Archive for the ‘Search market share’ Category

Bing vs. Google Round 5

July 7, 2009

Picture 27From Citigroup’s Mark Mahaney this morning:

We Conducted Our Own Proprietary Study of Comparative Search Results – We three-screen tested 200 of the most popular current Search queries using Google, Yahoo!, and Bing.

  1. We found Google with either the most relevant results or tied for top relevancy 71% (142 Searches) of the time.
  2. We found Bing with either the most relevant results or tied for top relevancy 46% (92 Searches) of the time.
  3. And we found Yahoo! with either the most relevant results or tied for top relevancy 30% (59 Searches) of the time.

(emphasis added)

We view our study as generally validating the positive Bing reviews . . . but also demonstrating Google’s very strong position.

In Terms Of Stock Takeaways… – We find these datapoints incrementally positive for MSFT, incrementally negative for YHOO (although strategic options provide a bit of a hedge here and Street estimates appear to already assume Search market share erosion for YHOO), and generally neutral for GOOG.

In my initial discussion of Bing and Google on SEL the day Bing launched I said:

Some may look at the screens above and shrug. Indeed, some people have argued to me that Bing “has to be at least 50 percent better” than Google to start peeling away users loyal to Google (or Yahoo). Bing isn’t 50 percent better than Google. However, Bing does offer results that are, across the searches I conducted, highly competitive with Google and in some cases it offers features that are more user-friendly.

Given the strength of Google’s brand and its “ownership” of search Bing may struggle to make market share gains. However I predict that it will gain share. Those potential gains may come not at Google’s expense but rather from Ask, AOL or even Yahoo.

The Campaign for ‘Bing': What Would You Do?

May 26, 2009

Picture 27AdAge published a story yesterday that speculated about the forthcoming Microsoft search engine, allegedly to be called “Bing.” Here’s the essential information:

The software giant is set to launch an $80 million to $100 million campaign for Bing, the search engine it hopes will help it grab a bigger slice of the online ad market. That’s a big campaign — big compared with consumer-product launches ($50 million is considered a sizable budget for a national rollout) and very big when you consider that Google spent about $25 million on all its advertising last year, according to TNS Media Intelligence, with about $11.6 million of that focused on recruiting. Microsoft, by comparison, spent $361 million. Certainly Google has never faced an ad assault of anything like this magnitude.

JWT has been tapped for the push, which will include online, TV, print and radio.

Say you’re at JWT, what would the campaign look like? Would you go directly after Google or not? Would you use humor? This is a huge creative challenge. I’m curious to know what your “messaging” might be.

Publishers Looking to a ‘Post Google’ Future

April 16, 2009

The Local SEM products that YP publishers have been selling with varying degrees of success are deeply flawed in many respects — going to the way they’re sold and/or explained — and they don’t deliver the margins that publishers need. Google, Yahoo and MSFT will always be central to some “network” proposition that the YP publisher (or newspaper) offers local advertisers. But increasingly the “sales channels” are looking for alternative sources of qualified traffic.

Call it the “post Google” future, where reliance on Google as a source of traffic is not as heavy as it is today. That future requires lots of cooperation and the knitting together of many different traffic sources. Eventually the sources of traffic may become totally “opaque” to the individual advertiser — “We’ll deliver you 100 leads from our network.” As with the old Overture or the online ad networks today, publishers and traffic sources will be listed but advertisers may have little or no choice regarding where the traffic comes from.

Yodle has undertaken to build a version of this. YP publishers Idearc, RHD and Yellowpages.com, in exchanging traffic and advertisers, are moving down this path. Citysearch and Marchex have as well. Local.com and a range of others are doing a version of this too.

More of them are coming together to try and deliver quality clicks, calls and impressions without relying on buying search traffic as heavily.

More to come . . .

Is Yahoo! Losing Local to Google?

February 19, 2008

Yahoo! has always been one of the leaders in local and a kind of standard setter. Relatively speaking, Google is a bit of a “Johnny come lately” in the segment — albeit with a lot of resources and attention. However Google’s devotion to its maps product has paid off and caused it to overtake Yahoo, in the quest to beat market leader MapQuest:

Maps traffic 1/08

Over at SEL I blogged about big customer satisfaction gains for Yahoo in general search, which are based on the the most recent Keynote Customer Experience Rankings of search engines. Overall, Yahoo has made some impressive strides and also recently beat Google according to the University of Michigan American Consumer Satisfaction Index (ACSI).

According to one of the Keynote satisfaction findings, however, Yahoo appears to be declining vs. Google in local:

Task Success

Source: Keynote Systems, Inc. (2008)

In discussing the 2007 ACSI index results with Larry Freed, President and CEO of ForeSee Results, which sponsors and interprets the ACSI e-business report, I asked him how to reconcile the findings with the market share distribution in search. Freed told me he was confident that “search market share reflects past behavior. But the ASCI is predictive of future consumer behavior.”

If that’s true Yahoo! might well still be the local traffic leader, but this Keynote datapoint should be of concern.

Is the Future Flat for Ask?

January 15, 2008

Ask logoAsk3D is in many ways a bolder version of Google’s Universal Search or the comparable “blended search” being featured across engines now. Jim Lanzone was the architect of that innovation, which has given Ask’s traffic a modest bump and apparently increased the frequency of casual Ask users. But Lanzone, as is widely known, is out in favor of Jim Safka, who used to run Match.com and who currently runs IAC’s venture arm.

What’s interesting to consider is whether Ask can grow to the 7%-10% market share that IAC head Barry Diller was hoping to develop when he bought Ask in 2005. Ask is a cash cow of sorts but it seems a bit stuck in its sub-5% market share. Diller’s apparent belief is that Ask only needs more marketing exposure to gain share and so he brought in Safka. Here’s Saul Hansell from the NY Times:

Out is Jim Lanzone, the highly-regarded executive, who spearheaded the site’s redesign, called Ask 3d. In is Jim Safka, who had run Match.com and later Primal Ventures, IAC’s venture arm. Mr. Safka is most remembered for renovating Match’s advertising with a campaign featuring Dr. Phil McGraw, the self-help expert. Several IAC executives told me the move reflects Mr. Diller’s belief that what Ask needs was better high profile advertising. Mr. Safka, indeed, is seen as more marketing oriented, while Mr. Lanzone was more interested in building Ask’s core search engine as well as creating flashy features that will differentiate it from that other very very very large search engine. He clashed with Mr. Diller, the IAC executives said, over how much to spend for engineers and servers. Mr. Diller, a former movie studio and television executive, often takes a personal hand in the marketing of his companies, from the design of their logos to the scripts of their commercials.

The right marketing campaign — “the algorithm” was not it — might gain notice and give the company another bump. But Diller’s goal can only be achieved, if it can be achieved, with a long-term vision and sustained product innovation. That doesn’t seem to be the prevailing philosophy however.

So what if Ask can’t move substantially beyond where it is today; it’s still a near billion dollar business. What if it stays there? If Yahoo! and Microsoft are having trouble “moving the needle” what would enable Ask to do so?

IYPs Can Compete with Search (Apparently)

January 7, 2008

RHD put out a press release this morning that says its DexKnows consumer destination is the leader in its 14-state print market, according to comScore:

[I[ts comprehensive, feature-rich local search site, remained the top local search site in the 14-state area* where Dex is the official print directory for Qwest. According to comScore, DexKnows.com (formerly DexOnline.com) was the most used local search site in this area in terms of number of searches, accounting for 24 percent of all searches during the quarter. This marks the fifteenth consecutive quarter DexKnows.com led the market.

I have some issues with how comScore segments and measures the “local search” market — it uses a conservative methodology and separates “local search” and “IYP” into two distinct categories. But taking these numbers at face value it shows how the combined power of print and online — together with some traditional branding and marketing — can be a successful strategy for traditional media companies vs. online-only competitors.

DexKnows is supported by Local Matters’ destination search platform. In addition, Dex is testing a voice search service (free DA) using CallGenie’s platform and technology.

Hitwise Search Shares: G Down, Y! Up, M Down

September 20, 2007

Here’s the data (click to enlarge):

Hitwise August

Danny Sullivan does a longish analysis of this data and trends (together with the important caveats about drawing conclusions from one month of data).

What’s interesting to me is that ACSI data, showing Yahoo! beating Google and Ask way up is supposed to be predictive of future consumer behavior and market share trends over the next 12 months:

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We’ll see how accurate that turns out to be.

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Here’s Nielsen data, showing slightly different trends.

Brand Power and Search

June 29, 2007

I and others have argued that Google’s brand (and related branded user experience) is now substantially carrying the company’s market share leadership. This Penn State study, released and widely written about a couple days ago, appears to confirm that thesis:

Researchers in Penn State’s College of Information Sciences and Technology (IST) copied Google results pages from four different e-commerce queries, ascribing them to four different search engines — Google, MSN Live Search, Yahoo! and an in-house engine created for the study. Then the researchers showed the pages to 32 study participants who were asked to evaluate the engines’ performance in returning relevant results.

The queries included “camping Mexico,” “laser removal,” “manufactured home” and “techno music.”

Despite the results pages being identical in content and presentation, participants indicated that Yahoo! and Google outperformed MSN Live Search and the in-house search engine.

“Given that there was no difference in the results, all of the search engines should have had the exact same score,” said Jim Jansen, assistant professor and lead researcher. “Some emotional branding is having an effect here.”

Also, Yahoo! ranked better:

Given that many of the participants said they used Google to search, Jansen said he was surprised that Yahoo! came out on top. Its total scores were 15 percent above the average for the four queries while Google’s total scores were just 0.7 percent above the average.

There’s a good deal more to say about this but it gets at the power of brand in search, which refutes the oft-heard line: “The competition is just a click away.” Not so . . .

Brand affinity is also something that will thwart the ambitions of the Powersets of the world unless the company has a long time horizon (3-5 years to see an impact) and its results and related user experience are truly and visibly better.

FTC Begins Google Anti-Trust Investigation

May 29, 2007

Here’s the story from the NY Times:

The Federal Trade Commission has opened a preliminary antitrust investigation into Google’s planned $3.1 billion purchase of the online advertising company DoubleClick, an industry executive briefed on the agency’s plans said yesterday.

The inquiry began at the end of last week, after it was decided that the Federal Trade Commission instead of the Justice Department would conduct the review, said the executive, who asked not to be identified because he had not been authorized to speak. The two agencies split the duties of antitrust enforcement.

An F.T.C. spokesman said yesterday that the agency did not comment on pending inquiries.

The EU also has an investigation going against Google (and MSFT, Yahoo). Google has faced lots of legal issues and litigation since it went public. The anti-trust “complaints” by big corporate competitors ring somewhat hollow and, I believe, are part of a shrewd PR campaign against the search market share leader.

But this is where Google is vulnerable. I don’t think the FTC will block the DoubleClick acquisition ultimately. I think the real danger for Google now lies in its footprint and market power. Consumers show no signs of abandoning Google, as it continues to gain search share.

If Google becomes seen as too powerful or in control of too much consumer data and thus a privacy risk it may erode the public’s confidence in Google. This is what I meant when I said that as Google appears to be more powerful than ever it is increasingly vulnerable.

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Related: Microsoft’s Don Dodge posts on the relationship between search market share and market capitalization. He also analyzes Google’s revenues.

Google at Its Apex?

May 25, 2007

Here’s new search market share data from comScore showing Google gains vs. others:

comscore April

This should be taken in the larger context of longer-term trends and compared with data from other firms. But it shows continued Google momentum. This is also at a time when Google is “politically” vulnerable to the charge that it’s now too powerful and has too much access to user information and data.

There’s a much longer post to be written on this — it looks like Danny Sullivan has written one. I’ll try and do that later.

WSJ: MicroHoo! Talks Off

May 5, 2007

The WSJ (sub req’d) is now reporting that the possible merger or acquisition talks are off:

Microsoft and Yahoo discussed a possible merger or other matchup that would pair their respective strengths, say people familiar with the situation. The merger discussions are no longer active, these people say, but that doesn’t preclude the two companies from some other form of cooperation.

Hmmm…

My position and point of view have consistently been that Yahoo! doesn’t want to be acquired but would potentially consider a strategic alliance of some sort. From the WSJ article:

For now, Yahoo doesn’t appear interested in a major deal with Microsoft, say people familiar with the situation. The Sunnyvale, Calif., Internet company’s course may largely depend on a new advertising-system upgrade, called “Project Panama,” whose delay last year prompted criticisms from investors and others that were directed toward the company’s management. Panama is now running, and Yahoo said recently that it expects the system to contribute to its revenue, starting this quarter.

We’ll see what happens. Regardless, it appears that some changes are afoot for Microsoft, with some heads possibly rolling:

Microsoft’s online division could be heading for a shake-up, say people familiar with the situation. Failure by the Redmond, Wash., company to make better headway against Google in Internet search, combined with Microsoft losing a deal to Google last month to buy online-advertising specialist DoubleClick, has spurred Microsoft Chief Executive Steve Ballmer to consider new action, these people say. Mr. Ballmer’s frustration with the group’s progress has been “palpable,” said a person familiar with the company.

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Related: There are rumors of Google interest in jobs meta search site SimplyHired. Who knows with so many rumors flying about so many companies these days; but if it were true it would suggest that Google’s Base strategy is not working to build depth and content in key vertical categories — at least in jobs.

Google presumably doesn’t need the search technology so what would it be buying?. . . an existing repository of data, business development relationships and some nice site features. That’s not to minimize SimplyHired — here’s an early favorable post I did about the company — but it’s curious to me. Maybe, again if true, this is Google saying: in key categories we want to build specialized sites; in others we’ll use a more “generic” approach.

WSJ: MSFT to Buy Yahoo! — Again

May 4, 2007

The Wall Street Journal (sub req’d) is reporting that Microsoft is in talks (again) to acquire Yahoo!

In what appear to be early-stage discussions, executives at Microsoft and Yahoo are taking a fresh look at a merger of the two companies or some kind of match-up that would pair their companies’ respective strengths, say people familiar with the situation.

The renewed talks are a sign of the continued growth in Google’s power and problems over the past year with in-house efforts at Yahoo and Microsoft to ride a boom in Internet advertising. Meanwhile, management changes at both companies could help pave the way for a pairing that a year ago couldn’t happen. The talks were first reported in the New York Post.

I’m sure that the talks are indeed real and, as the WSJ story points out, there are some (SOME) synergies potentially here. Of course it remains to be seen whether anything results. Microsoft may also be talking to TimeWarner simultaneously about acquiring AOL, which would be somewhat less of an asset but also less expensive.

Microsoft needs to do something big and Yahoo! (read Terry Semel) needs to deliver more value to shareholders. This would do that in there near term. (Yahoo! shares are up on the rumor.) Yahoo! wants to remain independent but, if the terms are right it might do something like this. I’ve also argued that a strategic alliance is more likely than an outright acquisition.

While the market would cheer the estimated $50 billion acquisition (and to a lesser degree an alliance), in the former case I think there would be lots of challenges and issues integrating the two companies. The cultures are different, though not so different as Microsoft and Google, and there would be lots of turf wars around products and roles. And I think such a deal would ultimately send a bunch of Yahoo! employees out the door.

Again I believe the talks are real and it could happen but it would be very complicated to make work in some respects and it might not make any inroads against Google’s search market share, although it would provide either a formidable competitor or unified front against Google across the board in other areas.

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Here’s the related NY Post story that kicked off the frenzy this morning. Here’s PaidContent’s coverage.

Ask’s New Ad Campaign: Will It Be Effective?

May 3, 2007

I continue to be fascinated by Ask and its mix of innovative ideas (Ask X, Ask City) and guts (the “information underground“). I have often put myself in CEO Jim Lanzone’s position and tried to think how one might get consumers’ attention and grow usage. It’s a very challenging problem and I don’t envy him.

Today, the Wall Street Journal (sub req’d) writes about the forthcoming Ask ad campaign:

The multimillion-dollar campaign, which follows a similar effort last year, is expected to last a year and is designed to raise consumer awareness about what the company considers its secret sauce: Its algorithm, or the formula a search engine uses to determine which Web pages are most relevant to a particular query.

Ask, which is owned by IAC/InterActiveCorp of New York, plans to drum up interest in its algorithm through the ads, in which people slip the word into casual conversation with phrases such as “Do you have a lame algorithm?” or “I was all algorithm-ed out.”

Algorithm “is a funny word that people don’t hear every day,” said Jim Lanzone, chief executive of Ask.com. This phase of the campaign won’t go into details about how the algorithm works, he said. “The point is to introduce technology in a nontechnical way.”

But some observers wonder how widely the ads — designed by Crispin, Porter + Bogusky of Miami, a unit of MDC Partners Inc. — will appeal to consumers. The concept of an algorithm may be too nerdy for the average consumer, said Charlene Li, an analyst with Forrester Research. “Most people would not know what an algorithm is,” she said.

I’ve been seeing the billboards for several weeks in the SF Bay Area: “The algorithm killed Jeeves.” While industry insiders know what an algorithm is, Forrester’s Charlene Li (quoted above) is absolutely correct — ordinary people do not.

As he did in this Forbes Interview, IAC’s monetization guru Peter Horan would say:

We’re already noticing the marketing efforts. There are billboards on the Highway 101 in San Francisco that say “The Algorithm Killed Jeeves.” Across the country there are signs that say “The Algorithm is from Jersey” and “The Algorithm Constantly Finds Jesus.” In the U.K. there are signs supporting a mock uprising against an unnamed dominant search engine. It’s hard to tell, but these are all from IAC. What’s it all about?

Horan: The thing we’re trying to address is that people are sleep-searching. They’re not thinking about which search engine they’re using, and of course that benefits Google. We want to cause consumers to think about another option. The campaigns here and in the U.K. was designed to be intriguing and disruptive.

We want to highlight our search algorithm because somewhere, deep in the heart of a search engine, is a difference. Ours is fundamentally different from Google, and we want to put the spotlight on that. What you’re seeing is the first few weeks of a longer-term campaign. It’s typical to start a campaign with a teaser phase. That’s what this is. The branded elements are coming soon. Soon we’ll go heavily into answering these questions. It’s the opening shots of a war.

As Horan and Ask CEO Lanzone point out, this is designed to get attention, which it does, before going on to other claims and arguments. That part of the campaign will be interesting to see because if it tries to say that Ask is better based on some “technical” arguments it’s not going to work.

Depending on the market segment being addressed the messaging has to be adjusted, but it all must be clever, funny and simple. Anything that gets into the mechanics of search will be lost on consumers.

Everyone over 30 might want to see how using Ask is more effective or efficient or simpler; basically how it “works better.”

Anyone under 30 (maybe 25) would probably be more persuaded by emotional arguments that go to self image (think of the old Apple “Think Different” campaign).

Speaking of Apple, Ask can take a lesson from Apple’s current commercials (vs. PC), which are very entertaining and reinforce the Mac’s image of simplicity and effectiveness. They do so by personifying the Mac and PC and putting them in very humorous discussions and situations. There’s also demographic messaging in the ads.

They just work and they don’t really get into any “under the hood” debates. If they do touch on mechanics, they do it in a simplified and amusing way. Ask should take a page from Apple’s playbook and do something similar. However the ads have already been shot and the media buys made. We’ll see if they are effective.

Meanwhile, Yahoo is doing its own multimillion dollar ad campaignBe a Better . . .

____

Related: IAC announces Q1 results.

Google Search Personalization and Local

May 1, 2007

I’ve written a very very long post at Search Engine Land about my day at Google yesterday with a group of reporters who cover the Internet for most of the major national and SF Bay Area news publications: WSJ, NY Times, Times, USAToday, AP, Reuters, Bloomberg, BusinessWeek, SF Chronicle, San Jose Mercury, among several others.

Google made several announcements yesterday:

  • The Google personalized homepage has officially been renamed iGoogle
  • iGoogle is now available in 26 languages and in more than 40 countries
  • iGoogle “themes” are being rolled out internationally
  • Google introduced Gadget Maker. Here’s the official Google post.

This coincides with other personalization efforts going on at Google.

Location is one of two data layers that Google is using to personalize search results. The other is personal Web history. If you’re not registered and signed in, you don’t get personalized results. But if you are, your results and, over time, the ads you may see will reflect your location and preferences based on Web history:

As someone who covers local and geotargeting, it’s clear that the second layer of personalization here – location – is potentially quite significant for Google. There’s empirical evidence that shows, and I’ve argued previously, that lots of local search is obscure to the engines because of a lack of geographic modifiers or other factors.

Currently Google uses IP targeting to serve geographically relevant ads in cases where no geographic modifier is included in the query. Default location targeting will help Google not only offer more locally relevant organic results but ultimately to offer locally relevant ads even when IP targeting fails to accurately identify user location. Thus both organic and commercial local search will ultimately get a big boost from personalization.

There are lots of interesting aspects to this and issues (i.e., privacy). I go into most of these things in the SEL post.

Personalization shows how Google is continuing to develop and invest in search and why it will be hard for the foreseeable future for its competitors to grab search market share — not because of personalization per se (that will be invisible to most users) but because of Google’s ongoing R&D and product development.

Google Most Valuable Global Brand

April 23, 2007

The image “http://www.google.com/intl/en/images/google_sm.gif” cannot be displayed, because it contains errors.Search Engine Land (via Gary Price) covers a relatively new brand ranking scheme from Millward Brown (.pdf) based on a calculation of dollar value. The SEL post has the full rankings.

Google is number one, followed by GE, MSFT, Coke and so on. Earlier Brand Channel found Google was the top global brand (based on International surveys).

Beyond the fact that Google continues to invest in search, this (brand equity) is the single reason Google won’t be unseated any time soon as the search engine of the masses.

iProspect ‘Social Networking’ Survey Findings

April 10, 2007

Interesting stuff; the high level findings are here. Here’s a chart that “visualizes” them:

Chart

(Click to enlarge.)

Ask’s ‘Underground’ Marketing Strategy

April 5, 2007

The WSJ (sub req’d) has an interesting article, complete with video, that discusses the “controversial” anti-Google marketing campaign IAC/Ask has launched in the UK:

The goal of the campaign is to convince consumers that Google’s success — it is used for 75% of all Internet searches in the United Kingdom — is unhealthy because it limits the sources for getting information from the Internet.

The ads illustrate how newer, edgier marketing techniques can backfire. Much of the Ask.com campaign relies on hiding the fact that it is advertising and that it is promoting Ask.com. Some Internet users have reacted angrily, saying they’ve been duped.

The Fallon Worldwide agency, a unit of Publicis Groupe SA, based in Paris, created a tongue-in-cheek story about a pretend revolutionary movement mobilizing the British public to rebel against what it calls the “establishment” Google. Television and radio spots, outdoor ads, street stunts, and, of course, a Web site, are designed to look like messages from the underground movement. The campaign doesn’t include newspaper advertising, because that’s something a corporation would do, an Ask.com spokesman says.

I like this line: “The campaign doesn’t include newspaper advertising, because that’s something a corporation would do…”

Ask’s “non-disclosure creative” may have backfired for many but the campaign has struck a nerve and is interesting to me because it gets away from the fruitless “our algorithm is better” messaging that is destined to fail as a competitive tactic.

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Danny Sullivan has more, plus embedded video of the TV commercials (scroll).

Interesting Google/Anti-Google Posts

March 27, 2007

Topix’s Rich Skrenta (formerly of the Open Directory Project/DMOZ) on how to “beat” Google “part 1″ (a distributed editorial staff iis in there somewhere.) Tune in for part 2. He also penned the memorable post, “Google and the Third Age of Computing.”

And Robert Young at GigaOM opines that Google’s search advantage and model may buckle under the weight of video and traditional content licensing. He may be putting much too much faith in News Corp. and underestimate Google.

The Search Market Share Story

March 25, 2007

I’ve basically stopped regularly writing about search market share. There are four firms putting out monthly releases on the subject (comScore, Nielsen, Hitwise and, now, Compete), something of an ironic analogy to the search competitors themselves. The fluctuations are typically a fraction of one percent. This is a critical area but the monthly news is not as important as larger trends and movements.

If you’re interested, Danny Sullivan has a detailed discussion of recent search traffic news here.

MSFT’s Web Missteps = Corporate Trouble?

March 23, 2007

Here’s a critical review of Microsoft’s search and Web strategy and its internal executive shuffling from BusinessWeek. The gist of the piece is that Microsoft’s Internet and search missteps may make its core (Windows and Office) businesses vulnerable over the long term:

Microsoft’s search problems present it with a huge quandary. The company’s revenue from online advertising is relatively small–just $836 million in the first six months of the fiscal year ending in June, vs. $5.9 billion in sales of the Windows PC operating system. But the Web is increasingly the place where computing gets done. Everything from e-mail to customer-relationship management applications is moving from programs on a PC to services on the Net. Meanwhile search advertising is exploding: Piper Jaffray & Co. (PJC ) says it should hit $44.5 billion by 2011, up from $15.8 billion in 2006.

If Microsoft can’t keep pace, it risks seeing its Windows and Office software franchises erode as Google and others launch Web-based rivals. “It behooves Microsoft to be there,” says Charles Di Bona, an analyst with Sanford C. Bernstein & Co. (AB ). “If they don’t get there, it gives others a platform from which to attack Microsoft’s core business.”

Just as troubling, Microsoft’s search problem reflects its approach to new markets in general. It spends little time focusing on tiny, emerging niches that generate little, if any, sales. But those are precisely the markets that can quickly blossom on the Net into meaningful businesses. “Bill [Gates] and Steve [Ballmer] and the leadership don’t understand the value of small things,” says Robert Scoble, a former Microsoftie whose blog recently took the company to task for its Web missteps. “That cripples their entire Internet strategy from the start.”

Microsoft has some cool products and is being innovative in certain areas but the company has numerous, well-funded competitors (and startups) that are at least as motivated to succeed. Microsoft may be seen, in some sense, like a well-heeled, traditional media company responding to threat of the Internet to its ad revenues. The company has largely played defense and been reactive to date.

A couple of former Microsoft personnel whom I was recently speaking with said the software giant is now largely a “me too” company. And some have suggested to me that the decision to have TellMe report in to Jeff Raikes and the enterprise group implies that TellMe may not be used in the most strategic way for the company, which is providing an edge in consumer Mobile Search.

The challenging thing for any once-innovative company that has become an “incumbent” is to remain innovative and to not become complacent and then defensive in the face of potential disruption. Google ultimately shares this risk online too.

If the internal culture of Microsoft is such that the kind of needed innovation is no longer possible, I might get out my checkbook and start buying. The TellMe acquisition reads like something of an admission in that sense. Buying sprees of course create their own challenges: integration and management of acquired companies. That’s an issue Yahoo! recently had to look closely in its own reorg.

But the big problem might ultimately reside with Steve Ballmer himself.


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