The Battle for AOL Heats Up - The Growing Rivalry
(Page 3 of 4 )
Earlier this year, Microsoft sued Kai-Fu Lee after he defected to Google over a non-compete agreement he signed with MSN. "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. "Google is fully aware of Lee's promises to Microsoft, but has chosen to ignore them, and has encouraged Lee to violate them.
"He has access to sensitive information, to trade secrets about our search technology and business plans and our China business strategies," [Microsoft’s] Deputy General Counsel Tom Burt told CNET News.com. "He has accepted a position in direct competition with Microsoft in those areas." In the first of the hearings held in early September, 2005, to uphold the injunction Microsoft asked for, not allowing Lee to have anything to do with Google’s search technology until after the trial next year; making him no more than a highly paid recruiter.
A former engineer, Mark Lucovsky, testified to Ballmer’s reaction to the news of Lucovsky’s resignation, which was throwing a chair in anger, then allegedly saying, “Just tell me it’s not Google.”
On top of that, there is another recent competition between Google and MSN over VoIP (voice over IP) technology, both having offered consumers Internet phone-call capabilities within one week of the other. Google Talk is a downloadable Windows-based application for instant messaging and PC-to-PC voice calls; Microsoft’s acquisition of VoIP startup Teleo, Inc. includes plans to expand voice over IP capabilities over its instant-messaging software, MSN Messenger. The same day Google released its messaging/VoIP software, Microsoft disclosed an upgrade in MSN Messenger to version 7.5, offering voice-chat quality and other features.
The renewed vigor and motive(s) for MSN acquiring AOL now seem more like a personal vendetta than a strategic financial move, so I’m surprised that more speculation regarding Google’s latest stock offerings concerning MSN didn’t emerge immediately.
MSN’s user base for their search engine has been on the steady decline, from 28% of the market share in 2000, to roughly half that today. However, they’ve seen a rise in revenues from advertising increase from 30% to 57% in the past three years, and up to $337 million in the last quarter from $228 million from the year-ago figure.
AOL’s subscriber revenues have continued to dwindle over the last few years as well, and what may look like a last ditch effort by Time-Warner’s CEO, Dick Parsons, to put AOL front and center really comes as no surprise to analysts. After Time-Warner acquired AOL in 2001, it was projected that AOL could increase Time-Warner revenues by 10%. Instead, the company has seen several quarters of billions dollar losses. Throw in a few settlements with the Department of Justice and the SEC totaling over $700 million, and you could probably see how this could add up to some huge financial difficulties. Despite the fact that subscriber revenues keep falling, AOL’s ad revenue is increasing at a fast pace. But powering this ad revenue is Google. Will AOL bite, then, the proverbial hand that feeds them? In 2004, AOL received about $300 million in revenues from the arrangement between Google and AOL.
Next: Who Will Grab AOL? >>
More Search Engine News Articles
More By Jennifer Sullivan Cassidy
