Microsoft (Nasdaq:MSFT) is gearing up to lock horns with Google (Nasdaq:GOOG) as the software giant unveils a new version of its internet search engine this week. This heavyweight matchup will take some time to play itself out, and neither company is likely to flinch.

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Drawing A Line In The Sand
According to the most recent comScore rankings, Google has maintained its commanding lead in the search engine market with a 64.2% share. Yahoo (Nasdaq:YHOO) is second with 20.4% while Microsoft is presently a distant third at a market share of 8.2%. The Ask Network, which is owned by IAC/InterActive (Nasdaq:IACI), and AOL, owned by Time Warner (NYSE:TWX), are afterthoughts with each claiming less than 4% of the market.

Improvements to Microsoft's search engine platform are expected to provide users with better organized groupings of search results. The search engine also will aim to cut down on the time that web users need to spend clicking between web pages to find the data they seek.

On Again, Off Again Relationship
Yahoo is also looking to improve its positioning in the search engine market. On May 19 at an event for reporters in San Francisco, the company announced its plan to provide more specific data to address users' web queries, as opposed to serving up links to other web pages. As recently as last month, talks were said to be back on between Microsoft and Yahoo to create a partnership whereby the two companies would sell ads for each other.

Although I am not expecting Microsoft's new search engine to make a significant dent in Google's market share, the consequences of the launch are probably greater for Google than for Microsoft. Online advertising revenue tied to Google's search engine platform is its lifeline. Microsoft operates under an entirely different business model, with the lion's share of its revenue coming from software, licensing and servers.

Google has already demonstrated that online advertising can persevere in down markets. In its most recent quarter, the company reported a 6% year-over-year improvement in revenue. This is an impressive development that Microsoft will be looking to take aim at when its new search engine comes out this week.

The Bottom Line
It is unlikely that Google will lose its lead in the search engine market anytime soon. A new launch by Microsoft would certainly make competition more interesting, but Google's lead is too substantial at this point.

For more, see Industries That Thrive On Recession.

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Tickers in this Article: MSFT, YHOO, GOOG, TWX, IACI

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