Microsoft's Search Analysis & Evaluation

General Environment

The advanced show of the U.S. economy in the late 1990's has led a lot of experts to conjecture that a New Economy has materialized in which heavy investment in information technology (IT) has led to an period of continued economic growth. Even though the current economic slowdown has dampened some of the passion for the idea of a New Economy, a basic question remains of whether the output growth experienced in the late 90's, can be attributed to IT and how is this going to look going forward (Information Technology and the New Economy, 2001).

Industry

Some time after the dotcom boom turned into a magnificent bust in 2000, the industry as a whole began to hope for another chance. And it looks like they got what they hoped for. Facebook and Twitter are valued by secondary-market trades at some seventy six billion and almost eight billion respectively. LinkedIn, a social network for professionals, was valued at a little over three billion in an initial public offering (IPO). Microsoft purchased Skype, an internet calling and video service, for eight and half billion. This was ten times its sales the year before and four hundred times its operating income. These are all companies that are major companies with customers around the world. Prices have looked even more impressive for firms in the private market. Color, a photo-sharing social network, was recently said to be worth one hundred million, although it has an inexperienced service. There has been a rush for shares in Renren, known as China's Facebook, and other Chinese web giants listed on American exchanges (The New Tech Bubble, 2011).

Experts say that the tech landscape has changed radically since the late 1990's. Back then few people were plugged into the internet; today there are two billion netizens, a lot of them in enormous new wired markets such as China. A dozen years ago ultra-fast broadband connections were unusual; today they are ever-present. Today web stars such as Groupon, which offers its users online coupons, and Zynga, a social-gaming company, have exceptional sales and already make reputable profits (The New Tech Bubble, 2011).

When looking at the industry in relation to Porter Five Forces, there is a medium threat in regards to competitors in the overall market around the world. There is not much of a threat of a substitution of products; since everything is done nowadays via the Internet there isn't much other way to do things. The bargaining power of both suppliers and buyers is both small, both have some influence but not a lot. The competitive rivalry within the market is the biggest force there is in the industry (Porter's Five Forces, 2010). This is what continues to drive the market forward. Competition is the key success factor in this industry. Each company that is presently in the market works to drive innovation and success which drives the market.

Competition

As Microsoft fought battles in other domains, search was emerging as a major movement on the Internet. One of its biggest competitors in this area for Microsoft is that of Google (Rivkin and Van Den Steen, 2009). "Google Inc. is an American multinational public company invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit chiefly from advertising through its AdWords program" (Google Corporate Information, 2011).

Google has advanced a lot over the years. From presenting search in a single language they now offer many products and services that include a variety of types of advertising and web applications for all kinds of tasks, in many languages. Considering the started with two computer science students in a university dorm room, they now have thousands of staff and offices worldwide (Google Corporate Information, 2011).

Internal Audit

In 2008 Microsoft decided that they needed to improve the company's situation in the market in regards to Internet searches and associated advertising. At the time Microsoft was one of the world's strongest corporations. In 2008, they closed their fiscal year with cash and short-term investments at almost twenty four billion, revenues of sixty billion and operating cash flow at roughly twenty two billion. Microsoft has grown over the years to sell a multifaceted line of software, services and hardware (Rivkin and Van Den Steen, 2009).

Since 2008 Microsoft has made great strides in both technology and marketing, but they still find themselves a distant third behind Google. They are chasing Google and losing...

They vow that they are going to continue to battle Google, but are considering a different approach. They are considering an array of radical moves and real game changers in order to catch and pass Google in the market (Rivkin and Van Den Steen, 2009).
Microsoft once had a very strong status. But after years of ruling the operating system marketplace, Microsoft has become the institution. Microsoft has gotten vicious condemnation for some of its releases over the years, including troubles with stability, security and compatibility. Windows ME and Windows Vista have both made bad first impressions. Although Microsoft released patches to deal with a lot of those troubles, a lot of people had already decided to stay away from them. Fortunately for Microsoft, it's preserved some respect with releases that have left more optimistic feelings, like Windows XP and Windows 7 (Strickland and Crawford, 2011).

"Microsoft has a very strong hold on the desktop application market. Beside the Windows OS, Microsoft produces the Office suite of productivity software, software for computer servers and the Web browser Internet Explorer. Another significant Microsoft product is its line of Xbox consoles and games. The video game market is one area of strength for Microsoft that Google has yet to get into" (Strickland and Crawford, 2011). At the present moment Microsoft is doing a good job at keeping the competition between themselves and Google at a high level. This key success factor is driving innovation in the industry and Microsoft is right there with the best of them.

Identification

Microsoft currently finds themselves third behind Google in the search market. Microsoft first became a search provider as a result of other business ventures. In 2003, the company decided that if they were going to keep up with Google they had to build search capabilities within Microsoft. They decided to build a search engine from scratch instead of buying an all ready built one. This proved at times to be very difficult for the company. It took until February of 2005 before they had it completely up and running. At the same time that they were building their search engine Microsoft sought to develop its own advertising network. They thought about buying a network, but in the end decided to build their own, AdCenter (Rivkin and Van Den Steen, 2009).

Alternative Options

Over time, the leading search engines introduced new features to their sites. Most of the leading search engines offered corrections when users misspelled what they were looking for, suggested refinements to common searchers, searched images as well as text and suggested complete query terms as users started to type in the search box. Since the beginning Microsoft had tried to distinguish its service in a number of different ways. For example, the service was integrated with Microsoft's Encarta Encyclopedia. In 2006 they switched from MSN search to Live Search. Microsoft made a special effort to make its site unusually effective for product searchers. Through advanced text and context analysis of online product reviews, Microsoft was able to extract the reviews' sentiment on specific product criteria and summarize these in an opinion index. In 2008, Live Search launched it most aggressive effort to distinguish itself with respect to product searches. They launched their "cashback" program. Under cashback, ads of partner advertisers were marked by a special symbol on each Live Search product results page. If a user clicked through and purchased an item, Microsoft would deposit a rebate up to fifteen percent of the purchase value into an account set up by the user (Strickland and Crawford, 2011).

To date Microsoft has succeeded in innovating in three different areas: the user occurrence, the business representation and the network of the industry as a whole. They now have to use this same philosophy to bring the same height of innovation to assist consumers and advertisers in regards to search if they are to be successful in this arena (Strickland and Crawford, 2011).

Recommendations

The bottom line is that Microsoft wants to improve the capabilities of its search engine so that it can be more competitive with Google. In order to do this they have to improve their long-tail search. The only way to do that is to crawl faster, deeper, and with a lot more scale. Google has over 200,000 servers and although Microsoft can match Google dollar to dollar on spending for servers if they really want to be number one they need to get the right engineers in the crawling group working on the right set of challenges, like building crawlers that can crawl at least…