Software giant Microsoft's reported bid to take over Internet search king Google has highlighted the high-stakes battle mounting over the multibillion-dollar search engine business.
The New York Times said last week that Microsoft's overture for a partnership or buyout was rebuffed by the much smaller, privately-owned Google.
Instead, the California-based firm, whose quirky name has become synonymous with online searches, has moved toward a long-awaited initial public stock offering.
It is expected to raise at least US$2 billion in the offer early next year that some analysts believe will be used to defend its place as the Internet's favorite search engine.
The Internet's three titans -- Yahoo, America Online and Microsoft's MSN.com -- are all pushing hard to develop their own search functions to snatch market share from Google.
At stake is the hot market for targeted advertisements which accompany search results.
With around 500 million online searches taking place daily, the targeted ad business is predicted to generate more than US$7 billion annually within four years.
"Search engines have become extremely important" in producing income for Web site operators, said Internet analyst Safa Rashtchy of investment bank US Bancorp Piper Jaffray.
Searches are "the most effective monetization function for Internet companies," he said.
Search engines that allow users to dig through billions of Internet pages for a specific topic have been around for a decade and Web advertising has existed for nearly as long.
But only in the past two years have the two come together.
In the past, when a user searched on the term "Spain," for instance, search engines would produce a long list of links to Web sites about the European country.
Type in "Spain" now, and you get the same list, but accompanied by advertising links to commercial sites offering hotels and tours in Spain.
Tap in the search slot "Chinese food," and you get Web sites about Chinese cooking and recipes -- and advertisement links to suppliers of ingredients and tools for Chinese cuisine.
Advertisers like the mechanism because the ads reach only their target audience and they only pay a fee when the user clicks on their ad. For each click-through ad, the advertiser pays the search engine Web site from US$0.15 to US$50.
Those amounts add up to US$2 billion a year in revenue, according to Danny Sullivan, the head of consultant Search Engine Watch. "Search engines are an incredible advertising medium," he said.
Although much smaller in size than the big portals, search specialist Google dominates the market because its highly-developed search engine scours more of the Internet and returns the best results, searchers feel.
In just five years it has become one of the world's most recognized brand names, its name synonymous with searching. "To Google" has now become the equivalent of "to search" on the Internet.
But much larger and richer Yahoo and MSN.com are spending heavily to catch up, recruiting hundreds more engineers to develop the algorithms and programs which underlie search functions.
In addition, in July Yahoo paid US$1.6 billion to take over Overture, the leader in placing targeted, search-related advertisements on Web sites.
That is believed to have pushed cash-rich Microsoft to sound out Google over a buy-out.
But, rebuffed, Microsoft recruited more experts to build its own engine, and is thought to be eyeing smaller search engine companies, analysts said.
Google's plan to go public is seen by some experts as an effort in part to shore up the company against this challenge.
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