Verizon Picks Microsoft over Google, Yahoo for Search, Mobile Ads

The rumors proved true, as Verizon Wireless picked Microsoft over Google and Yahoo to provide Web search and mobile display advertising services to customers on its devices for the next five years.

The deal, announced at the Consumer Electronics Show and rumored to be worth $500 million, begins in the first half of this year. It means Microsoft Live Search will be offered on new Verizon Wireless feature phones and smartphones. Verizon is the United States' No. 2 wireless network behind AT&T Wireless, serving more than 70.8 million customers.

Microsoft said in a statement the agreement will grant customers access to voice commands and typed queries, as well as location-aware searches to access maps, directions, traffic information, information on local businesses, movie theaters and show times, gas prices, and weather over the Web. This is crucial, as consumers continue to buy Web-based smartphones to surf the Internet for music, video, games and other content.  

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Verizon Wireless customers will also be able to access Microsoft Live Search from a device's home screen by downloading an application or through Verizon Wireless' Mobile Web service.  

Rumors of the deal surfaced a month ago in the Wall Street Journal, shrouded in supposition that Verizon distrusted Google since it bid against it for the 700MHz wireless spectrum a year ago primarily to drive up the asking price. Google later admitted its move was an attempt to boost open access, allowing any application or Web service to run on any device.

Verizon was miffed and has yet to support Android, the Google-created open-source mobile operating system supported by T-Mobile, Sprint and others. Verizon's chilly reception to Google through 2008 makes its deal with Microsoft, the third largest search provider and losing share, less surprising.

Google currently commands around 63 percent of worldwide searches, with Microsoft in the 9 percent range. It is unclear whether Verizon's massive U.S. footprint will boost adoption of Live Search, or trigger growth spurts in Microsoft's mobile display advertising.

But as many analysts have already pointed out, it can't hurt Microsoft. In a few years, the deal could be seen as a brilliant chess move to block Google from gaining more power, something that Microsoft certainly wants to do and something that Verizon is signaling is important by striking this deal with the weaker search and mobile ad partner.

After all, mobile Web services and advertising are largely green fields ready to blossom in 2009. Whoever—Google, Yahoo or Microsoft—can carve out the greatest chunk in these segments could hold great sway over the future of the Internet.

Meanwhile, Microsoft's Live Search momentum will be supported on the PC side thanks to a new deal with longtime partner Dell, which said it will offer Live Search as the default search engine in the browser on most Dell consumer and small-business PCs in 23 countries around the world starting Feb. 1. Dell, which is booting Google in favor of Microsoft, will also include a tool bar powered by Live Search and Windows Live Essentials on new Dell PCs.  
 
Microsoft also updated its Live Search for Mobile client for Windows Mobile phones. This client app features new Query Autosuggest, Bird's Eye View imagery and LocateMe, which helps people automatically know their approximate location sans GPS.