The battle for the web is hotting up

Microsoft battling Google could boost competition

It’s about advertising. It’s about search. It’s about Microsoft trying to take over the world. The $44.6bn (£22.4bn) offer for Yahoo has been cast in many lights since hitting the headlines last week.

Online ads are certainly a big draw ­ worth $40bn (£20bn) last year, and expected to double to $80bn by 2010. And search is one of the main ways to tap the market.

Hence the involvement of Google, which delivered 56 per cent of global searches at the last count, and which is sufficiently keen on keeping Microsoft out of the game to be banging hard on the anti-competition drum and, reportedly, in talks with Yahoo itself.

But there is also a longer game behind Redmond’s proposal, which offered Yahoo shareholders a 62 per cent premium despite stock value falling consistently since October.

The deal is not just about Microsoft trying to extend its dominance into new markets, it is also about protecting the core business.

In his speech at the Institute of Directors last week, Bill Gates made much of the future of software as a service (SaaS) ­ that is, applications no longer held individually on a PC or server but accessed in real time over the internet.

Google launched its online Google Apps service for business last February, and has at least one major consultancy offering it to corporate clients.

Assuming Gates is right and SaaS is the future, then Microsoft needs to take its desktop software onto the internet as fast as possible or it will lose the initiative.

All of which leads to a conclusion that offers some cause for cheer.

Not only is it simplistic to dismiss the Yahoo bid as another sign of Microsoft’s overweening dominance. It is also too easy to consider the bid’s success as another nail in the competitive coffin.

In fact, the reverse may be true. Neither Microsoft nor Google has any real rival in their respective spheres.

Anything that brings them into direct competition could finally provide long-suffering consumers and IT managers with a genuine choice.