Google Stakes Desktop Claim Through Intuit Alliance

The deal threatens Microsoft because Google is staking its claim not just on Internet applications, but on desktop software, too. The alliance unites one of Microsoft's oldest competitors with one of its most recent.
Google and Intuit on Wednesday announced a strategic alliance that will make some of Google's advertising and search tools available from inside the upcoming 2007 version of Intuit's popular QuickBooks financial software, due out this fall.

"This alliance combines the strengths of both Google and Intuit to deliver innovative online technologies that help small businesses succeed in an increasingly competitive business environment," Eric Schmidt, CEO of Google, said in a statement. "By adding key Google services into the world's most popular accounting product, we're making it easier than ever for small businesses to find and use all of the tools available to them."

As part of the deal, Intuit will be incorporating Google's search software, Google Desktop, into QuickBooks, in conjunction with a new security tool to limit access to QuickBooks data if desired.

QuickBooks 2007 users will be able to market their businesses online by adding a listing to Google Maps, by initiating Google AdWords marketing campaigns, and by posting products for sale though Google Base, an open database that functions as a product listing service.

The alliance between Intuit and Google unites one of Microsoft's oldest competitors with one of its most recent. Microsoft has been working to win market share from Intuit's Quicken and QuickBooks for decades with products like Microsoft Money, Microsoft Profit, and Microsoft Small Business Accounting. Microsoft has recently committed itself to a similar campaign to take search advertising market share from Google.

In a conference call for investors, Schmidt declined to detail the specific impact of this deal on Microsoft. Instead, he characterized it as part of "the real architectural revolution" represented by the movement toward software-as-a-service.

Despite Schmidt's coyness, this deal poses a real threat to Microsoft because Google is staking its claim not just on Internet applications, but on desktop software, too. "That's where the battle will be fought," says JupiterResearch analyst Joe Wilcox. "That's the territory Microsoft wants to protect."

During the conference call, Steve Bennett, president and CEO of Intuit, said, "The business world is one of collaboration... Together we're able to deliver more value to customers than we could ever do on our own."

Shareholders of the two companies may see more value, too. Google has managed to embed itself in a major financial application, just as it has done with Web browsers through its various search toolbar deals. In so doing, it stands to expand the distribution of its products and to bring in new advertising customers. And Intuit has managed to transform its standalone accounting application into a Google-affiliated Internet commerce platform.

"We take this long-tail business very, very seriously," Schmidt said, a reference to the currently vogue notion that products of little value individually are worth a great deal collectively.

Indeed, the alliance represents a continuation of Google's effort to monetize the "long tail," exemplified by the company's success in the online advertising market. Google has thrived by using its AdWords and AdSense systems to aggregate small ad buyers and publishers into a massively profitable market. Both Google and Intuit stand to gain significant revenue if QuickBooks' new online marketing and commerce capabilities prove appealing to small businesses, many of which still lack a significant online presence.