Microsoft's search strategy in the competitive technology industry

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).

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 money while they do it. 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 fifty percent of the web (Bhatti, 2010).

Plan of Action

The best way that Microsoft can accomplish what they need to do in order to truly compete with Google is to join forces with Yahoo. Yahoo and Microsoft's search deal was confirmed after regulators determined it would not hurt customers. The new affiliation will allow Microsoft's Bing search engine to power Yahoo's search results for a piece of ad income.

The association is projected to cut expenses and elevate revenues for both companies as they fight back to gain share against Google, which keeps a projected seventy percent of the U.S. share of search, the source of billions of dollars from tiny text ads. E.U. And U.S. regulators agreed to the agreement without stipulations, leaving the two with the tricky task of integrating some, but not all, of their search and online advertising programs. Jointly the two make up the majority of the outstanding thirty percent of the search market, and both are working hard to make up ground against Google's apparently undefeatable lead (Singel, 2010).

Under the agreement, Bing supplies the list of links for every Yahoo search, freeing Yahoo from the operating expense of running huge web spidering and indexing computer centers. On the other side, Yahoo will take over the search advertising labors for Microsoft and pay a part of Yahoo's search ad revenues to Microsoft. Yahoo's wealth has been declining in the last few years, and has seen its search share go down as well. Microsoft tried to buy Yahoo for forty five billion, but Yahoo founder and then CEO Jerry Yang rejected the offer. Microsoft's search labors had struggled until it released Bing, which has demonstrated to be an unexpectedly vigorous and ground-breaking competitor. The mutual ad platform could mean real wealth for both companies as it lets advertisers put ads on both networks, making it more eye-catching for advertisers to spend time managing an ad campaign (Singel, 2010).

Yahoo has powerfully fought the extensive idea that the company was giving up on search and turning itself exclusively into a media company. Yahoo called upon a group of tech reporters to highlight it was still investing and innovating in search. The company disputes, not unconvincingly, that the real innovation in search is now about learning how to unite information to bring back smart and visual convincing results, so that a search on an unclear Polish polka band and one on Justin Timberlake gets the identical machine produced info packaging. Company engineers have had to incorporate their platforms, with Yahoo's in order to move forward (Singel, 2010).

This joint venture has improved the Web search experience for users and advertisers, and delivered sustained innovation to the industry. For Web users and advertisers, this deal accelerated the pace and breadth of innovation by combining both companies' complementary strengths and search platforms into a market competitor with the scale to fuel sustained development in search and search advertising. Users have found what they care about faster and with more personal relevance. Microsoft's competitive search platforms have lead to more value for advertisers, better results for web publishers, and increased innovation and efficiency across the Internet (Singel, 2010).

With this new Bing search platform, they have created breakthrough innovation and features. The agreement with Yahoo provided the scale that they needed in order to deliver even more rapid advances in relevancy and usefulness. Microsoft and Yahoo both know there's so much more that search could be. This agreement has given them the scale and resources to create the future of search (Singel, 2010).