How Microsoft Could Win The Search Wars

    May 15, 2006

There’s been a lot of news recently about Microsoft’s new efforts to take on Google. Much of the visible battle concerns IE 7.0, Microsoft’s in-Beta browser, which contains a search box whose default setting points to MSN’s search.

IE 7.0 will be bundled with Microsoft’s forthcoming Vista operating system, slated to be released in about 10 months.

Google is worried enough about Microsoft’s moves that it’s complained to the EC (European Commission) and US Justice Department, arguing that IE 7.0, by steering searchers to Microsoft’s search engine, gives it an unfair competitive advantage. So far, the Justice Department has not taken this argument seriously (although on Friday it agreed to extend its oversight of Microsoft’s compliance with an antitrust settlement by two years). More than a few observers have accused Google of having a double standard in this matter, especially given its recen $1 billion deal with Dell to make Firefox and Google the defaults for buyers of new Dell systems.

For his own part, Mr. Frog believes that the way defaults are set is actually pretty important. Call it the “AOL factor” (some would call it “the Idiot Factor) but the fact is that many people don’t know how to change basic settings on their computers, which means they will probably never change the default search providers which came bundled with their systems. Even if these “Internet Options-challenged” folks only comprise 25 percent of Net users (and I’d argue that the percentage is much higher), funneling these queries through MSN would have a noticeable impact on Google’s overall share of queries, which now hover at about 43 percent, according to the latest comScore numbers.

Aggressive browser-bundling is, of course, the tactic which Microsoft successfully used against Netscape back in the 1990’s. Netscape, of course, once had an 80 percent browser share and today is just a memory (although its code lives on in the open-source Firefox browser). It’s too soon to tell whether Google will be the next Netscape, but I will sketch out a few reasons why I believe that, if Microsoft really puts its mind to it (and there’s a lot of evidence it is), it could take Google down a few notches by the end of this year.

1. Search Engines Have Become Commodified

Maybe my life is overly boring, but I really enjoy doing comparative queries on all the major Search Engines. In the past, there were big differences in the quality of results, but these differences have clearly waned over time. Does Google provide more relevant queries? Well, maybe in some instances it does. Does it have a sleeker, less cluttered interface than Yahoo’s? Sure. But do these subtle differences add up to more than a hill of beans for most users? Nope. Because the majority of people don’t care about the size of a given engine’s index; they just want to find what they’re looking for and get on with their lives.

Today, MSN, Yahoo, and Ask do almost as good a job as Google does, and that’s enough for most searchers. If the Googleplex was hit by an earthquake tomorrow, we’d all be sad, but we’d all have changed search providers within 90 seconds. Google might have great brand equity but brand loyalty? Let’s just say that I have my doubts.

2. Marketers Want Better Targeting

MSN’s adCenter, which includes advanced geo- and demographic targeting capabilities for MSN Search, represents the wave of the future for PPC advertising. Sure, its search query volume is orders of magnitude below Google’s right now, but as usage grows you’ll see more advertisers appearing on its SERPs, and if better targeting provides higher conversion rates and better ROI, these advertisers will begin to move dollars out of Adwords and Overture into adCenter. According to Did-it’s own data, MSN is out-converting Google right now, a finding which Google should take as a danger sign.

3. Marketers Want More Transparency

Among the difficult issues the Search Marketing industry is wrestling with right now, Click Fraud is the 800 lb. gorilla. Google’s characteristic secrecy in terms of how it’s handled the problem hasn’t been helpful, although it’s probably impossible for Google to be more forthcoming about how it detects false clicks, because it doesn’t want to tip the cheaters off. MSN hasn’t yet had to wrap its arms around this problem, because it just doesn’t have the click volume, or the large contextual network that Google has, which is where most of the fraud occurs. If Microsoft can provide a more complete, more transparent level of leadership in the fight against Click Fraud, it has an opportunity to make a powerful case to marketers that its network is “cleaner” than Google’s.

4. Publishers Want a Fairer Share of Click Revenues

Google’s Contextual network accounts for more than 40 percent of Google’s revenues, but many of the sites in the network are struggling along on just a few dollars a day. If Microsoft could promise legitimate site and Blog operators even a marginally higher share of CPC revenues than Google currently offers them, it might be enough to jumpstart an avalanche of defections away from Google. Of course, there are thousands of sites in the partner network and individually, they don’t account for more than a smidgen of Adsense revenue. But were Microsoft to target high-traffic sites first and offer them a slightly better deal, it might make a noticeable dent in Google’s revenue.

Sure, Adsense has been a big boon to bloggers, but let’s be realistic: nobody’s part of Google’s Adsense network because they love Google; it’s just that right now, they can’t get a better deal from anybody else. If Microsoft comes forward with a reasonable level of traffic and a more favorable revenue split, Google’s contextual network would be highly vulnerable.

5. Developers, Developers, Developers!

Google has done a lot to encourage the development of 3rd party applications in the last few years, but recently, it seems it’s rolling up the gate by beginning to charge for API use of some of its products, notably Adwords. Were Microsoft to come out and publicly state that adCenter’s API is and would always be free, it would do a lot to ease the minds of search marketers by encouraging the continuing development of campaign management applications to further customize adCenter for their clients and improve ROI.

As 2006 unfolds, it will be very interesting to watch the moves and countermoves of Google and Microsoft, as each strives for strategic advantage. I would expect that such competition will be good for end-users and good for marketers, because the choices offered to each will grow and deepen. The stakes in this battle of the titans are vast, the outcome is uncertain, but given the level of competition, the opportunities for publishers, marketers, and searchers are abundant.

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Mr. Frog is a leading Search industry visionary. Mr. Frog is a member of the Did-it Search Marketing team which accompanies him to most major
marketing conferences.