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Netscape's business model consisted of selling webservers to organizations. Its legendary web browser hardly brought in any money through direct sales. What it did do, however, was give the fledgling company instant high visibility in the online world. When organizations were shopping for a webserver, the Netscape brand was instantly recognizable. Additionally, their browser's position as de facto standard web browser allowed Netscape to effectively control the development of HTML, giving it an edge over competitors in the nascent market for webservers.
When Microsoft needed to crush Netscape, it went for the jugular. Via a combination of sketchy but effective tactics it was able to unseat Netscape from its comfortable spot atop the web browser heap and place its own IE there instead. This meant that it was now Microsoft who wielded the power to influence the direction of web development. It also tarnished Netscape's image as a leading Internet brand. Between that and Apache's sudden rise to dominance, Netscape saw sales of their webserver decline. Since they had never found a sustainable line of business that was independent of the browser's popularity, they could no longer survive.
There is no doubt that Google will continue to be a top-notch search engine so it is unlikely to be eclipsed by any new search technology that Microsoft can unleash upon the world, no matter how much money they throw at the project. However, Microsoft does not need to compete with Google using the traditional rules when they have an unstoppable weapon at their disposal in the form of the Windows monopoly. They will will change the nature of the game entirely by building search features based upon MSN into Longhorn and gently cajoling users into giving up on the use of a web browser to search the web. By redefining search to encompass local documents as well as the web, it will be able to leverage its desktop muscle in a manner against which Google, having no stranglehold on the desktop market, will find itself unable to compete. After all, nobody has ever taken Microsoft on in the desktop arena and escaped unscathed.
Actions of this nature would violate the antitrust restrictions under which Microsoft is required to operate but those have proven to be ineffective deterrents in the past. For instance, Microsoft intends to stonewall the EU on the matter for long enough that it will no longer matter whether WMP is bundled or not because RealNetworks will have lost its customer base. After that, if they have to pay a half-billion dollar fine, it's just pocket change to them anyway. Unless the government can force Microsoft to stop its antitrust violations before its too late, there's no point. Unfortunately, the appeals process and the red tape it involves make this rather unfeasible.
The critical question for Google is whether or not they could survive if Microsoft managed to coerce the majority of websurfers to switch to using MSN as their default search engine. If Google is sufficiently well insulated against this then they can weather whatever Microsoft throws at them. It seems, however, that they currently make most of their profits from the text ads that appear beside search results. Unless they can branch out from that dependence upon the search engine before MSN is able to usurp Google as the world's most popular search engine, Google will be hard pressed to avoid the same fate as Netscape.
Fortunately, Google does appear to have learned from Netscape's mistakes and has already begun to reduce its dependence upon the search engine via two different strategies. Firstly, it is looking into other ways of drawing traffic to its site: News, Froogle, Groups, Blogs, Webmail. Secondly, it is finding novel applications for AdWords, the profit engine: the AdSense program & ad-supported consumer software (like Opera). Since Microsoft will require at least a couple of years to oust Google as the kingpin of search engines, things don't look too bad for Page & Brin.