Google's YouTube Purchase Gives It A Big Lead Over Microsoft

Eventually, Microsoft will have to launch its own set of unique services that capture market share in video and social networking, or "it's game over," Bernoff said.

Nevertheless, Microsoft has gone from underdog to a market leader before. Examples include its toppling of Netscape in the late 1990s to take over the Web browser market, and its rise from zero to No. 2 in the videogame market behind Sony.

In an Oct. 9 meeting with BusinessWeek editors, Microsoft Chief Executive Steve Ballmer said the company has a long-term strategy against Google, and mentioned the company's come-from-behind history.

"We're very long-term. We've got a stick-to-it-iveness, a tenaciousness that I would argue is unmatched," Ballmer said.

Matt Rosoff, analyst for Directions on Microsoft, agreed that the company's bulldog spirit would keep them in the game.

"I think they'll be a player (in online video)," Rosoff said. "They'll stick with it for a long time."

Google's acquisition didn't change the market dramatically, since YouTube was already way ahead in gathering an audience around its service, Rosoff said. Google, however, does bring the money to grow YouTube's business faster, and the search engine's backing means YouTube will be around for a long time.

"YouTube is one of those things that's hard to duplicate and replicate," Rosoff said. "Microsoft will take a more measured approach."

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