• NY Times, Monday, December 19, 2005 10:01 AM

As it turns out, many of us were wrong to believe Microsoft had the upper hand in Time Warner's ongoing pursuit of a partner for America Online. About two weeks ago, Microsoft had confidently told the Wall Street Journal it was on course to be Time Warner's chosen advertising partner for AOL, and many analysts out there agreed this was the right decision. Not to be. Tomorrow, Google will announce that it has renewed its search partnership with AOL and expanded upon it, by allowing AOL to sell advertising across its sites. This is bad, bad news for Microsoft, experts say, especially given the software giant's very public ambitions to become the leader in Internet search. Currently, its MSN Search is a distant third to Google and Yahoo! The Times says Microsoft has been unable to become a leader in any online business, and its varying strategies for MSN have largely failed. This is worrying for the giant company, especially as it spends more and more on a new Web portal, Live.com, and exposes its industry-dominating software products to competition by bringing them online.

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