Microsoft Zeroing In On Verizon Wireless Deal

The deal would make Microsoft the default search provider on Verizon Wireless phones, and would also amount to a major pie in the face of Google, which for more than a year has been trying to work out a similar agreement with Verizon.

According to the WSJ, Microsoft and Verizon would share advertising revenue from mobile Web searches, and Verizon would receive guaranteed payments of between $550 and $650 million, approximately double the amount that Google is offering.

But aside from preventing Google from adding to its massive search market share, a Microsoft-Verizon mobile search tie-up might not be a major coup for the software giant.

There has been much industry speculation that mobile search advertising will be big, but it still represents a relatively insignificant portion of the search market, said Matt Rosoff, an analyst with Kirkland, Wash.-based research firm Directions On Microsoft.

Microsoft has had a similar deal in place with Sprint since early 2007, but that hasn't had an effect on the company's search market share, Rosoff said. "I think the deals with PC OEMs like Lenovo and HP are much more important in helping Microsoft gain search market share," he said.

Microsoft also wants to get Windows Mobile on more Verizon Wireless mobile devices, but the WSJ said the financial terms of these negotiations weren't clear.

It's "very unlikely" that Microsoft would pay Verizon to use Windows Mobile, or give it away for free, because this would turn the entire Windows Mobile business model on its head, Rosoff said.

"While Microsoft is definitely facing more competition in the mobile space than it was before the iPhone emerged, overall, Windows Mobile share actually grew in the last year," Rosoff said.