In the past Microsoft has been very adept at building new technologies and staying at the forefront of the industry to keep the competition very much at bay. Online, however, the tides, over recent years, have turned, and not in their favour. All you hear about these days is Google this, Google that - any company looking into organic search engine optimisation will tell you they want to be number one on Google... It's: MSN who? Microsoft has had to evolve its way of thinking and has undoubtedly realised it can no longer rely on their own research and development to bring the fight to the table.
Microsoft has spent millions of dollars investing in search engine technology, and online ad systems have provided little in the way of revenue or market share for the company according to the Wall Street Journal. MSN's current search engine market share stands at 9% in the UK and 11% in the US. Google however commands a colossal 73% in the UK, and 49% of the US search engine market. Insurmountable? Perhaps, but the Senior Vice President of Microsoft doesn't seem to think so.
Hank Vigil, Microsoft Senior VP, has pioneered Microsoft's growing involvement in acquiring new technologies rather than building them in-house. Vigil, it is said, 'led the failed negotiations to combine MSN with AOL'. Sure, AOL would have provided existing traffic but would that have really been worth it? One can't help but speculate that MSN dodged a bullet with that one. AOL quite frankly could not have offered them any kind of solid search technology, after all they only command 5% of the UK search market and 8% in the US - clearly they are also struggling to find that winning formula.
Yahoo!, on the other hand, is a much smarter choice than AOL as they provide plenty of that all important traffic, which comes hand in hand with their coveted search technology. If that wasn't enough they can throw in a huge advertiser base to boot. Certainly an attractive package, but will the price of acquisition simply be too high? Yahoo! itself has a higher market share than MSN: will they want to merge or go it alone? Many have speculated that Jerry Yang - Cofounder of Yahoo! - would never go for it but it has been confirmed that they have been talking informally over the past year. Is it time to make it formal?
One thing's for sure - MSN is getting serious about search. The Wall Street Journal attributes this to the hiring of Steve Berkowitz whose appointment has been seen as a big sign that MSN are tired of being outperformed, outclassed by its competitors in terms of search. An acknowledgement, if you will, that their current strategy is falling short of expectations - time for a new battle plan no matter how outlandish it may seem. To compete with Google you need the following ingredients:
- A quality search engine
- A less crucial but handy advertising network
- Gall
Microsoft clearly has bags of the third option - Yahoo! would bring the rest. Surely a winning combination...or is it? Marketing is all about the brand, online marketing is no exception. The question is whether or not MSN and Yahoo! could create a symbiotic relationship that would benefit themselves as well as their customers.
Ah! The customers - we almost forgot about them. Never mind Yahoo!, will the customers buy it?
