The search business is a highly competitive market that is worth billions in advertising revenue every year. As the search engine giant Google leads the way, many of their rivals are finding it a struggle to keep pace - a situation which Microsoft's Chief Financial Officer, Chris Liddell, said he is "not happy" about, but which is not expected to turn around any time in the near future.Google's success in this market continues at an unprecedented rate, buoyed by a constant stream of ever expanding innovative new services, advertising solutions and currently unassailable public support. Meanwhile, Microsoft and other search service providers are finding that their market share is either remaining static or falling, along with their revenues.
While some may feel that a Microsoft US market share loss of 0.5 per cent in December 06 to 10.5 per cent compared with the previous month (source comScore.com) should not be seen as a source for major concern, it is necessary to put the statistics into context. These figures represent Microsoft's share of dealing with the 6.7 billion online US searches, in a market where overall search volumes have increased by 30 per cent over the last 12 months and where their major competitors Google and Yahoo! have both increased their share to 47.3 per cent and 28.5 per cent respectively.
Previous annual revenue growth estimates for Microsoft Net services of 7 per cent to 11 per cent have now had to be replaced by more cautious 3-8 per cent figures, making the company focus on its core Windows operating system, Office software and server software businesses to make up the shortfall in its sales targets. Despite this, Microsoft has decided to take a long-term approach towards the market and continue investing heavily in its existing AdCenter paid search backed business, with plans to further develop their second branded service under the name Windows Live to work alongside MSN.
Regarding Microsoft's financial profitability situation, Liddell said that targets will require "tradeoffs and choices"; moreover, deferred sales figures from new upgrades of its Windows and Office software will be used by Microsoft accountants to put a positive spin on their current finances and bolster this quarters poor search performance.
Microsoft's hopes are now firmly pinned on the releases of Vista and Office 2007, which are to be officially launched this week by Bill Gates in New York. Although Microsoft's overall revenue still exceeds that of Google, as the search giant continues to make advances in leaps and bounds, the software giant is desperately looking towards future new services and existing core strengths to temporarily bolster its online offerings.
While Microsoft suffered most at the hands of these latest search share statistics, Ask and the Time Warner Network have also seen a drop in their figures. Ask's share reduced by 0.1 per cent to 5.4 per cent overall, while Time Warner fell by 0.2 per cent to 4.9 per cent, making these companies the fourth and fifth ranked search engines in the US.
