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Google Takes Friendly Fire

Vishesh Kumar

It's not just Google's(GOOG Quote) rivals that would like to reign in the search giant -- its own partners are starting to test the limits of cooperation.

Over the weekend, The Wall Street Journal reported that Comcast(CMCSA Quote) is negotiating to use Microsoft's(MSFT Quote) search service on its broadband portal, citing people familiar with the matter.

With 15 million unique visitors a month, Comcast is one of the biggest outside sources of searches for Google. And although Comcast expects its cut from the partnership to amount to about $70 million this year, the cable giant believes it should get at least $100 million, according to the article.

The leak to the press -- and demand for more compensation -- have all the makings of a power play by Comcast. "Comcast is using The Wall St. Journal as a broadcast medium to potential partners that its deal with Google is up soon, and it's looking for someone to buy the business," Searchblog author John Battelle wrote in a Monday post on his site. "Price tag? $100 million."

Comcast's clamoring for an additional $30 million may not seem like a big deal. After all, Google announced revenue of $2.23 billion in its fourth quarter alone -- shelling out $30 million to keep an important partner like Comcast would hardly dent the search giant's balance sheet.

Still, the unseemly public spat demonstrates that Google's position may be trickier than that.

Caving to Comcast's demand would embolden its many other business partners, who could then push for more cash -- or threaten to take their business elsewhere. In fact, IAC/InterActiveCorp's(IACI Quote) Ask.com -- the high-profile search engine that uses Google's ad network to make money off its searches -- seems to be headed in precisely that direction.

Ask.com's partnership with Google is set to expire at the end of this year, and Ask.com is taking every opportunity to broadcast that it would happily partner with a Google rival if it were better suited to its interests after that period. "Earlier this year, we will also be evaluating our options for monetization and distribution. I expect that to be a vigorous process," IAC CEO of media and advertising Peter Horan told Searchblog in January. "The initial overtures have been very interesting."

What makes Google's position even more difficult is that main rivals have upped their game as of late. In January, Yahoo!(YHOO Quote) launched the key ad ranking component of its highly anticipated Panama system. Panama has received excellent review so far, and Yahoo!'s stock is up about 18% since the beginning of the year.

Microsoft, meanwhile, seems to have no qualms with using its enormous financial muscle to gain share in the search market. Last week, it was reported that the software giant was testing an incentive program in which it would give credits for Microsoft products to companies that got their employees to use its search service. Desperate for new avenues of growth, Microsoft may make extreme concessions in a partnership that could give it a bigger footprint in search.

The opportunity does not seem to be lost on Ask.com. "It may be that the best track for us is to see how Panama strengthens and that the gap between Google and Yahoo! narrows and that Microsoft makes some progress," IACI CEO Barry Diller said during the company's last conference call with investors. "But they are all interested in talking with us now."

As the competition in the sector intensifies, partner companies will find it even easier to play the major search providers off each other. Indeed, the Comcast move seems to be a page right out of the AT&T(T Quote) playbook. Just 10 days ago, news surfaced that the telecom giant would re-evaluate the terms of its partnership with Yahoo!.

The hardball negotiating tactics by partners could add up to a real headache for Google. The company also has agreements with Time Warner's(TWX Quote) AOL division, News Corp.'s(NWS Quote) MySpace and the popular Firefox browser that help drive searches.

Skeptics would argue that public barbs by companies like Comcast and Ask.com may amount to little more than posturing in the hopes of getting more leverage. Google, after all, is known for the quality of its search results, and that the ads it serves up next to its results bring in more revenue than those of its rivals. Even Diller said that "it will take a lot" to drive Ask to another search service.

But while Google's commanding position in the market makes it harder to jilt, it also makes the search giant a bigger target for rivals looking to curb its power. A recent guerilla ad campaign in the U.K. questioning whether one company -- Google -- should have as much control online as it does was traced back to none other than Ask.

In a media interview last week, Ask CEO Jim Lanzone admitted that his company was behind the campaign, saying the move was driven in part because of the difficulty Ask had at breaking into the U.K. market because of Google's dominance.

In other words, being too good may end up making Google not good enough to be a partner for other threatened Internet companies.