Google Shares Slammed On Billion-Dollar Dell Deal

Google shares slipped $17 on reports that Google was thinking of paying a billion dollars to Dell to bundle its software. Under the plan, Dell would preinstall Google's Toolbar and Desktop suite on 100 million computers, with Google paying as much as $1 billion over three years in fees. The Journal explains one of Google's other deals, with HP: Google pays it $1 for every PC that ships with a Google toolbar - a strip that sits atop a browser and enables users to easily operate Google's search engine - and another 75 cents the first time a home-computer user taps the service, says a person familiar with the matter. We can say all we want about viral marketing and how great the Google brand is, but if Google has to pay a billion freakin' dollars, then maybe that whole word-of-mouth thing isn't working as much as we'd like to thing. Google prides itself on growing out of quality, but it looks like installations of its software aren't reaching the levels they expected. I never thought I'd see the day where Google had to buy customers. This is exactly the sort of thing we'd expect from Microsoft, but we get it from Google. I can only hope that at least the deal is only for Windows XP PCs, as Google's desktop search and sidebar in Vista would just be redundant and confusing to users. As you can see in the snippets below, it looks like this all happened after a bidding war with Microsoft. Is it possible Microsoft's new strategy is to get Google to "win" bidding wars and tear through its war chest as quickly as possible? Together with the AOL deal, aggressive bidding with Microsoft has cost Google five billion dollars, or 82% of its entire revenue for 2005. Considering the same software Google is paying a billion dollars for will be on ever Vista PC, the only real loser here is AskJeeves, which previously had a similar deal with Dell. Nathan Weinberg writes the popular InsideGoogle blog.