Then there is ad delivery, where Microsoft recently extended through June 2006 a contract for Yahoo Inc. to place relevant ads alongside its regular search results. Ad placement alongside search results is Google's main cash cow.
David Smith, a vice president with Gartner Inc., says the chain of events illustrates that Google is proving to be customer-driven while Microsoft tends to be more driven by competitive threats.
Microsoft denies that Google has been the impetus for improvements in its products. Sohn says the company is simply responding to customer feedback. He also downplays the Google competition, saying Microsoft has always faced plenty of foes.
``There's lots of innovation and competition, and it's way bigger than just Google, who I think everybody's excited about and focused on because they're a little bit newer,'' Sohn said.
Google, meantime, has signaled that it will fight Microsoft's moves into its turf. The day before Microsoft launched a test version of its Web search engine, Google said it had nearly doubled the size of its search engine index. And this week, Mountain View, Calif.-based Google opened an office in Kirkland, not far from Microsoft's Redmond campus.
Mayer said the goal is to attract employees who don't want to leave their hometown.
Asked if that meant the company was recruiting Microsoft workers, she said: ``Not in a specific or targeted way, but we are looking at technical workers in the Seattle area who are interested in working for Google.''
Still, Scevak said it's still too early to say if Google will ultimately be able to pull off a massive shift in allegiance. While many people turn to Google for search, he says plenty of others could see no reason to leave Microsoft products, such as Hotmail _ especially if Microsoft is willing to match Google's improvements for free.
And while Google has been the first to desktop search, he says many users may still prefer to wait for Microsoft's more familiar product.
``It's a very, very early stage,'' Scevak said.