Microsoft sought to boost its dwindling position in the internet search business with a distribution deal on the 2 Junethat could wrestle market share away from rival Yahoo.
The software maker struck a deal with Hewlett-Packard to have its search service set as the default on all the PCs that HP sells in the US and Canada. The agreement partly replaces a similar deal that HP and Yahoo announced nearly two years ago to carry that company’s search service on HP machines in the US and Europe.
The terms of the deal were not disclosed but such arrangements normally involve payment by the search company for each machine that is shipped with the search services set as default.
Distribution deals with hardware makers have become one of the main weapons the search engines have used in their battle to win new users. Google signed a global distribution deal with Dell two years ago, while Microsoft itself reached a similar arrangement with Lenovo, the fourth-largest PC maker.
By partially winning HP away from Yahoo, Microsoft has stepped up the competition between the two as they struggle to find a way to catch market leader Google. According to ComScore, Google’s share of searches in the US grew to 61.6 per cent in April compared with 20.4 per cent for Yahoo and 9.1 per cent for Microsoft – both of which lost ground from a year before.
Microsoft has made gaining market share its top priority in the search business, in the hope that greater scale will draw more advertisers to its search advertising system. The software company last month abandoned an unsolicited offer to buy all of Yahoo but has since returned to the table with a proposal for an alternative partial transaction.
According to Microsoft, 40 per cent of internet users never change the default setting of their computer’s search engine. In one sign of the importance of distribution partnerships, a deal that makes Google the default on the Firefox Web browser has helped turn Mozilla, the group behind the browser, into one of the fastest-growing internet companies in Silicon Valley. Mozilla generated $60m in revenues from its Google deal in 2006, the latest date for which figures are available.