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Last Updated: Friday, 29 December 2006, 05:37 GMT
Alliances key for search giants
What have the big four tech firms - Google, Yahoo, Apple and Microsoft - been up to in 2006 and what is expected from them next year?


Woman looking at Google home page
Google has been eyeing up new friends this year

Google has become the web's equivalent of McDonalds - a brand that has become embedded in our language and seems to be everywhere.

It has had another busy year, adding yet more services to its ever-widening portfolio, setting the rumour mill buzzing with talk of take-overs and alliances and, of course, the much talked about rivalry with Microsoft.

At the beginning of the year it tottered on its pedestal for a while, with the announcement that it would be offering a censored version of its search engine in China.

There was dismay among Google fans who felt it was being hypocritical to its motto of "do no evil", while others lauded its attempts to face the Chinese authorities head on and inform users when their searches were being censored.

Scattergun approach

On the product front, it was as busy as ever and 2006 saw the launch of, among others, Google Calendar, an online payments system, and a News archive.

Nate Elliott, senior analyst at Jupiter Research, is not convinced that its constant release of new products is the best way forward.

"It has what I term a scattergun approach to product launches. It seems to launch whatever it feels like launching but it has yet to have a commercial hit. In fact the one hit in their history has been search.

Mr Elliott feels a "more directed product strategy" should be top of Google's priorities for 2007 but in terms of what it will offer, he is not prepared to speculate.

"They surprise us so regularly I wouldn't attempt to guess but expect more creativity," he said.

Perhaps the most exciting development in the Googlesphere this year was unrelated to products.

A deal with MySpace in the summer saw the search engine paying the social networking site $900m for the right to provide it with search and adverts.

This was followed by its buy-out of YouTube later in the year, signalling how seriously it was taking the whole area of user-generated content.

The media furore that followed saw talk of it fuelling a second internet bubble. The buy-out helped its shares climb to an all-time high of $500 by the end of the year.


Yahoo's home page
Yahoo has been criticised for its involvement in China

Few of the stories written about web giant Yahoo this year have failed to mention in some way or another that it is "struggling to compete with Google". This struggle has been reflected in falling share prices.

John Delaney, an analyst at research firm Ovum, believes that the headline battle between Yahoo and Google belies Yahoo's stature as an internet veteran.

"It is important not to underestimate Yahoo. It has a well established group of users who, unlike Google, are willing to pay for its services. Also unlike Google, it is not so heavily dependent on a single service," he told the BBC News website.

To counter the decline in its fortunes, Yahoo's homepage had a major make-over in May and at the end of the year the company undertook a big restructuring process.

Despite criticisms that Yahoo has been slow to innovate compared to Google, the search giant has launched a number of new services including Yahoo Go at the beginning of the year which saw it move from its traditional home on the desktop to mobile devices.

Tie-up with Microsoft

Like Google, Yahoo has been sniffing around for a social networking friend but rumours in September that it was on the verge of buying Facebook - a website that allows university friends to stay in touch - have not resulted in anything concrete as yet.

It did make some other friends though and notable tie-ups this year included a deal with eBay, which gave Yahoo the right to use PayPal for Yahoo services and a deal with Microsoft that allowed users of the rival instant messaging system to finally talk to each other.

For Mr Delaney, this tie-up was the single most important part of Yahoo's 2006 calendar.

"It could see figures for instant messaging increase rapidly," he said.

Instant messaging, unlike Google's core asset of search, is an innately sticky service, explained Mr Delaney.

"With search it is very easy for a user to switch if a better service comes along. This is more difficult with instant messaging because you leave behind buddy lists, need a new address, etc," he said.

While many companies' involvements in China have been questioned this year, the lions share of the criticism has fallen on Yahoo.

News that information it provided to the Chinese authorities had led to the jailing of a second Chinese blogger prompted human rights groups to question the presence of big companies in oppressive regimes.

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