According to a report in the Wall Street Journal, Microsoft is getting out its wallet to beat Google and become the default search provider for Verizon cell phone subscribers:
Under the terms now being considered, Microsoft would share revenue with Verizon from ads shown in response to cellphone Web searches, with guaranteed payments to the carrier of approximately $550 million to $650 million over five years, or roughly twice what Google offered, these people said.
Separately, Microsoft is negotiating a deal to put its Windows Mobile software in more Verizon devices. The combined value of the two deals could top $1 billion, these people said, though it isn’t clear if Microsoft is offering to pay Verizon to use Windows Mobile, or would allow Verizon to use the software for free.
Verizon is tilting toward Microsoft because the software giant is offering significantly better financial incentives, but the telecom company is still in discussions with Google and the situation is fluid with both companies, these people said.
Everyone enjoys a good eyeball auction since we can all discuss whether the winner overpaid, but paying Verizon to use Windows Mobile? Maybe Microsoft plans to make it up on volume?
Steve Musil observes that, "While mobile search is still a nascent market, Google controls the lion’s share with 61 percent, followed distantly by Yahoo with 18 percent and Microsoft with 5 percent, according to Nielsen figures." so I suppose that if the deal is done as described, it can be put on the Microsoft balance sheet as another of Steve Ballmer’s "big bets." However, a billion here and a billion there sooner or later adds up to real money even for Microsoft, especially when a payday does not seem imminent.