News Corp. CEO Rupert Murdoch is threatening to keep his newspaper content beyond the reach of Google searches. Murdoch wants to keep Google from reaping so many of the financial benefits of advertising placed adjacent to News Corp. content. He’s being aided and abetted by Microsoft.

In a scenario under consideration, Microsoft would pay News Corp. for making articles from The Wall Street Journal and other Murdoch-owned publications searchable exclusively through Microsoft’s Bing search engine. If the effort encourages other powerful content providers to demand compensation from Internet companies that generate revenue from online ads, the Murdoch-Microsoft partnership could create a big problem for Google.

Google’s threat to Microsoft and other software and telecom companies is widespread. Google is competing not only in search engine software, but also in mobile phone services, personal navigation, and operating systems. If Microsoft could reduce the overall market value of Web searches, it could protect its own software revenue while hurting Google. Microsoft could gain search market share by paying content providers more than they’re getting from search referrals.

In the Web search market, Microsoft could redirect the flow of funds. The company doesn’t need the money from search. In its most recent quarter, Microsoft generated more than $7 billion in sales from its main businesses, Windows and Office. By reducing the value of Web searches for media content, Microsoft could strike a blow at Google, which is challenging its main applications and operating system businesses.

Microsoft is likely well aware of the potential. In 2008 it tried enticing consumers to use Bing through a program that provided consumers with cash back on purchases made via its search engine. The program wasn’t successful, but it reflected Microsoft’s willingness to try to shake up the Web-search economy.

Today, Microsoft is focused on working with companies that care dearly about revenues—media companies such as News Corp. Search-related ad revenue is the bonanza on the Internet, and News Corp. doesn’t make enough from display ads to pass up Microsoft’s deal. News Corp. could strike an arrangement that lets it lock in a disproportionate share of search ad revenue from Bing-driven hits on News Corp. sites. That kind of deal would work to Microsoft’s advantage, too.

Microsoft could sweeten the deal for News Corp. by sharing a cut of broader Bing search ad revenue. Microsoft could in effect say, “Rupert, old pal, we really like you. Here’s a big chunk of our search revenues, as long as you’re willing to work with only us.”

Other publishers have reasons to follow News Corp.’s lead. If payments from Microsoft exceed the value of ads generated by Google-related traffic, it would make sense for other publications to delist from Google, too. As more content becomes available exclusively on Bing, users could switch away from Google search. That in turn will move market share. Google may even begin to pay incentives, putting pressure on its margins.

By Roger L. Kay