Google, Microsoft At It Again--This Time It's VoIP

In what's become a chess match between Google Inc. and Microsoft for the attentions of Internet-savvy consumers, Microsoft made another move last week. It acquired voice-over-IP startup Teleo Inc., with plans to expand on the Internet phone-call capabilities it offers through its instant-messaging software, MSN Messenger.

The acquisition comes one week after Google released Google Talk, a downloadable Windows application for instant messaging and PC-to-PC voice calls. That same day, Microsoft disclosed an upgrade to MSN Messenger, version 7.5, that it says offers better voice-chat quality and some new features, including the ability to send a 15-second audio clip.

Users of Microsoft's MSN Messenger already can click on telephone numbers stored in Microsoft Outlook and Internet Explorer to make calls from PCs equipped with headsets or speakers and microphones. Teleo's technology offers more options for conducting voice communications, including the ability to place calls from PCs to traditional landline phones and cell phones, Microsoft says. Google Talk doesn't offer those options. "If you're a product manager at Google, AOL, or Yahoo, you have to be worried," said Jeff Pulver, a VoIP expert and creator of the Voice Over Net conferences. "If it chooses to, Microsoft could dominate" consumer VoIP.

The battle over consumer VoIP is just the latest in a dizzying string of competitive product rollouts between the two companies. Also last week, Google released Google Desktop 2, which updates its desktop-search software with personalization features.In July, Microsoft launched a test version of a search engine that lets users search PCs and the Web with a single tool. Microsoft also unveiled a Google-esque MSN search site, eliminating paid advertising from main search results and introducing a simple, fast-loading design.

That same month, Microsoft launched Virtual Earth, a Web site that lets users scroll around a map of the United States that includes satellite photos of buildings and streets. That came a month after Google released Google Earth, which gives users 3-D maps with zoom-in, zoom-out capabilities.

The battle doesn't stop at technology. Microsoft sued Google and one of its former executives, Kai-Fu Lee, in July, claiming Lee was violating an agreement he signed five years ago barring him from working for a direct competitor in an area that overlapped with his roles at Microsoft. Google had recently hired Lee to head up its operations in China.

Now VoIP is in Microsoft's crosshairs, and other consumer technologies are ripe for the technology. For example, it makes sense as an option for Microsoft's Xbox or Xbox Live, says Drew Brosseau, managing director at equity firm SG Cowen & Co. LLC, who follows, but doesn't own, Microsoft stock. "On Xbox Live, you can message back and forth while you're playing, and you can talk

back and forth, but that's over a traditional telephone line," he says. "Ultimately, that could all go through the same IP pipe."Photos courtesy of Newscom