It is hard not to read these two pieces of news as flip sides of the same coin. On the one hand we have Hitwise saying this morning that Google’s share of all searches in the last four weeks of the year hit a remarkable 66%, up a point or so from all of last year. It is impressive stuff, and an ever more daunting platform from which Google can continue its dominant efforts in search, advertising and web apps.
On the other hand, we have this morning Microsoft buying FAST Search and Transfer for $1.2-billion. The purchase (oodles of chatter here) of the Norwegian company, known for its enterprise and unstructured search technology, is an attempt by Microsoft to end-run Google, taking a stronger position in enterprise search, as opposed to butting its head more (for now) against the market that Google dominates. Showing Microsoft’s seriousness, this deal is being done at a premium to previous deals — 5.9x 2008 sales, versus prior deals at 4.5x — and it represents (according to Goldman Sachs) 5.5% of Microsoft’s cash balance.
You should read this as Microsoft increasing its efforts outside of traditional search. Having largely failed at getting a self-sustaining and growing position in core Internet keyword search, the company is now coming to the clear realization that it is, to some extent, pushing on a rope, with organic growth just not in the offing. While I generally like that Microsoft is getting more aggressive, put against Google’s escalating search share this is still expensive, fringe, and definitely playing at the edges of search. Show me a Microsoft deal for Yahoo — bring search, advertising and content — and then we can talk.