New browser sends user queries to MSN

Washington, DC (Monday, May 1, 2006) -- With a $10 billion advertising market at stake, Google is objecting to the way that it says Microsoft is wielding control over Internet searching in its new Web browser.

Google, which only recently began beefing up its lobbying efforts in Washington, says it expressed its concerns in recent talks with the Justice Department and the European Commission, both of which have brought previous successful antitrust actions against Microsoft.

The new browser includes a search box that is typically set up to send users to Microsoft's MSN search service. Google contends that this positions Microsoft to unfairly grab Web traffic and advertising dollars away from its competitors.

The move, Google claims, limits consumer choice and is reminiscent of the tactics that got the company into antitrust trouble in the late 1990s.

"The market favours open choice for search, and companies should compete for users based on the quality of their search services," said Marissa Mayer, the vice president for search products at Google. "We don't think it's right for Microsoft to just set the default to MSN. We believe users should choose."

Microsoft replies that Google is misreading its intentions and actions. It says the default settings in the browser, Internet Explorer 7, are easy to change. And it says the product was designed with consumers and many partners in mind -- even though it might not be to the liking of Google, the leading search engine.

"Whatever behaviour happened in the past, the guiding principle we had is that the user is in control," said Dean Hachamovitch, general manager of the Internet Explorer group.

Companies often talk with antitrust officials, and the talks do not imply that an investigation is imminent. But they do indicate that Google is pursuing every option in its escalating rivalry with Microsoft, which has already led to some public battles.

Last December, Google outbid Microsoft to remain the primary search service on America Online, paying $1 billion and taking a 5 per cent stake in AOL. Last year, Microsoft sued Google to stop a computer scientist and manager at Microsoft, Kai-Fu Lee, from working on search technology at Google. The suit was settled, and Lee runs Google's operations in China.

Microsoft first made IE 7 available to the public for downloading last week in a test version. It is the first new release of Microsoft's browser in five years. A final version is expected to be released this summer and will be included in Microsoft's new operating system, Windows Vista, set for release in January.

The focus of Google's concern is a slender box in the upper right-hand corner of the browser window that allows users to start a search directly instead of first going to the Web site of a search engine such as Google, Yahoo!!! or MSN. Typing a query and hitting "Enter" immediately brings up a page of results from a designated search engine.

That slice of virtual real estate could be enormously valuable, and Microsoft is the landlord. Internet Explorer 7 is the first Microsoft browser to have a built-in search box, while non-Microsoft browsers such as Firefox, Opera and Safari have had them for some time. Google estimates that the boxes, when available, are the starting point for 30 to 50 per cent of a user's searches, making them a crucial gateway to the lucrative and fast-growing market for advertisements that appear next to search results.

Microsoft has lost some ground in the browser market in the past year, mainly to Firefox, which is a Google ally. But Microsoft still holds more than 80 per cent of the market. And Internet Explorer 7 is expected to be extremely popular because it is an improvement over Microsoft's previous browser and because Microsoft will promote downloads of it and include it in Windows Vista.

That would let Microsoft use the browser to steer substantial traffic, and business, to MSN and away from rivals. MSN handled 11 per cent of searches in the United States in March, down slightly from a year earlier, according to Nielsen/Net Ratings, a market research firm. That put it well behind Google, which had a 49 per cent share, and Yahoo!, with 22 per cent.

Microsoft insists it has no intention of deploying its browser as a weapon in the search wars. Google suspects otherwise.

In meetings beginning last year, Google told Microsoft of its objections to the company's plans to set MSN as the default search engine in Internet Explorer 7, according to Mayer of Google. Yahoo!! raised similar objections in a meeting with Microsoft last year, according to a person familiar with the conversation.

Yahoo!! declined to comment last week beyond a statement: "We would be concerned about any company's attempts to limit user choice or change user preferences without their knowledge, and believe others would share that concern."

With its objections unresolved, Google took the matter to antitrust authorities in Europe and the United States during the past month.

In Europe, where Microsoft is challenging an antitrust decision against the company for its past behaviour, the European Commission has already made inquiries about Microsoft's plans for Vista. Though it is now distributing Internet Explorer 7 separately, Microsoft has long maintained that its browser is part of its Windows operating system.

Google has informed the European antitrust authorities of its worry that "Microsoft's approach to setting search defaults in Internet Explorer 7 benefits Microsoft while taking away choice from users," said Steve Langdon, a spokesman for Google.

Google would not say specifically what it has discussed with American antitrust officials. A Justice Department spokeswoman declined to comment.

The best way to handle the search box, Google asserts, would be to give users a choice when they first start up Internet Explorer 7. It says that could be done by asking the user to either type in the name of their favourite search engine or choose from a handful of the most popular services, using a simple drop-down menu next to the search box.

The Firefox and Opera browsers come with Google set as the default, but Mayer said Google would support unfettered choice on those as well.

Microsoft says that could add complexity and confusion to the browser set-up process.

Instead, those wanting to pick a new search-box option in the new browser need to click through a menu with options such as "Get Search Providers," which links to a Web page with six search engines, including Google, and 16 "topic search" sites, such as Amazon and MTV.