gonzalez’s ruling also prohibits Dr. Lee from disclosing trade secrets or proprietary information learned while he was employed at Microsoft. It also forbade Google from “attempting to induce” Microsoft employees to work for Google. Read more…

Back in the good old days, headhunters never got sued. If a lawyer went nuts on you, there was always a good shrink available. Being a headhunter meant never having to say you were sorry. Corporate law has evolved substantially since then.

Today, Google is getting sued for headhunting one of the brightest techno-brains in China, Dr. Kai-Fu Lee . Actually, Dr. Lee was in Redmond Washington, working for Microsoft when the deal went down and Microsoft is pretty pissed about it all.

In a press release issued around noon on Tuesday, Google reported it had hired one of China ‘s most respected computer pioneers, Dr. Kai-Fu Lee. Problem is, until Monday afternoon anyway, Dr. Lee was the corporate VP of Microsoft’s Interactive Services Division. That got Gate’s goat, big time.

Hours before Google issued the press release, Microsoft issued suit in a Washington State court against Dr. Lee and his new employer, citing breach of contract. They are seeking an injunction to prevent Dr. Lee from taking his new position as head of Google’s China Division.

“Accepting such a position with a direct Microsoft competitor like Google violates the narrow non-competition promise Lee made when he was hired as an executive,” Microsoft said in its lawsuit, as quoted today in a ZDnet report . “Google is fully aware of Lee’s promises to Microsoft, but has chosen to ignore them, and has encouraged Lee to violate them.”

The suit seeks monetary damages for the loss of Dr. Lee’s services as well as injunctive measures to prevent Dr. Lee from violating a narrowly worded non-competition agreement or sharing information Microsoft claims as its intellectual property. The lawsuit states that Dr. Lee was for some time, “responsible for overall development of the MSN Internet search application.”

Calling Dr. Lee’s move a “particularly egregious” violation of a non-competition agreement that was part of his contract with Microsoft, Deputy General Counsel, Tom Burt said Dr. Lee “…has access to sensitive information, to trade secrets about our search technology and business plans and our China business strategies.”

Google is planning to open a massive Research and Development Centre in China by the end of October. With decades of investment in science and engineering, and many of the world’s top technical universities, China is seen by most in the industry to be the leading IT nation in the near future. It also has an economy developing at 9% or more per year, three times faster than most G8 economies.

The press release noted these factors stating, “China , with its thriving economy and excellent universities, is home to many outstanding computer scientists and engineers. By establishing an R&D center in China , Google is making a strong commitment to attracting and developing Chinese talent, as well as partnering with local universities and institutes. The selection of Dr. Kai-Fu Lee to lead this important operation underscores Google’s commitment to building a successful Chinese product research and development center and to expanding its international business operations.”

Google VP of Engineering, Alan Eustace said, “The opening of an R&D center in China will strengthen Google’s efforts in delivering the best search experience to our users and partners worldwide. Under the leadership of Dr. Lee, with his proven track record of innovation and his passion for technology and research, the Google China R&D center will enable us to develop more innovative products and technologies for millions of users in China and around the world.”

As for Dr. Lee himself, apparently he informed his boss at Microsoft on July 5 th that he wasn’t coming back from a sabbatical he had planned and that he was in discussions with Google about China. In yesterday’s press release, Google spokespersons quoted Dr. Lee saying, “It has always been my goal to make advanced technologies accessible and useful to every user, as well as to be part of the vibrant growth and innovation in China today. Joining Google uniquely enables me to pursue both of my passions and I look forward to returning to China to begin this exciting endeavor.”

This is bound to get more interesting as time develops.

The Rubicon has been crossed. Even for traditionalists, there is no going back. The Internet has finally become the world’s primary marketing tool, fundamentally altering corporate ad planning and spending. Momentum had been building around the online marketing sector for over three years but 2005 appears to be the year that mainstream marketers notice their universe has changed. Read more…

Bill Gates is blowing smoke at Google again. Twice this week Gates has said nasty things about Google. Yesterday he was sounding sort of high-school churlish with his statement, “Google is still perfect; the bubble is floating, and they can do everything. You should buy their stock at any price. We had a 10-year period just like that.” Read more…

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Monday, April 18th, 2005

Adobe to purchase Macromedia

Adobe Systems Inc. has announced an agreement to purchase Macromedia for approximately $3.4Billion in stocks.

Adobe and Macromedia both make software for the creation of web documents. Adobe’s most famous product is the document security software Acrobat. It also makes the popular website editing software GoLive, and image editors Photoshop and Illustrator. Read more…

Several forums are tackling the Autolinks feature in Google’s new Toolbar v3(Beta). It’s getting ugly friends.

Accusations of spyware, adware and malware are springing up beside the obvious comparisons with Microsoft’s previous abuses of their powerful position.

Over at Jill Whalen’s HighRankings Forums, the discussion turns towards class action lawsuits.

Meanwhile, over at CNet, reporter Stephanie Olsen speculated on Google’s hiring of former MS product manager (and the original author of the failed MS Smart Tag auto-link software) and the fact that Microsoft continues to hold the patent on auto-linking.

Even in the quiet retirement community of Palm Springs the local daily, The Desert Sun raises questions about Google Maps (a main feature of Google autolink) and a person’s right to privacy. After writing such an angry article, one wonders what will happen if the author Cindy Uken starts to dig a little deeper.

Google is flirting with the event horizon of a massive PR nightmare.

What would you do if you were tasked with designing a new search engine?

You have all the resources the world can offer and the certain knowledge that your project is so important to your employer that mountains, molehills, companies, code and really comfy office chairs will be moved, built or acquired to meet your needs, no questions asked. Your boss demands a product that is better than best and, having failed to notice how overwhelmingly essential search would become back when he came to dominate everything else, appears ready to back your project with missionary zeal and Machiavellian maneuvering. The cold hard truth is, the future of one of the largest corporations in the world, owned incidentally by the world’s wealthiest man, may well rest on your shoulders. In this scenario, there are no obstacles, only the challenge of beating Google at Google’s best game. Whoa…. Read more…

Apple Computers CEO Steve Jobs has scooped rival Bill Gates for the umpteenth time in their parallel careers. Yesterday, Jobs unleashed TIGER, the new Apple O/S. Tiger’s main feature, aside from providing an operating environment is SEARCH. Helping users find documents, email, and websites on their hard drives, intranets and the greater Internet, Tiger seems to have taken the important pages from the MS engineers’ notebooks. For anyone who has seen the movie “Pirates of Silicon Valley“, this seems to be a bit of ironic justice. Sometimes I wish I was a MAC user.

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