Deal gives the search giant access to Intuit’s small-business customers–a sought-after advertising sector.
Google just upped the ante in its desktop challenge to Microsoft The Web search leader hammered out a deal to include various Google tools in an upcoming 2007 version of Intuit’s popular QuickBooks small business accounting software. The partnership represents one of Google’s most aggressive moves into PC desktop software, the market dominated by Microsoft.
As part of the deal, Intuit will be incorporating Google’s search software, Google Desktop, into QuickBooks, in conjunction with a new security tool to limit access to QuickBooks data if desired.
The companies announced that four Google products will be imbedded into Intuit’s upcoming update to its QuickBooks accounting software. Google, which has sought to attract small-business advertisers, will have access to a large number of them via QuickBooks and its 3.7 million users, marketing analyst Greg Sterling said.
"This is a huge market that Google is getting access to in a direct way," said Sterling, founder of Sterling Market Intelligence. "Consider that there are 3.2 million U.S. advertisers in the Yellow Pages. Small business is where all the volume is."
This alliance combines the strengths of both Google and Intuit to deliver innovative online technologies that help small businesses succeed in an increasingly competitive business environment, said Eric Schmidt, CEO of Google, in a statement.
“By adding key Google services into the world’s most popular accounting product, we are making it easier than ever for small businesses to find and use all of the tools available to them.”
The software will include other tools both companies hope small businesses will find invaluable. QuickBooks 2007 users will be able to market their businesses online by adding a listing to Google Maps, by initiating Google AdWords marketing campaigns, and by posting products for sale though Google Base, an open database that functions as a product listing service.
“QuickBooks has millions of small businesses, and this is the fastest way to get millions of new advertisers into these online networks,” Schmidt says.
Desktop Wars
The alliance between Intuit and Google unites one of Microsoft’s oldest competitors with one of its most recent. Microsoft has been working to win market share from Intuit’s Quicken and QuickBooks for decades with products like Microsoft Money, Microsoft Profit, and Microsoft Small Business Accounting. Microsoft has recently committed itself to a similar campaign to take search advertising market share from Google.
With Microsoft on the verge of releasing a flurry of software upgrades, time is of the essence for Google. Early next year Microsoft plans to release new versions of its Office productivity suite and Windows operating system — Office 2007 and Windows Vista, respectively — that will come with built-in access to Microsoft’s search engine.
As Google stakes its claim to the desktop, Microsoft is increasingly blending its desktop software and online services. "This notion of being able to have desktop products integrate with online services is something we support today and will continue to evolve," says Satya Nadella, corporate vice president for business solutions at Microsoft.
In a conference call for investors, Schmidt declined to detail the specific impact of this deal on Microsoft. Instead, he characterized it as part of "the real architectural revolution" represented by the movement toward software-as-a-service.
Despite Schmidt’s coyness, this deal poses a real threat to Microsoft because Google is staking its claim on not just on the Internet applications but on desktop software too. "That is where the battle will be fought," says JupiterResearch analyst Joe Wilcox. "That is the territory Microsoft wants to protect."
During the conference call, Steve Bennett, president and CEO of Intuit, said, "The business world is one of collaboration…. Together we are able to deliver more value to customers than we could ever do on our own."
“It is a good win for Intuit. It is a good win for Google,” said Schmidt. “More importantly I think it is the beginning of a much deeper partnership.”
In response to the Google-Intuit partnership, Nadella rattled off features that will come with Small Business Accounting 2007, Microsoft’s competitor to QuickBooks: one-click product listings on eBay, PayPal invoicing and payment services, credit monitoring through Equifax.com, and online payroll services from ADP, to name a few.
Seeking an Edge
In Microsoft, Google and Intuit have a common foe. Intuit has held its own against Microsoft in a multiyear battle for the small business accounting software market. Partnering with Google will give Intuit an edge against its rival as Microsoft adds more online features to its desktop products.
The Intuit deal gives Google the opportunity to make friends in this community by making Internet advertising less imposing.
For example, business owners using QuickBooks to keep their accounts in order can help customers pinpoint their stores via Google Maps. A Google-enabled QuickBooks will also enable customers to create keyword searches for their products, so that their advertisements pop up whenever someone searches for the product on Google. Merchants can also upload information about their inventories to Google Base so customers can learn what they have in stock.
Beyond desktop software, Google is also integrating its services into online business software. In August, Salesforce.com and NetSuite said they would incorporate AdWords into online customer management applications.
An earlier attempt by Google to build bridges with this group came in March, when it cut a deal with Verizon SuperPages.com to have the classified ad provider help its tens of thousands of marketers get ads onto Google search result pages. But for companies like Google, forming relationships with small businesses has proven difficult. Many neighborhood business owners have been slow to establish a presence on the Web. A big reason for that, says Sterling, is many do not know how.
"The real issue here is not the sophistication, or lack thereof, of small business owners," Sterling said. "The real issue Google has to be concerned with is time. The company has to make it simple for these time-strapped business owners to learn about online marketing and where to put their money."
Schmidt was quick to distinguish those arrangements from the Intuit deal, because the QuickBooks desktop software will give millions of small businesses who have not yet ventured onto the Internet the ability to do so — and in the process, he hopes, bring Google millions of new customers.
“We take this long tail business very, very seriously,” Schmidt said, a reference to the currently vogue notion that products of little value individually are worth a great deal collectively.
Indeed, the alliance represents a continuation of Google’s effort to monetize the "long tail," exemplified by the company’s success in the online advertising market. Google has thrived by using its AdWords and AdSense systems to aggregate small ad buyers and publishers into a massively profitable market. Both Google and Intuit stand to gain significant revenue if QuickBooks’s new online marketing and commerce capabilities prove appealing to small businesses, many of which still lack a significant online presence.
“This is an exciting new alliance to help businesses find new customers.”
Schmidt sidestepped a question asking whether he thought Google’s alliance with Intuit, which makes comprehensive software packages for small businesses, could be seen as "a stake in the heart" of business software giant Microsoft.
Schmidt said he would leave it to others to gauge how the partnership changed the "competitive terrain."
"We think its great for our companies because it is great for our customers," said Bennett.
Microsoft is, of course, trying to challenge Google in search, and Intuit, which sought to merge with Microsoft in 1994, has outpaced Redmond in personal finance software. Microsoft did not respond to interview requests.
“It is clear that Google understands the Web better than anyone else, and Intuit has a reputation for making easy-to-use solutions for small businesses.”
More than 25 percent of US small businesses use Intuit software such as QuickBooks and Quicken, according to the company. QuickBooks sales last year tallied 1.4 million and the company boasted 3.7 active QuickBooks users.
Intuit estimated that at least half of the small businesses using QuickBooks did not advertise online. The new QuickBooks would provide a simple way for businesses to make pay-per-click ads on Google and create online coupons, the companies said.
Google would create free “profile pages” for businesses that did not have websites.
"We expect it to be enormously successful and have big hopes and expectations to expand it next year," Schmidt said. Among the possible additions next year was adding Google Checkout, an online financial transactions system, to QuickBooks.
The companies did not disclose how revenue from the joint-endeavor would be divvied up, saying they collaborated with the expectation that the reward would come in the form of increased business for both of them.
“It is all about a big new business opportunity in which we split the revenue and profits in some fashion based on the value we contribute to each of these ideas. We are quite excited about that.”
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