Microsoft’s thwarted ambition to buy Yahoo! has forced the software giant into activating a Plan B search strategy, based on organic growth together with “disruptive” ad solutions.
But observers question whether it can hope to dent the might of Google, which last week unveiled the partnership with Yahoo! that finally put paid to any “Microhoo” merger.
Microsoft has embarked on a number of initiatives, including broadening its Live Search Cashback, which allows consumers to get money back on products searched through its engine, and opening a European Search Technology Centre to develop advertising ideas, models and platforms.
A Microsoft source says its products and services will rival and surpass Google’s in quality but admits it will be a hard sell to agencies and, ultimately, the consumer for whom Google is increasingly the default.
GroupM head of online trading Robin O’Neill says Google has established itself as one of the world’s biggest brands. “It’s more than just a product.”
Indeed, Google had 81% of UK searches in April, Yahoo! 5%, AOL 4% and Microsoft just 3%, according to Nielsen Online data. And its deal with Yahoo!, to be implemented in the US and Canada initially, stretches its dominance further, allowing Yahoo! to use Google technology to display Google ads alongside its own search results.
“It will be a tough slog to reel Google in,” admits Chris Dobson, Microsoft vice-president of the UK online services group. Microsoft’s revenue doesn’t depend on search, so it can afford to do “unusual” things, he says. “It is about offering something compelling. It’s about value and engaging consumers.”
Search and display
“Search isn’t the centre here. It’s about the whole gamut of search and display,” says Dobson. “Because we are so behind in search, we need to put a disproportionate amount, versus display, of investment in to get up there.”
Observers say that Microsoft’s chances of gaining search share are slim, but it could grow its other online advertising revenues. Walker-i head of digital Mark Syals says that Microsoft does have a “perfectly healthy” display ad platform. “It has decent revenues that are healthier than Google’s,” he says.
O’Neill says that Live Search, which has struggled despite good traffic across Microsoft’s properties, came to market too late – in September 2006 – and has been under-promoted. “People may visit MSN, but still go to Google for search,” he adds.
It is something Dobson says Microsoft is attempting to correct. It is putting search in Mail and Messenger and is gradually introducing search capability into much of its online inventory.
Meanwhile, Microsoft is targeting agencies and advertisers with a package of tailored solutions it hopes will make its “brand-led” proposition unique in the market. And last week it acquired NAvic, a US company that delivers and measures interactive TV campaigns.
Microsoft, a pioneer of the pre-internet age, seems unlikely to eclipse Google, even if it succeeds in derailing the search giant’s own deal with Yahoo! Yet mutterings about a Google backlash persist, with the industry pointing to an “over-dominant” position somewhat unencumbered by regulation.
Microsoft knows only too well how easy it is to fall from the top; yet with its impressive margins and varied portfolio it would be premature to discount a spirited fightback, however daunting the task.