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Windows development kept them away from search

Kevin Johnson, president of the Platforms and Services Division at Microsoft, whined a bit about the pact between Google and Yahoo, during a debate in Cannes about advertising topics.

Yahoo EVP Hilary Schneider gave Johnson a little something to chew on in exulting over the company's advertising agreement with Google. Valued roughly at $800 million in annual revenue initially, placing Google ads alongside Yahoo search results gives the latter a big boost.

Reuters noted Schneider calling the deal a "win-win," to which Johnson said, "If win is consolidating around 90 percent of the paid search with Google, you can say, ok, Google would do that as a win."

"I don't think that from an industry perspective that supports having choices and having a number of strong players in the advertising business," he continued.

Unfortunately, the awful truth shows Microsoft completely missing the boat on search, and the multi-billion dollar revolution delivered by contextual search advertising. Microsoft CEO Steve Ballmer told the Financial Times his company simply didn't take advantage of the chance search presented.

"I give Google credit for innovating in the business model around search. They did a nice job on that, and that’s why they won," he said in the report. Ballmer also blamed the five-year gap where its research and development resources were focused on Windows rather than other areas, including search, as 'calcifying' Microsoft's ability to respond to Google's competition.