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Microsoft Still Needs Help Understanding Search (1/4)


When a company resorts to bribery not once, but twice in an effort to get customers to try their product, you have to consider that maybe there’s something wrong with the product itself. That’s especially true if the product is free – even if rival products are also free. What does that tell us about Microsoft’s recent actions concerning its search engine?
To my way of thinking, it tells us that Microsoft still doesn't understand search nearly as well as Google or even Yahoo. But you don't need to believe me when the figures speak for themselves. A little over two years ago, in February 2005, market research firm Nielsen/NetRatings reported that Microsoft had 14 percent of all web searches to itself, compared to Google's 46 percent share of the market. Two years later, after rebranding its search engine, Microsoft could only claim a 9.6 percent share of web searches, compared to Google's 56 percent share.

Those percentage points aren't small potatoes. They represent a loss to Microsoft of nearly 300 million searches per month. This loss is happening at a time when search advertising is set to explode. According to Piper Jaffray, revenues in this field will reach $44.5 billion in 2011. That's more than double the $15.8 billion they reached in 2006. Even Microsoft can't ignore those kinds of figures. In the first six months of last year, it made less than $1 billion on search advertising, as opposed to nearly $6 billion on sales of the Windows operating system. But Google recently spent more than $4.5 billion just to acquire two companies, YouTube and DoubleClick. It's no secret that Google gets most of its money from search advertising. If you were Microsoft, wouldn't you want a piece of that action?

Clearly Microsoft does want a piece of that action. So far it has been unsuccessful at stealing market share from Google with its own advertising campaigns. And though its product shows signs of improvement, most users seem to agree it still isn't as good as Google. So rather than out market or out compete the search giant, Microsoft is now trying to out leverage Google with a little bribery.