Microsoft Taps Europe for Search R&D

Microsoft's Steve Ballmer says the company will start a European Search Technology Centre to help gain on leaders Google and Yahoo

Microsoft will set up a Search Technology Centre designed to help its Live Search gain on search leaders Google and Yahoo!, Microsoft chief executive Steve Ballmer said at the end of last week, in the midst of a five-city European tour.

The move follows Microsoft's $1.2bn cash acquisition of Norwegian enterprise search firm Fast Search & Transfer earlier this year, a buy that will make Norway one of Microsoft's principal centres for enterprise search R&D, Ballmer said.

The new centre will have branches in Paris, London and Munich, and will come on top of Microsoft's existing R&D investment of more than $600m per year in Europe, though Ballmer did not specify how much additional investment the centre would represent.

The centre will be led by general manager Jordi Ribas, previously general manager of Microsoft's Connected TV business group.

The centre joins Microsoft's more than 40 other R&D centres, including labs in Cambridge, Dublin, Copenhagen and Oslo. Microsoft already has 2,000 researchers and engineers in Europe, the company said. Microsoft is soon to complete a $500m European data centre in Dublin.

Aside from Fast, recent European acquisitions by Microsoft include UK-based mapping specialist Multimap and German-based price comparison site Ciao. The company said it employs a total of 16,000 staff in Europe, and draws a third of all its revenues from the region.

Ballmer said in a statement: "Increasingly, we are finding the talent we need here in Europe. Today, Europe is second only to the United States in the number of engineers and researchers we have working on creating innovative products and services."

Live Search currently serves about two billion queries worldwide per month but still ranks a distant third behind Google and Yahoo!. In Europe, Microsoft has only two per cent of the market, compared with Google's 79 per cent, according to web research firm ComScore. Worldwide, Google holds about 60 per cent of the market, compared with nine per cent for Microsoft.

In the US, Yahoo! and Google have teamed up to consolidate their lead with an advertising pact that is expected to boost their revenues by as much as $800m per year. The deal, set to go into effect this month, has drawn criticism from newspaper organisations, privacy advocates and others, and has drawn the attention of European Commission and US regulators.

Microsoft's measures for increasing its search share in the US include the somewhat unusual option of paying users for using the service. A programme called Live SearchPerks, introduced last week and valid only in the US, requires users to install a counter device to determine the number of times per day a user accesses Live Search, awarding 'tickets' based on the frequency of search usage. The tickets enter users into the running for prizes such as free music downloads, air miles and video games.

Ballmer's European trip includes stops in Denmark, France, Norway, Portugal and the UK.

Before it's here, it's on the Bloomberg Terminal.