Microsoft's New Bet on Search

It's hoping its refined search technology for Live Search will finally help it close the gap with Google

Microsoft (MSFT) has a long history of taking its time to get products just right, then vanquishing rivals. But the Web search business is one that continues to stymie the software giant.

Now, it's trying again, still intent on chipping away at the huge lead held by the company's most troublesome rival, Google (GOOG). On Sept. 27, Microsoft flipped the switch on its updated search technology, called Live Search, saying it will make results more relevant to Web surfers seeking information.

Microsoft's Passed This Way Before

Live Search zeroes in on four key markets—entertainment, shopping, local information, and health—to give Netizens a more refined way to find the Web sites they're after. Microsoft says its technology is just as good as Google's. "We believe we've closed the gap," says Brad Goldberg, a marketing general manager at Microsoft.

If that marketing-speak sounds familiar, there's a reason. Microsoft has launched and relaunched its search efforts with similar enthusiasm before. And for the most part, Microsoft has barely made a dent in Google's massive lead. Back in February, 2005, when Microsoft first launched its homegrown search engine (the previous version was powered by Inktomi, the company asserted that its technology improved the relevance of search results (BusinessWeek, 2/2/05). "We're going after the core problem, which is customers saying they can't get their questions answered," Microsoft Senior Vice-President Yusuf Mehdi said at the time.

At the time, Google accounted for nearly 34.7% of all Web searches while MSN Search, the name of Microsoft's search engine back then, garnered about 16.3%, according to industry tracker comScore Networks (SCOR). By August, 2007, Google's share had climbed to 56.5% of all U.S. searches, compared with 11.3% from Microsoft's search sites.

Product Searches: Prices and Reviews

Microsoft is more sanguine now about its search ambitions. It's not trying to topple Google. Rather, the company says, it wants to get the folks who already use its search technology to use it more often, giving them less reason to surf over to Google, Yahoo! (YHOO), or any other competitors. Analysts and journalists were not invited to test the new search engine prior to its release, so it remains to be seen whether Microsoft has succeeded in making its results any more relevant compared with those of rival services.

So what's different this time around? Well, Microsoft says it has vastly expanded the index of Web sites, going from 5 billion just a few years ago to 20 billion today. "We can start an honest-to-God arms race with the best of them," says Satya Nadella, vice-president of the Search & Advertising Platform Group at Microsoft. The company also says it's improved the search engine's ability to predict what users are trying to find: Live Search is now much better at understanding misspellings, abbreviations, and punctuation.

Microsoft also poured resources into refining its search in specific markets to give Web surfers more precise results in high-interest niches. Product searches, for example, now yield results that include reviews, prices, and product images on the same page as the links to retailers. Restaurant queries lead searchers to pages that include maps, reviews, and hours of operations. "We're trying to move away from the 10 blue links" of current Web searches, says Goldberg. The question is whether Microsoft can convince Net users to move with them.

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