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Verizon: Microsoft beats Google

Microsoft, not Google, will be the default search provider for all phones on the Verizon Wireless.

Jessi Hempel, writer
January 8, 2009: 7:57 AM ET

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LAS VEGAS (Fortune) -- Microsoft has beat out Google to become the default search provider on all phones on the Verizon Wireless network.

Steve Ballmer made the announcement to a packed hall as part of his keynote address at the 2009 Consumer Electronics Show in Las Vegas on Wednesday.

Starting in the first half of 2009, Microsoft (MSFT, Fortune 500) will power all search on Verizon Wireless devices and serve up the advertising.

The five-year deal is strategically critical to Microsoft, which didn't yet have a search deal in the United States. Competitor Yahoo (YHOO, Fortune 500) powers AT&T and T-Mobile and Google (GOOG, Fortune 500) is the search provider for Sprint. That's why Microsoft has fought so hard to wrangle the deal from the reigning search giant.

Last November, it was widely reported that Microsoft was offering guaranteed payments to the carrier of approximately $550 million to $650 million over five years.

Neither company is offering financial details about the deal, but it's clear the payments aren't the prize. As the smartphone market explodes, mobile cyberspace searches are set to grow.

Right now, only about 20% of cellphone users search, according to Nielsen Mobile. Citi analyst Mark Mahaney wrote in a recent report, however, that the market could grow to $2.3 billion by 2010.

With the completion of its Alltel acquisition this month, Verizon Wireless becomes the largest wireless provider in the United States, surpassing AT&T. And the company says 25% of its revenues come from wireless data - business-to-business data, multimedia services, and text messaging. Ballmer is hoping the deal will give Microsoft a leg up in the battle for control of the smartphone platform.

Then again, just because users land on a Microsoft search page when they open their browser doesn't mean they'll stay there. With 61% of current mobile search queries, Google already has a good deal of momentum, and users are conditioned from the web to begin most searches on Google.com.

No matter the official search engine, they may very well go off-portal to plug the Web's de-facto front door - Google.com - into their browsers. To top of page

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