Las Vegas— Trouncing out over rivals Yahoo and Google, Microsoft Corp., the third most-visited Internet search portal, has forged a five-year alliance with Verizon Wireless to be the default Internet search services provider for cell phones, in addition to managing mobile advertising services, which certainly appears to be seen as a blow to rivals Google Inc. and Yahoo Inc.
Verizon Chief Executive Ivan Seidenberg, addressing a Citigroup conference, said on Wednesday that Microsoft CEO Steve Ballmer would officially present the deal later in the day at the Consumer Electronics Show in Las Vegas. He gave no further details, reported Reuters.
The agreement succeeds more than a year of speculation on whom would become the default mobile search provider for Verizon Wireless, which is set to surpass AT&T Inc as the No. 1 U.S. mobile carrier after it closes its purchase of smaller operator Alltel later this week.
“It is certainly a feather in Microsoft’s cap. Tough news for Google and tougher news for Yahoo,” CCS Insight analyst John Jackson said of the agreement.
According to The Wall Street Journal that quoted sources familiar with the deal that the two companies are busy in negotiations and that Microsoft would share revenue with Verizon from advertisements displayed on cellphones when users conducted searches. Microsoft would offer guaranteed payment to Verizon for about $550 million to $650 million over the period of five years.
Other previous reports had said Verizon was exploring a deal with Google.
More and more, individuals and businesses are embracing their mobile phones as a means to interact with the Internet and advertisers are well aware of the trend.
Microsoft, the biggest software maker, had one-seventh the Internet search traffic of Google in November, according to Nielsen Co. Microsoft is paying to cement this deal and ones with Hewlett-Packard Co. and Sun Microsystems Inc. to try to narrow that gap.
“I’m sure Microsoft is giving these companies good deals to get carriage but that is not necessarily a bad thing,” said David Card, an analyst at Forrester Research Inc. in New York. “People will use what is on the screen to do the searches so that is important for Microsoft even if they do wind up overpaying a little.”
Jackson said the deal would probably not change how many Verizon Wireless customers user their phones to browse the Web. He said Google may have been the better choice to enable Verizon to offer customized Web services, such as offering targeted ads that are relevant to users.
“The ultimate goal in mobility is contextual awareness and the delivery of highly personalized experiences,” Jackson said. “These are competencies Google has in spades, so it may be that Verizon’s customers ultimately end up with an inferior experience relative to what Google might enable.”
In any case, the announcement is a blow to Yahoo and Google for their mobile efforts.
Yahoo shares changed during mid-day trading as news appeared that Verizon had chosen a mobile search provider, but then fell back to earth after the Microsoft disclosure.
Microsoft Chief Executive Officer Steve Ballmer will detail the accord later today at the Consumer Electronics Show in Las Vegas, Ivan Seidenberg, CEO of Verizon Communications Inc., a co-owner of Verizon Wireless, said at an investor conference today.
“Mobile search and mobile advertising offer tremendous opportunities for innovation and growth, and Microsoft is in a unique position to deliver a fully integrated, voice-enabled solution for Verizon’s customers,” Ballmer said.
Verizon is expected to finalize its $28.1 billion purchase of Alltel on January 9, which would add almost 14 million subscribers, surpassing AT&T making the company the No.1 U.S. mobile carrier.
Microsoft spokesman Tom Pilla declined to comment