July 1, 2008

Live! From Redmond, It's Microsoft Powerset Live!

Ya-Who? Seems Microsoft has already forgotten the Sunnyvale search engine.

Microsoft has agreed to buy Powerset, the semantic search engine touted as the next generation of search. Powerset is the much-hyped beta natural language search engine that the metaphor-challenged mainstream media call the Google Killer. That means you can type questions in a search box the way you normally ask them. (Think Ask Jeeves 1.5)

That doesn't mean natural language search or Powerset can kill Google, or even commit assault and battery on Google.

Powerset launched with a smart concept: better search results than Wikipedia's own search box. So the play is a "non-Google Custom Search Engine" for Wikipedia. Let's see about what Powerset can can do.

What's interesting is that Microsoft appears to have purchased Powerset as much for the software engineers as the software.

From the Live Search blog:

More importantly, Powerset brings to Live Search a set of talented engineers and computational linguists in downtown San Francisco. This is a great team with a wide range of experience from other search engines and research organizations like PARC (formerly Xerox PARC).

We're buying Powerset first and foremost because we're impressed with the people there.

From the Powerset blog:

Microsoft shares our goal to improve search through deeper analysis of queries and documents, and understands that our technology and expertise will play a key role in the evolution of search. With an existing search infrastructure, incredible capital resources, unlimited data, a leading search team, and clear mission to revolutionize the search landscape, Microsoft can rapidly accelerate our progress in building semantic search technology and bringing it to full Web scale. When we launched our first product, we heard: this is great, but when and how will we get Powerset to go beyond Wikpiedia? Microsoft accelerates our ability to move Powerset to the entire Web faster than anyone could have imagined.

Powerset will continue to operate much as we currently do, working in the same building, with the same organizational structure, and with the same uniquely talented and growing team (apply on our jobs page). We’ll continue to tackle the hardest problems in parsing, semantics, ranking, indexing, scalable computing, user experience and all of our other specialties. But now we’ll do it with the support of Microsoft and the vast resources of the entire Live Search team.

Posted by Kevin Heisler at 2:10 PM | Permalink | Comments (0)

June 25, 2008

Microsoft's Steve Ballmer Sees All Media Electronic in 10 years

Microsoft CEO Steve Ballmer told the Washington Post today that trees will have no fears from newspaper publishers as all media will be eletronic.

Funny to see someone with such influence on our lives be so far off the track. Guess it is a long time since he used public transportation, Unless Microsoft is working on some method of running cars using paper and give the world electronic readers to stop them from wanting newspapers. Or the advertisers sponsor the giveaways in return for strategically inserted ads?

Either way I have the comment time logged.... wonder where Ballmer will be in ten years? Fighting off a Google takeover perhaps, if that prediction comes true.

Posted by Frank Watson at 8:50 PM | Permalink | Comments (0)

June 3, 2008

Microsoft Live Search Solves 404 Error Problem

No one likes generic 404 error pages. Site visitors have to click the back button and start their search over. Most times, they give up on the site.

To solve that problem, Microsoft Live Search will now enable Web site owners to create error pages that recommend help even if the exact URL isn't available.

The Web Page Error Toolkit is a customizable Web app that extracts keywords from the search and delivers relevant search results in a custom error page.

Here are the details on the Web Page Error DTK:

For large web sites with extensive amounts of content, 2 to 10 percent of traffic is looking for pages that either don’t exist or have been moved. Most web servers return a generic 404 error page or a sitemap when a user’s desired page cannot be found. These unhelpful pages often result in a dead end for users.

With Microsoft’s Web Page Error Toolkit, you can create dynamic 404 pages that contain customized error messages along with search results seeded with relevant keywords to help your users move past the missing page and find the information they need.

The Toolkit is a customizable ASP.net application that replaces the default error page on your IIS server. The Toolkit enables you to use Live Search (or any search engine) to return results for the specified domain and locale, control the number of results returned on your page, choose whether to offer spelling corrections, and customize your error message.

You also have the option of choosing from several keyword extraction strategies that are included with the install, or providing your own implementation.

Posted by Kevin Heisler at 12:55 PM | Permalink | Comments (2)

May 23, 2008

Microsoft Live Search Cashback: How Will You Spend Your $600 Rebate?

This morning investment bank Collins Stewart hosted a confrerence call for clients who wanted to learn more about Microsoft Live Search Cashback.

The buzz and excitement surrounding the Cashback launch has been palpable.

CNET has coverage of the Microsoft Live Search Cashback call this morning.

What's truly brilliant about Microsoft's move: share of searches is the most watched index of search engine success. What matters most, though, is the quality of those searches.

The most valuable searches are commercial searches. Helping satisfy the collective curiosity of a nation is, at times, a noble mission. Most searches, though, tend to be news and gossip-related.

While it's great for the online tabloid industry, there's not much value in being the go-to search engine for the Gossip Girl and lad mag crowd. Does a search engine really care if it delivers the best results for "elke the stallion," gyrotonics, and "la rag mag?"

Microsoft wants all Americans who receive a $600 rebate check to think of Live.com search first. If you're going to spend money online, what's the most relevant result?

The SERP that delivers value, savings and bargains.

Posted by Kevin Heisler at 1:12 PM | Permalink | Comments (0)

May 21, 2008

Microsoft Launches Live Search Cashback and Live Search Farecast

Yesterday Search Engine Watch broke the news that Microsoft Live Search would offer cash rebates to consumers who purchase products while searching on Live.com.

Microsoft Corp. today announced it will offer ad-funded cash rebates to customers who find and purchase their favorite products through a new program called Microsoft Live Search cashback. Key partners include top Internet retailers eBay, Barnes & Noble.com, Overstock.com, Sears, Zappos.com, and WPP. Microsoft Chairman Bill Gates made the announcement this morning at advance08, Microsoft’s annual advertising leadership event.

The word "game-changer" is overused by analysts but it applies here. Microsoft's innovative program has the potential to revolutionize online search and advertising. While some critics have criticized the program as a bribe, in practice it's no different than Google Checkout rebates or DoubleClick Performics CPA campaigns for retailers.

The primary difference? Consumers could be the big winners. Live Search Farecast won't offer a rebate to consumers initially but Microsoft will evaluate the option.

Live Search cashback features more than 700 merchants offering more than 10 million products. More than 13 of the top 40 U.S. retailers will participate.

In addition, Microsoft also announced a new Live Search travel destination, Live Search Farecast, making it easy for searchers to find the best travel deals on the Web.

“We believe search can offer much more value to consumers and advertisers than it does today, and we see Live Search cashback as an important opportunity to deliver additional value,” Gates said. “Our goal is to make Live Search the most rewarding commercial search destination on the Web. Live Search cashback will help advertisers drive more online sales while giving consumers a new way to stretch their dollars.”

During his keynote address, Gates outlined three areas of focus for the company’s broad search vision:

1. Delivering the best search results by continuing to focus on relevancy and selection

2. Expanding the role of search around the set of tasks that searchers are most often working to accomplish — including commerce, entertainment, navigation and reference — through improvements in its user experience, intelligent tools and access across devices

3. Innovating in the economic model that today powers the search business by rewarding both advertisers and consumers for engagement

Microsoft's new strategy focuses on “Commercial Search” as the first of four tactics to achieve its goal as the premier search engine for consumers making purchases online and doing product research.

New Business Opportunity for Search Advertisers The opportunity to reach consumers via search advertising is enormous and growing. According to eMarketer Inc. and other industry data, U.S. online retail is projected to grow to $335 billion by 2012, and today 68 percent of all those retail transactions begin at a search engine. This translates to 3.7 billion commerce-related queries a month.

The primary choice for advertisers to reach these search customers is the cost-per-click (CPC) model, where merchants pay a fee each time a searcher clicks on their ad, whether or not the potential customer makes a purchase.

The cost-per-action (CPA) model, where advertisers pay only when a customer makes a purchase, or completes a specific transaction, gives advertisers a more precise return on their advertising investment, and is currently being deployed on a relatively limited basis. The CPC and CPA search advertising models represent the most targeted advertising approaches available today, but there is still room for improvement.

With Live Search cashback, Microsoft helps merchants maximize their advertising investments and drive more sales by providing consumers with an added incentive to buy — a cash rebate. Participating merchants choose to pay Microsoft a CPA fee each time a customer completes a sale through Live Search cashback. The fee is a percentage of the retail price, and when that transaction is complete, Microsoft returns that fee to the consumer in the form of a cash rebate.

“Our business is to connect consumers with brands in the most effective and efficient ways. Microsoft’s Live Search cashback creates a real incentive for consumers to connect with our clients,” said Sir Martin Sorrell, chief executive of WPP. “We believe this is a major development in the evolution of search marketing and look forward to participating and measuring the results.”

Key partners participating in the Live Search cashback offering include Abe’s of Maine, B&H, Backcountry.com, Barnes & Noble.com, Circuit City, Cookware.com, Crutchfield, eBags, eBay, Foot Locker, GiftBaskets.com, The Home Depot, HP, Jockey, J&R, Newegg.com, OfficeMax, Overstock.com, PetSmart, QVC, Sears, Spiegel, TigerDirect.com, Vitamin Shoppe and Zappos.com. A complete list of Live Search cashback partners can be found at http://www.live.com/cashback.

“We’re happy to be partnering with Microsoft on this innovative program,” said John Donahoe, president and CEO of eBay Inc. “By combining eBay’s marketing expertise and incredible volume and velocity of trade, PayPal’s leadership in online payments, and Microsoft’s cashback program, we see a great opportunity to deliver more value in the eBay marketplace.” Available to Consumers Today: Live Search Cashback and Live Search Farecast

Live Search cashback, built on technology and partnerships acquired through Microsoft’s October 2007 purchase of comparison shopping site Jellyfish, launched online today at http://www.live.com/cashback. With Live Search cashback, Live Search users can find some of the best deals on the Web either at the cashback gallery — where they can compare prices and get ad-funded rebates on more than 10 million products — or by discovering cashback ads in Live Search sponsored listings.

Customers sign up for a Live Search cashback account at the time of their first purchase, accrue ad-funded rebates in their account each time they purchase a product in the Live Search cashback program, and receive their rebates in their cashback account directly from Microsoft 60 days after completing purchases.

Also available today is the new Live Search Farecast, which includes technology acquired through Microsoft’s April 2008 acquisition of Farecast Inc., the award-winning travel site known for helping users find the lowest airfares by predicting when to buy. Starting today, Live Search Farecast results can be found at http://farecast.live.com and via Instant Answers in the main Live Search results page. Microsoft will explore the possibility of also incorporating an ad-funded rebate option for travel services in the future

Posted by Kevin Heisler at 12:54 PM | Permalink | Comments (2)

May 20, 2008

Microsoft to Launch "Live Search Cashback"

The major Microsoft Live Search announcement scheduled for tomorrow will be the official launch of a new product: Microsoft Live Search Cash Back.

The program in partnership with eBay and its PayPal unit will offer cash back to consumers who search on Microsoft Live and make a purchase. The announcement will be made in conjunction with a taped message from eBay CEO John Donahoe. The technology is based on the acquisition of Jellyfish by Microsoft in September, 2007.

The announcement is expected to be made by Satya Nadella, SVP Search, portal & Advertising Platform Group, Microsoft, prior to Bill Gates' presentation on "Connecting the Future." The goal is to differentiate Microsoft's vertical search experience for users while leveraging improvements in the core search algorithm.

Microsoft believes the Live Search Cash Back program will align the interests of consumers and the search engine, putting Microsoft "on the same side as the consumer."

The job of Live Search will be to match the most relevant products with the most relevant consumers.

Microsoft will likely offer advertisers a CPA (Cost-Per-Acquisition) model rather than a traditional search engine Cost-Per-Click (CPC) auction.

Tony Hsieh, CEO of Zappos, said in a taped interview that the program would help overcome the barriers of first-time buyers of shoes online.

A Barnes & Noble executive stated that clickthrough rates and purchases had increased through the use of the Jellyfish pilot program.

The following message is posted on the Jellyfish.com Web site:

"As part of our pledge to save you money on the products you buy, our Cash Back rewards service is currently offline to perform necessary service upgrades and enhancements. Jellyfish Account holders will receive an e-mail notification when our Cash Back service is up and running again. Thanks for your patience.

Using Jellyfish, consumers could compare prices of products from a number of online stores. Retailers paid Jellyfish fees to feature products. A portion of that fee was refunded to consumers who bought through the Jellyfish site.

Jellyfish also offered "Smack Auctions." During each Smack show, Jellyfish would auction off new products in a unique price dropping format. Every second that ticks off the clock, Jellyfish would drop the price of the product, until the deal sold out.

Jellyfish founder Brian Wiegand is agroup manager at Microsoft. Last year, ye stated, Microsoft is "investing heavily in shopping and e-commerce."

Microsoft closed the deal on Sept. 27, 2007 but didn't announce it until Oct. 2, 2007.

This isn't the first foray of Microsoft into the world of search engine incentives. Microsoft Live Club is an ongoing experiment with incentivizing searchers but never on the Live Search Cash Back scale. For example, Microsoft Live Search Club lets users play games. A completed gives earns tickets toward prizes, such as Zune accessories, song downloads and ringtones.

Microsoft's official statement on the announcement:

On Wednesday, we will be announcing a major new initiative that our search teams have been driving. We are getting better and better with our core algorithmic search, and at the same time, we are investing to differentiate in vertical experiences and to disrupt the current model. You’ll hear more about our plans Wednesday.

Posted by Kevin Heisler at 5:15 PM | Permalink | Comments (5)

James Cameron Live on "Avatar" - His New 3-D Film

The theme of Microsoft Advance '08 is "Connected Entertainment" -- mobile, music, TV/video, gaming. The big Live Search announcement will be covered live tomorrow.

Today, filmmaker James Cameron's producing partner at Lightstorm Entertainment, Jon Landau, said the abundance of digital information and the ability to use technologies opened up a whole new window that Cameron didn't know existed.

James Cameron started making films when they were photochemical emulsions. Now, films are digital.

"The essence of storytelling stays the same," said Cameron. "Intense CG (computer-generated) scenes with multiple shots doesn't change that. My greatest horror was the best thing we created would end up like the Ark of the Covenant and be put in a warehouse somewhere. I will make all my films in 3-D. I've been banging on the door at Microsoft since I introduced Windows Media 9 with LL Cool J and Bill Gates in 2002. Now I tell them, this is what you guys need to be doing. I'm going to continue to surf that wave."

His new film, Avatar, features a man who tries to become a miner by combining his being with an alien during an interplanetary war in which aliens can manifest themselves through human bodies — avatars.

"'Avatar' will make people truly experience something," said Cameron."One more layer of the suspension of disbelief will be removed. All the syn-thespians are photo-realistic. Now that we've achieved it, we discovered CG characters in 3D look more real than in 2D. Your brain is cued it's a real thing not a picture and discounting part of image that makes it look fake."

Part of the movie is subtitled because it takes place on an alien planet.

Avatar will have a human heart beating at its narrative center. It's an emotional journey of redemption and revolution; the story of a wounded ex-marine, who's thrust into an effort to settle and exploit an exotic planet rich in bio-diversity. He eventually crosses over to lead the indigenous race in a battle for survival.

Cameron has created an entire world, a complete ecosystem of phantasmagorical plants and creatures, and a native people with a rich culture and language. The film has a December 2009 release date.

"I don't know whether it will be a great film from a narrative and critical standpoint," said Cameron. "The experience of Avatar will be an experience unlike any other movie."

He started with Microsoft Research looking at the way people see. The project soon moved out of the realm of speculation.

"'Avatar' is the single most complex piece of filmmaking ever made," said Cameron. "We have 1,600 shots for a 2.5 hour movie. It's not with a single CGI character, like King Kong or Gollum. We have hundreds of photo-realistic CG characters. We were Microsoft's sandbox for filmmaking beyond the cutting edge."

During the film, he would grab chairs, gather his team, and talk about what they were doing wrong, how to do it better. That just isn't done on a film set.

The heart of the film technology is a digital asset management system created by Microsoft, which was praised by Cameron and Landau for understanding the arts and filmmaking. The system can track every cloud and every blade of CGI grass in the film.

Cameron noted that Titanic was about how technology let us down. He has always tried to be on cutting edge of what's going on. The Abyss featured the first photo-realistic CG character. Then "The Terminator" combined CG and human actors. "True Lies" pushed the bar even higher with composite technology.

In "Titanic" as a filmmaker, I struck the perfect balance of technology and the human heart," said Cameron. "I haven't forgotten that lesson with Avatar. It's the best lesson for any filmmaker."

Cameron also noted the radical changes in film distribution and made a prediction for the future:

"I'm on the fourth screen. The giant screen. Then it scatters down to other screens. It gets more interesting as more means of digital distribution become available to us. The interesting thing is the actual movie business is going strong. If you valued up revenues of what's lost to piracy, movies are doing better now than they ever have. You can have an HD screen in your home.

He noted, "Windows organized things spatially. That gave it its power. But we're not displaying things spatially. What could happen is now that the digital cinema revolution has taken place is the killer app is 3D. Dreamworks has announced all its animated films will be made and projected in 3D. Gaming will be changed by 3D. Consumer electronics people will need to make players for stereo-enabled monitors. Future versions of Windows should be fully stereoscopic. Smaller devices already are 3D-enabled without glasses. If you play "Avatar" on a 50-inch monitor, you're in the game."

Cameron said, "This is the ultimate immersive media. It's my fundamental belief that when you're viewing media in stereo, more neurons are firing, learning rates are higher. Engagement levels are higher. As advertisers, you need to think about how you're going to use this new dimension. How will you use the deeper levels of engagement?"

Posted by Kevin Heisler at 2:08 PM | Permalink | Comments (3)

May 4, 2008

Microsoft-Yahoo Mashup Scrapped: Hidden Winners and Losers

On Saturday, Microsoft formally withdrew its proposal to acquire Yahoo. With the Microsoft-Yahoo mashup scrapped (for now), who are the hidden winners and losers?

I’m not talking about the stockholders, advertisers, employees, CEOs, management teams, boards of directors or other stakeholders of Google, Yahoo or Microsoft. They are the obvious winners and losers.

No, I’m talking about the hidden winners and losers – or, at least the ones that have been hidden in plain sight. I may have missed some. I’ve been busy. (I’ve got a day job.) But, here are the ones I was able to find on Sunday:

Hidden Winners of the Scrapped Microsoft-Yahoo Mashup

The biggest hidden winner is AP photographer Mark Lennihan. His May 4, 2007 file photo of a Times Square news ticker flashing a headline about Microsoft above a billboard for Yahoo became one of the most used images in Google News to illustrate stories about Microsoft’s unsolicited bid for Yahoo.

Another hidden winner is the Flickr group photo pool, "Microsoft: Keep You Evil Grubby Hands Off Our Flickr." Its About Us statement reads, “THIS GROUP WILL STOP MICROSOFT FROM BUYING YAHOO! AND DESTROYING THE FLICKR WE KNOW AND LOVE OR WE WILL DIE TRYING.” Put down the camera, son. It’s over.

Kevin Ryan on the Microsoft Yahoo bid (Associated Press)

The final hidden winner is Kevin Ryan, the global content director for Search Engine Strategies and Search Engine Watch. His comments to AP on what the possibility of a Microsoft-Yahoo conglomerate means for the online marketplace ranks #1 in YouTube if you search for the two-word term, Microsoft Yahoo.

Hidden Losers of the Scrapped Microsoft-Yahoo Mashup

The biggest hidden loser is the Y-Que T Shirt Superstore. While it ranks #1 in Google Product Search for MicroHoo, that wasn’t as popular at term as "Microsoft Yahoo," according to Google Trends. And now it’s stuck with a bunch of funny t-shirts commemorating the takeover of Yahoo by Microsoft.

Another hidden loser is Kevin Heisler, executive editor of Search Engine Watch. What was he doing Saturday night at 9:59 p.m.? He was posting a story to the Search Engine Watch Blog entitled, “Microsoft Withdraws Yahoo Offer; Yahoo Responds.” He should have been out watching Iron Man, like Deborah Richman.

Steve Ballmer going crazy

The final hidden losers are the Rapid Response Team at Waggener Edstrom Worldwide and the staff at Joele Frank, Wilkinson Brimmer Katcher. Do a search for Steve Ballmer on Google. See the YouTube video of Steve going crazy? I’ve got four words for public relations professionals: Search Engine Reputation Management.

Posted by Greg Jarboe at 3:31 PM | Permalink

April 25, 2008

Microsoft Earnings Key Takeaways: Where's the Search?

The biggest acquisition news yesterday wasn't Microsoft-Yahoo but Arby's-Wendy's. In both cases, search marketers are asking, "Where's the beef?"

Better yet, analysts on the Microsoft conference call should have asked, "Where's the search?"

Microsoft search queries and page views are up year-over-year. By how much? No Wall St. analysts asked the question.

Microsoft reported $4.4 billion in net income for the quarter.

Microsoft's online services business increased revenue 40 percent to $843 million, including $143 million from aQuantive, which added 96 new publishers this quarter to the Atlas Publisher Solutions, the ad management platform that competes with Google's DoubleClick division.

Online advertising for Microsoft grew 39 percent. If aQuantive ad revenue ($47 million) is excluded, Microsoft was up 29 percent. Microsoft's online audience is still growing. Live IDs increased to 18 percent to 448 million.

Microsoft remains focused on the online advertising market (doubling by 2010 to $80 billion).

Yahoo would accelerate growth but the core strategy won't change: drive innovation and search, increase value to advertisers and publishers through innovation and scale and grow user engagement across MSN and Windows Live properties.

The weak U.S. dollar may be Microsoft's best friend. While about half of Google's revenue comes from the U.S., two-thirds of Microsoft's revenue is derived from users abroad. In addition, about 15 percent of revenue is in high-growth emerging markets.

Microsoft's strategy of reinvesting existing business, pursuing organic and acquisition growth opportunities makes the company a formidable competitor with or without Yahoo - except in search.

Posted by Kevin Heisler at 7:43 AM | Permalink

February 10, 2008

AOL Yahoo Talk Merger - Microsoft Rebuked

Yahoo merges with AOL, saves Time Warner and re-Bewkes Microsoft. That's a best case scenario for Yahoo from investment bank advisers at Goldman Sachs and Lehman Brothers. The i-banks are advising Yahoo on mergers with media and technology firms that might snatch Yang & Co. from the jaws of Microsoft. On Sunday, Siobhan Kennedy and Suzy Jagger of The Times Online (UK) broke the story AOL may emerge as Yahoo's exit strategy from the Microsoft $45 billion (give or take a billion) bid.

An AOL merger leads the pack of deals Yahoo and its i-bank M&A advisers are pursuing. Not long ago Yahoo failed to close a deal for AOL. Now the pressure from Yahoo shareholders won't let up until a Microsoft bid (sweetened or unsweetened) is accepted - or an AOL-sized deal is done. Time Warner CEO Jeff Bewkes would be the big winner.

Google has long been discussed as Yahoo's outsourced search partner (again). The surprise? The House of Mouse has emerged as a possible home for Yahooligans. (The revenge of Terry Semel?)

If you can't bring Hollywood to Yahoo, then move the Yahoo to Hollywood. Any Yahoo tie-up would likely put Disney CEO Bob Iger in the driver's seat, not a bad thing for Yahoo's beleaguered shareholders.

Would an AOL merger somehow increase the value of Yahoo's stock by more than 60 percent? (Microsoft premium: 62 percent) Not likely. Yahoo shareholders have long been asking - to no avail - for a plan to boost YHOO by 25 percent from its 52 week low. So far the Microsoft bid has been the only (un)plan that did.

I mentioned the AOL scenario last Friday morning on a conference call with Oppenheimer senior analyst Sandeep Aggarwal and Oppenheimer's Media & Internet and Enterprise Software teams.

Kevin Lee of Didit joined us on the call, along with Jaideep Singh, CEO of vertical search engine Spock.com and Seth Barnes, senior manager for Edmunds.com, a leading consumer automotive site.

To listen to a replay, the dial-in number is (888) 266-2081 or (703) 925-2533. Replay dates are now thru 2/22/2008 23:59 EST.

Whether the Yahoo AOL portal-saurus merger would work is moot.

Now it's One Deal, One Day.

All this week: Yahoo! on Woot!.

Posted by Kevin Heisler at 11:43 PM | Permalink | TrackBack

February 4, 2008

Just the First Shot

Unless you’ve been living in a cave this past week—or at least not reading this blog—you’ve heard about Microsoft’s offer to buy up Yahoo! for $31 a share, for a total of $44.6 billion. John Markoff, of the New York Times, called the moved the “firing the final shot of yesterday’s war”—the war in question being one we all know well: the battle for search advertising.

Nothing could be further from the truth. Buying Yahoo is firing the first futuristic shot in tomorrow’s war; Yahoo! is just the beginning for Microsoft. And the war is not for search advertising space alone; even a combined 34.6% for Microsoft/Yahoo! (assuming no one drops off during the merger) doesn’t compete with Google's 61% (including its major partners). This deal is about much more.

For one, it is about mobile, one of the last frontiers in which Google’s dominance is still tenuous. Google has spent time and made waves developing the Android mobile operating system, but its mobile offerings are relics compared with the new Yahoo! Go 3.0 and Microsoft’s recently-acquired TellMe service. It’s about emerging ad space, like Facebook—of which Microsoft owns a piece and has a 10-year exclusive advertising deal, beating out a Google bid—and advertising exchanges like Right Media, which was acquired by Yahoo!

Google may have video covered online, as it owns most video streams via its acquisition of YouTube and most video searches via its new integrated search bar and rumors of true frame-by-frame video search being developed. Photos, however, are still fair game, with Yahoo! holding on to more than 2 billion photos via its acquisition of Flickr. Blogging is worth fighting for as well. Blogger.com has been given over to spammers, but Windows Live Spaces and Yahoo! 360 both do well, with 45 million users between the two of them.

Microsoft wants Yahoo! for search, but it recognizes the need to lead in every other emerging online market where advertising dollars can be spent. And that means more acquisitions. And lots more shots fired.

Posted by Eli Feldblum at 4:57 PM | Permalink

Microsoft Won't Beg or Steal; Will Borrow to Buy Yahoo

Microsoft CFO Chris Liddell told Wall St. analysts the company would likely borrow to pay for the cash portion of its Yahoo bid. That's a first in the company's history. The half-cash, half-stock offer is $31 per share.

Microsoft has a huge war chest, approximately $21 billion at year end.

It's not as if Microsoft couldn't fund the cash portion without borrowing any money. The cash-rich company definitely won't have to beg for the loan.

So what's the exact amount Microsoft will borrow? It's anybody's guess.

The need for capital, though, won't subside if or when the bid is accepted. As Kevin Johnson, Microsoft President, Platform and Services, noted in the initial conference call, "There are a few key dynamics in the online advertising industry that I think are worth noting. First, this is a business that has scale economics in a few key areas; scale economics in search and ad serving and scale economics and the capital needed to support these areas, CapEx for data centers, servers and infrastructure."

Who ever said Web 2.0 has low barriers to entry? Not the search engine CEOs who claim competition is just one click away.

Posted by Kevin Heisler at 1:31 PM | Permalink

February 3, 2008

Microsoft Fires Back at Google: Who's Playing Monopoly?

Microsoft General Counsel Brad Smith fired back at Google in a published press release late today, in essence promising to Do No Evil after acquiring Yahoo.

Microsoft stated, "Google is the dominant search engine and advertising company on the Web." John Battelle, in response to the Esq. vs Esq. war of words (started by Google dropping an antitrust bomb) dropped his own f-bomb, sounding almost Shakespearean in a "first kill all the lawyers" kind of way: "Someone tell the chief counsels to shut the f. up."

Microsoft said in effect - Google, monopolize this: "Google has amassed about 75 percent of paid search revenues worldwide." Google's share of searches - the key success metric for search engines - continues to grow. Microsoft pointed out Google has more than 65 percent U.S search query share; 85 percent plus in Europe.

In surprisingly humble terms, Microsoft stated its goal in acquiring Yahoo is merely to create a "compelling number two competitor" in search and online advertising.

After the jump: full text of the MSFT statement, including how Yahoo shareholders can get their very own proxy statement/prospectus (snail)mailed to them.

(Anyone still think e-mail is a deal driver?)

Statement from Brad Smith, General Counsel, Microsoft

REDMOND, Wash., Feb. 3, 2008 – The combination of Microsoft and Yahoo! will create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising. The alternative scenarios only lead to less competition on the Internet.

Today, Google is the dominant search engine and advertising company on the Web. Google has amassed about 75 percent of paid search revenues worldwide and its share continues to grow. According to published reports, Google currently has more than 65 percent search query share in the U.S. and more than 85 percent in Europe. Microsoft and Yahoo! on the other hand have roughly 30 percent combined in the U.S. and approximately 10 percent combined in Europe.

Microsoft is committed to openness, innovation, and the protection of privacy on the Internet. We believe that the combination of Microsoft and Yahoo! will advance these goals.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed transaction, Microsoft Corp. plans to file with the SEC a registration statement on Form S-4 containing a proxy statement/prospectus and other documents regarding the proposed transaction. The definitive proxy statement/prospectus will be mailed to shareholders of Yahoo! Inc. INVESTORS AND SECURITY HOLDERS OF YAHOO! INC. ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors and security holders will be able to obtain free copies of the registration statement and the proxy statement/prospectus (when available) and other documents filed with the SEC by Microsoft Corp. through the Web site maintained by the SEC at http://www.sec.gov. Free copies of the registration statement and the proxy statement/prospectus (when available) and other documents filed with the SEC can also be obtained by directing a request to Investor Relations Department, Microsoft Corp., One Microsoft Way, Redmond, Wash. 98052-6399.

Microsoft Corp. and its directors and executive officers and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding Microsoft Corp.’s directors and executive officers is available in its Annual Report on Form 10-K for the year ended June 30, 2007, which was filed with the SEC on Aug. 8, 2007, and its proxy statement for its 2007 annual meeting of shareholders, which was filed with the SEC on Sept. 29, 2007. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.

Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as Microsoft Corp.’s ability to achieve the synergies and value creation contemplated by the proposed transaction, Microsoft Corp.’s ability to promptly and effectively integrate the businesses of Yahoo! Inc. and Microsoft Corp., the timing to consummate the proposed transaction and any necessary actions to obtain required regulatory approvals, and the diversion of management time on transaction-related issues. For further information regarding risks and uncertainties associated with Microsoft Corp.’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft Corp.’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft Corp.’s Investor Relations department at (800) 285-7772 or at Microsoft Corp.’s Web site at http://www.microsoft.com/msft.

All information in this communication is as of Feb. 3, 2008. Microsoft Corp. undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.

About Microsoft

Founded in 1975, Microsoft (Nasdaq "MSFT") is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

Microsoft is a registered trademark of Microsoft Corp. in the United States and/or other countries.

The names of actual companies and products mentioned herein may be the trademarks of their respective owners.

Posted by Kevin Heisler at 11:17 PM | Permalink

February 1, 2008

Microsoft Wants to Buy Yahoo: Convergence, Continued

There have been rumors of late about some sort of Microsoft/Yahoo hookup -- and here it is. Microsoft just tendered a $31/share bid for Yahoo. All of Yahoo.

It's about the advertising. From the press release: "The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010. The resulting benefits of scale along with the associated capital costs for advertising platform providers make this a time of industry consolidation and convergence. Today this market is increasingly dominated by one player. Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners."

Steve Ballmer, Microsoft CEO said in a statement: "We have great respect for Yahoo!, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market."

After the jump, Ballmer's letter to Yahoo board members. We'll be following developments closely, promise.

Dear Members of the Board:

I am writing on behalf of the Board of Directors of Microsoft to make a proposal for a business combination of Microsoft and Yahoo!. Under our proposal, Microsoft would acquire all of the outstanding shares of Yahoo! common stock for per share consideration of $31 based on Microsoft's closing share price on January 31, 2008, payable in the form of $31 in cash or 0.9509 of a share of Microsoft common stock. Microsoft would provide each Yahoo! shareholder with the ability to choose whether to receive the consideration in cash or Microsoft common stock, subject to pro-ration so that in the aggregate one-half of the Yahoo! common shares will be exchanged for shares of Microsoft common stock and one-half of the Yahoo! common shares will be converted into the right to receive cash. Our proposal is not subject to any financing condition.

Our proposal represents a 62% premium above the closing price of Yahoo! common stock of $19.18 on January 31, 2008. The implied premium for the operating assets of the company clearly is considerably greater when adjusted for the minority, non-controlled assets and cash. By whatever financial measure you use - EBITDA, free cash flow, operating cash flow, net income, or analyst target prices - this proposal represents a compelling value realization event for your shareholders.

We believe that Microsoft common stock represents a very attractive investment opportunity for Yahoo!'s shareholders. Microsoft has generated revenue growth of 15%, earnings growth of 26%, and a return on equity of 35% on average for the last three years. Microsoft's share price has generated shareholder returns of 8% during the last one year period and 28% during the last three year period, significantly outperforming the S&P 500. It is our view that Microsoft has significant potential upside given the continued solid growth in our core businesses, the recent launch of Windows Vista, and other strategic initiatives.

Microsoft's consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers. In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together. These discussions were based on a vision that the online businesses of Microsoft and Yahoo! should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing.

In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that "now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction." According to that letter, the principal reason for this view was the Yahoo! Board's confidence in the "potential upside" if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment. A year has gone by, and the competitive situation has not improved.

While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence. Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas:

-- Scale economics: This combination enables synergies related to scale economics of the advertising platform where today there is only one competitor at scale. This includes synergies across both search and non-search related advertising that will strengthen the value proposition to both advertisers and publishers. Additionally, the combination allows us to consolidate capital spending. -- Expanded R&D capacity: The combined talent of our engineering resources can be focused on R&D priorities such as a single search index and single advertising platform. Together we can unleash new levels of innovation, delivering enhanced user experiences, breakthroughs in search, and new advertising platform capabilities. Many of these breakthroughs are a function of an engineering scale that today neither of our companies has on its own. -- Operational efficiencies: Eliminating redundant infrastructure and duplicative operating costs will improve the financial performance of the combined entity. -- Emerging user experiences: Our combined ability to focus engineering resources that drive innovation in emerging scenarios such as video, mobile services, online commerce, social media, and social platforms is greatly enhanced.

We would value the opportunity to further discuss with you how to optimize the integration of our respective businesses to create a leading global technology company with exceptional display and search advertising capabilities. You should also be aware that we intend to offer significant retention packages to your engineers, key leaders and employees across all disciplines.

We have dedicated considerable time and resources to an analysis of a potential transaction and are confident that the combination will receive all necessary regulatory approvals. We look forward to discussing this with you, and both our internal legal team and outside counsel are available to meet with your counsel at their earliest convenience.

Our proposal is subject to the negotiation of a definitive merger agreement and our having the opportunity to conduct certain limited and confirmatory due diligence. In addition, because a portion of the aggregate merger consideration would consist of Microsoft common stock, we would provide Yahoo! the opportunity to conduct appropriate limited due diligence with respect to Microsoft. We are prepared to deliver a draft merger agreement to you and begin discussions immediately.

In light of the significance of this proposal to your shareholders and ours, as well as the potential for selective disclosures, our intention is to publicly release the text of this letter tomorrow morning.

Due to the importance of these discussions and the value represented by our proposal, we expect the Yahoo! Board to engage in a full review of our proposal. My leadership team and I would be happy to make ourselves available to meet with you and your Board at your earliest convenience. Depending on the nature of your response, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent in our proposal.

We believe this proposal represents a unique opportunity to create significant value for Yahoo!'s shareholders and employees, and the combined company will be better positioned to provide an enhanced value proposition to users and advertisers. We hope that you and your Board share our enthusiasm, and we look forward to a prompt and favorable reply.

Sincerely yours,

/s/ Steven A. Ballmer Steven A. Ballmer Chief Executive Officer Microsoft Corporation

Posted by Rebecca Lieb at 7:08 AM | Permalink

November 5, 2007

Microsoft's Garry Wiseman Interviewed on Shopping Search

I recently interviewed Microsoft's Garry Wiseman. Garry is the group program manager for the commerce search team in the Live Search group. We spoke at length about Microsoft's new Shopping Search engine. I covered the announcement of the new shopping search in detail previously on Search Engine Watch, and I wanted to get under the covers a little bit to learn more about how it worked.

One of the most intriguing things that Microsoft did with this release is start publishing detailed ratings for a large number of characteristics for consumer electronics devices. You can get to these by searching on a consumer electronics device, for example, iPod Nano, and then clicking on one of the 4 pictures presented in the results to get to the product details page. For example, you might see ratings for up to 40 different characteristic of the device. For an iPod Nano, 15 characteristics including price, sound quality, size, ease of use, battery life, screen, memory, instructions, and more.

According to Garry, this information is extracted from the web using a "sentiment extraction engine". This engine is used to automatically scan trusted review sites and then find out what are the attributes of a product that users comment on in reviews. Then, the engine looks at what people say about each attribute, to determine whether the review is positive or negative for that given attribute. This data is then all tabulated and presented on the product details page for that product.

Garry was not able to comment on whether or not this sentiment extraction engine might be used in other verticals in the future. Clearly, this depends on their being enough data available across the web for them to extract meaningful information. I suggested to Garry that they consider implementing a master product directory for consumer electronics to make the navigation from product a little easier than using search as the interface to all this great information. Understandably, he could not comment on that either.

Posted by Eric Enge at 8:58 AM | Permalink

September 27, 2007

Overview of Microsoft Searchification

I attended the Microsoft Searchification event yesterday. The most important thing that happened here is that Microsoft has finally suceeded in offering a differentiated search product, and this is what made the day so important.

Brad Goldberg started the day with an overview presentation on some basic facts about the search market. One very interesting data set presented by him was a market share table:

EngineUsersUser shareQuery share Live Search69M37%11% Yahoo104M56%23% Google142M77%56% Source: comScore

Looking closely at this table you will see that 37% of all people who search, do at least some of their searching using Live Search. However, the query share is only 11%. The observation was then made that this indicated that this was an indicator that Live Search was not suceeding in statisfying its customers.

Then Mr. Goldberg stated that a large part of their intention with this release is to address this issue. This is an interesting focus, although it does assume that simply improving the relevance and quality of Live Search's results will be enough to convert many of those 37% to doing a larger percentage of their searches on Live Search.

Nontheless, it's a compelling notion. Micosoft does capture a lot of search volume as a result of the integration of Live Search into MSN. They also have very large user bases with Microsoft Messenger and Hotmail. So they can keep putting search back in front of their user base.

In fact, the presentations and demos we saw suggested that Microsoft suceeded in accomplishing several things:

1. Improving basic search quality and relevance. Certainly a number of examples of this were offered. Of course, the acid test of improved relevance will be revealed across tens of millions of search queries
2. Showing compelling improvements in Shopping Search for consumer electronics
3. Providing a completely new look layout for Health search. New features included a set of refinements links up top to help users quickly adapt their search. In addition, the page now has a 3 column layout, with the left column providing access to the latest articles related to your search.
4. Making some great advances in local search, including their 3D mapping technology
5. Offering a rich Entertainment search experience that allows people to drill deep in searches related to their favorite stars
6. Providing a rich and engagin Mobile search experience. Microsoft already had a strong mobile product, and has made it even stronger still
7. Another area where Microsoft already had a great solution was their Image search product, but they made several enhancements here as well
8. Unveiling their video search solution, including some great technology for componsing 30 second trailers
9. Expanded their index from 5B pages to more than 20B pages

I will explore some of these items in more detail over the next week. Net-net, it looks like Microsoft has improved their base search results, and then made a huge effort to improve search quality dramatically in a number of major vertical areas.

Posted by Eric Enge at 9:25 AM | Permalink

August 7, 2007

Bill Slawski Uncovers Possible Barter System Patent At Microsoft

Bill Slawski, of SEO By the Sea, has posted more patent applications. This time Microsoft has applied for a bunch, including Bill Gates himself on one.

The patents cover click fraud as well as what could be the groundwork for a barter system between publishers and advertisers. Great reading as per usual Bill.

Posted by Frank Watson at 4:27 PM | Permalink

July 30, 2007

Microsoft to acquire Social Media Sites?

Dave Naylor speculated late last week that Digg will be bought by Microsoft. This is based on a statement by Kevin Rose that Digg had "signed on Microsoft as our new partner to sell and serve the ads on Digg". Dave admits that it's pure speculation and also observes that Microsoft has a similar deal with Facebook, and then speculates that Microsoft might buy Facebook too.

Having spoken with Robert Scoble recently, Microsoft's former technical evangelist, I am not sure that either of these are too likely. Don't get me wrong, I think both would be fabulous moves for Microsoft, which needs to look past short term revenue potential when looking at acquisitions, and start looking at the bigger picture of getting a strong foothold on the web, which they currently sorely lack.

It was Robert who pointed out to me the problem. Microsoft management has trouble understanding how to deal with these types of companies that are highly under-commercialized. He tried to persuade Bill Gates to buy Flickr at a time it did not have a set value yet (Yahoo! later bought it for $30M), but was soundly rejected. Robert pointed out that businesses to Microsoft generate $4B in revenue, not a few million with lots of upside potential.

That aside, it would be a very smart move for Microsoft to acquire Facebook, and potentially Digg as well. It would give them a strong foothold in the social media space, which, as Dave points out, they just don't have right now. You can see why it might make sense for Digg to sell, because it's no longer climbing like a rocketship. It's still a very important site, but it's peaked.

Facebook is another matter. Facebook is one of the hottest things in the valley right now, and this is likely to make the Facebook management team very patient in terms of selling out. That adds up to even higher pricing expectations. That makes it even less likely that Microsoft will step up to the plate with the more than $5B that such an acquisition is likely to require to get such a deal done.

As for Digg, this could be a step in the right direction for Microsoft too. They just need to do a lot more than acquire one company right now to establish themselves as a serious long term player on the web.

Posted by Eric Enge at 9:41 AM | Permalink

July 9, 2007

Yahoo, Microsoft To Change Privacy Policies

Pressure from the European Union has Yahoo and Microsoft changing their privacy policies, according to the Financial Times.

"The Article 29 Working Party, a group of national officials that advises the European Union on privacy policy, last month said it wanted to investigate how long companies such as Yahoo and Microsoft keep data on individuals who use their search engines," FT.com reported.

“We are talking to customers, to the industry and government officials about this, and intend to provide an update in the near future which will more directly give the time frame,” said Brendon Lynch, privacy expert at Microsoft.

Posted by Frank Watson at 11:23 AM | Permalink

June 27, 2007

Google Not Added to Microsoft AntiTrust Case

Google's attempt to be added to the list of plaintiffs in the Microsoft antitrust trial was ignored by U.S. District Judge Colleen Kollar-Kotelly yesterday.

"Google is not a plaintiff in this case," the judge stated.

The federal government, 17 states and the District of Columbia are involved in the case. As major portions of the landmark 2001 antitrust settlement are due to expire in November, Kollar-Kotelly suggested the judicial oversight of Microsoft be extended.

Google tried to join the case Monday, in order to further press its complaint about the desktop-search feature built into Windows Vista - though Microsoft - a week earlier - had committed to make changes that would allow users to set similar products from Google and other competitors as their default choice.

Posted by Frank Watson at 10:24 AM | Permalink

June 7, 2007

Interview of Microsoft's Satya Nadella at SMX Advanced

Monday night at SMX Advanced in Seattle, Danny Sullivan sat down with Satya Nadella, who is the Corporate Vice President of Microsoft's newly-created Search & Advertising Platform Group. In this role, he leads the engineering team for Microsoft's Search, Advertising, and Commerce platforms.

The first impression I got from the conversation is just how extremely well spoken Satya is. A few other interesting things came out of the conversation:

1. A clear sense of humility regarding Microsoft's current place in the market. At one point, Satya commented on how small the current market share is, that they don't "have much to lose".
2. Microsoft has 55M users use Live Search per month. Satya indicated that this was about half of Google's reach. But the problem is that Microsoft does not get each user to use them nearly as often as they use Google, and the challenge they fact is to increase the engagement of customers with Live Search. If I was Google, that reach number would scare me. As Microsoft improves their search result quality, it seems likely that they will have no trouble at all at getting people to discover that.
3. Microsoft intends to increase the integration of search into Windows Messenger and Outlook.
4. There are four major areas where Microsoft feels that they have differentiated themselves:
   • 3D search
   • Image search
   • Mobile search
   • Product Search

The net conclusion I took away from all this is that it's still very, very early in the search game. Google and Yahoo! should be very, very afraid of the potential of Microsoft. Microsoft has far more cash, and spins off far more profit then Google and Yahoo! combined. Combine that with the reach they already have, and they remain a very dangerous competitor.

Posted by Eric Enge at 11:06 AM | Permalink

May 18, 2007

Microsoft to Acquire AQuantive

It looks like Microsoft wasn't really missing out on getting 24/7 Real Media after all. This morning, the company announced plans to acquire digital marketing agency aQuantive for $6 billion.

AQuantive is the parent to Atlas (ad-serving tools for advertisers and publishers, as well as Atlas Search bid management tools), DRIVEpm (behaviorally targeted ad network/media broker) and Avenue A | Razorfish (digital marketing agency, including search).

Microsoft is touting this as a commitment to become a "major player in online advertising."

The acquisition puts Microsoft in a similar position as Google with its DoubleClick acquisition. DoubleClick's Performics and DART Search; and aQuantive's Avenue A | Razorfish and Atlas Search create potential conflicts of interest. Google has said it is not planning on spinning off Performics, and on a conference call this morning, the company said it had no plans to spin off Avenue A | Razorfish.

You can find all the coverage on Techmeme.

Posted by Kevin Newcomb at 10:33 AM | Permalink

May 9, 2007

Yahoo and Microsoft: A deal made in heaven or hell?

It appears that the on-again, off-again merger talks between Yahoo and Microsoft have cooled once again, but they're not officially dead. And Google's acquisition of YouTube for $1.65 billion and pending acquisition of Doubleclick for $3.1 billion certainly make a deal between the #2 and #3 search engines more likely today than six months ago. But do Yahoo and Microsoft really need each other?

PC Magazine has got dueling opinions, with John Dvorak offering that this is still a bad idea, explaining that 1 + 1 would probably equal far less than 2. Lance Ulanoff, on the other hand, thinks the idea makes perfect sense. Check out their debate.

Posted by Greg Jarboe at 1:44 PM | Permalink

May 4, 2007

Yahoo and Microsoft Planning Merger Talks?

We've seen plenty of unfounded speculation lately about Google's plans to acquire NBC, or Dow Jones. Now we've got another rumor that Microsoft is asking Yahoo to consider a merger. It's being reported by both the New York Post and the Wall Street Journal, both citing unnamed sources.

The two companies had preliminary talks last year, but that was before Microsoft built its own search ad system, and Yahoo upgraded to Panama. Now there's not a whole lot that a merger would offer either company, at least on the search side. On the content side, it might make a bit more sense, since the two networks draw different demographics. It's not likely that anything will come of these rumors, but stranger things have happened when competitors start getting scared, and merger-mania strikes an industry.

UPDATE: The idea is being discussed all over the blogosphere today, as you can see from the Techmeme coverage.

Forrester's Charlene Li says it's a great idea (on paper at least) for Microsoft, but not so much for Yahoo. She goes on to say it will never work. "Given the messiness of a full out merger – and also the limited benefit it would bring to Yahoo! – I believe that a merger won't be in the works anytime soon. More logical would be partnership agreements where the strengths of each company are shared."

Former Wall Street Analyst Henry Blodgett, in his Internet Outsider blog, says that if the two decide to merge, the best plan would be an immediate spin-off of the combined entity. "If it doesn't, both Yahoo and MSN will die," he says. That seems to defeat the purpose of a merger, though, as Nicholas Carr notes in his Rough Type blog: "Microsoft has come to believe, for instance, that advertising will be central to the software business in the future. It's not going to spin off its ad networks or search functions."

UPDATE 2: The opinions keep coming, with the majority of people appearing to think this deal makes sense on some levels, but would never happen for various reasons:

Mathew Ingram, technology writer for the Globe and Mail in Toronto, says the deal makes sense, but the idea of combining Yahoo with Microsoft is like "two icebergs, roped together": It makes sense when you consider that Microsoft’s search and related assets are running a distant — and I mean distant — third in the market. And Yahoo, for all of its faults, is a big property with a snappy new engine behind its search, which is (theoretically) supposed to close the gap with Google.

That’s the “glass is half full” argument. The half-empty argument is that both Microsoft and Yahoo are lumbering behemoths with hardly an agile bone left in their sclerotic bodies. Most of their problems stem from the fact that they have accumulated immense bureaucracies — a big part of the impetus for Yahoo exec Brad Garlinghouse’s infamous “peanut butter” manifesto — and a collection of legacy businesses that keep getting in the way.

They are like icebergs: not only is nine-tenths of them unseen, but they are slow-moving and difficult to steer. Impressive? Yes. Powerful? No doubt about it. But fast, or nimble or imaginative? No. Roping them together would do nothing but compound their problems.

VC Paul Kedrosky writes in his Infectious Greed blog that "the idea of Microsoft trying to buy Yahoo, while in a sense inevitable, is still desperately difficult." He notes the stark differences in company culture, but says the real issue is that this would be a huge undertaking, and a merger of this size is difficult to complete for those with experience, and next to impossible for those without: [Microsoft] can do the deal, in other words, but the subsequent carnage may be something to behold – which Google might actually end up applauding.

UPDATE 3: The WSJ is now reporting that the talks were going on earlier this year, and have since been called off: Microsoft and Yahoo in recent months discussed a possible merger of the two companies or some kind of match-up that would pair their respective strengths, say people familiar with the situation. But the merger discussions are no longer active, these people say. The two companies may still explore other ways of cooperating.

Well, it was fun while it lasted.

Posted by Kevin Newcomb at 9:27 AM | Permalink

January 24, 2007

Microsoft offered cash to blogger for Wikipedia edits?

Brian Bergstein of AP reports that Microsoft has landed in Wikipedia's doghouse after it offered to pay a blogger to edit technical articles on the community-produced Web encyclopedia site.

While Wikipedia is known as the encyclopedia that anyone can edit, founder Jimmy Wales and his group of volunteer editors, writers and moderators have blocked PR firms, campaign workers and anyone else with a perceived conflict of interest from posting self-serving or slanted entries. "So paying for Wikipedia copy is considered a definite no-no," writes Bergstein.

UPDATE: Microsoft is saying that this was an unauthorized move by a low-level employee, that no offer of payment was involved, and that the motives were to improve a listing on Wikipedia that appeared biased. Lisa Barone has a good run-down of events at the Bruce Clay blog.

Posted by Greg Jarboe at 1:54 PM | Permalink

December 27, 2006

AOL Merger Speculation

Mediapost reported last week that Merrill Lynch was eyeing the possibility of AOL merging with either Microsoft or Yahoo, in an attempt to gain back market share from Google. This speculation comes on the heels of a report that AOL's total subscriber numbers are up for the first time in a year, after dropping premium memberships in August.

Yahoo would be the more likely company to merge with AOL, accourding to Merrill Lynch. Merrill Lynch's report also noted that traditional media companies may stay away from the purchase of AOL, in the wake of the "disasterous" initial merger with Time Warner.

Posted by Elisabeth Osmeloski at 12:18 PM | Permalink

December 18, 2006

2006 Top Searches

Following Yahoo's release on December 4 of its top searches for 2006, last week AOL, Lycos and MSN Live released their top searches for the year 2006. Google still has their 2005 review at Zeitgeist, along with recent monthly totals. Ask.com presents weekly lists, but has yet to release a 2006 year in review.

A closer look at these lists reveals some interesting questions about the differences in the data from engine to engine.

Looking at the slight differences between this data can be an interesting project, and can probably yield some good insight into both the user demographics of each of the engines

Paris Hilton is an interesting example to use in showing how search engines classify types of searches. In Yahoo! and in AOL, Paris is listed as a celebrity, yet she is found in top News searches for MSN Live. Does this mean that people search Live's (formerly search.msn.com) News category when they look for everyone's favorite socialite?

More can undoubtedly be read into the top overall searches reported for each portal. AOL reports: "weather" (does this mean they included all weather-inclusive searches or just the term "weather?"); Yahoo! says Britney Spears is number one (hmm...wonder if that includes people misspelling it?); MSN Live claims that the world wanted to know about Ronaldinho more than anyone or thing else; and Lycos puts Poker at number one. Again, others can fill in the blanks as to what they think the demographics most closely associated with each portal are.

It will be interesting to see what the top Google searches are. It would also be nice to have some more details as to how many misspellings were included in searches and perhaps how many of the searches for each top term were actually contained in a longer keyword phrase.

See also the discussions about this at the Yahoo! Search Blog, and the MSN Blog post that introduced their list. AOL has opened up the floor for discussion at the AOL Search Blog (thanks Susan for the link!). Lycos provides a platform for discussion which can be found at the Lycos 50 Blog. (Thanks Carolyn!)

(Note this story was edited after I discovered that Paris Hilton did make the top celebrity list at AOL. For some reason I missed that originally. Apologies to the AOL team for this oversight. CB)

Posted by Chris Boggs at 10:58 AM | Permalink

December 11, 2006

Berkowitz Tells NYT about Microsoft's Challenges

Steve Berkowitz, former CEO of Ask.com and now senior VP of Microsoft's Online Services Group, overseeing Windows Live and MSN, describes the challenges with turning around Microsoft's online unit in a New York Times interview.

Communication, inertia, and a penchant to focus on technology instead of user experience are all making Berkowitz's job more difficult, he says. he's also not too fond of the "Windows Live" brand, but he's not about to change that until more pressing concerns are addressed -- like making a search engine people want to use. So for now, Microsoft will keep both MSN (the portal) and Live.com (the search engine).

Posted by Kevin Newcomb at 11:51 AM | Permalink

November 28, 2006

Live's Erik Selberg On Microsoft's Tough Search Challenge

Talk about the echo chamber coming full circle. The stats on Microsoft's search share decline that I posted last week were commented on by Erik Selberg of Microsoft's Live.com search team in his General disarray at The Big 3 post. He provides a fresh, honest assessment of Microsoft's search challenge ahead from someone in the rank-and-file:

Microsoft will continue to lose share until it can make Live.com something people chose versus just the IE default. That will happen when the average person starts to see Live.com as a bit better than Google. Right now, Google wins on brand (people like them a lot) and quality, so it’s to be expected that existing Yahoo / Live customers will migrate to Google than vice-versa and new customers will pick Google more than Live or Yahoo.

If that sounds dismal, it gets worse:

Google is making people focus on features, which should tell people that they’re worried about how we’re catching up, and are going to put more people on their core products to keep and extend their lead. So it’s going to be a tough, tough battle for Microsoft to get there

And how long a battle? We've had Microsoft execs say it would take months to overtake Google in quality to years, with the spin that we're still in the early days. Erik's in the realistic years camp:

While our management set the goal of having relevance that beat Google after 2 years (then 3, and I believe 4 now…) it’s not realistic to think that it can be done quickly. If you ask Google, Yahoo, or the fine SEOs at WebMasterWorld or other such places, they’ll all say that Live Search has increased in quality over the years so that it’s much closer to Yahoo and Google. Not yet better, but no longer laughable. And yeah, we’ve done our own share of copying feature parity, and we’re starting to do a few things that cause Google and Yahoo to do the same (ok, noODP is a small feature, but it’s a start!).

How about some optimism? Erik sees Google's stability working against it in some ways, making it stagnant (see my Why Search Sucks & You Won't Fix It The Way You Think post for more on that concept). Potentially, this is true. But realistically, I think the fact that Google has changed slowly is reassuring to the searching audience.

Microsoft has changed four or five times in radical ways over the past two years, including an entire brand change. The last service to change so much like this was AltaVista, which I joked could give Madonna a run for her money in the image change department. None of those changes helped AltaVista. For Microsoft, I think it would actually benefit from really locking down the overall look-and-feel for an extended period. The good news is, I suspect that's actually going to be the case. New features seem likely to be added, but yet another redesign doesn't seem in the works.

I actually think Google's weakness is the same as the weakness Erik sees with Yahoo:

Yahoo is just in a rough place. They’ve got Google dominating, and they’ve got us coming up from behind. So they’re trying to do everything to avoid getting squeezed everywhere… and the result is too many people doing too many things in a mediocre way (the buzz-speak is “not enough critical mass in several areas”). Nothing surprising here either.

On the upside for Google and Yahoo lovers, both companies themselves understand this. The now famous Yahoo "Peanut Butter" memo covers some at Yahoo internally understanding the issue, while in October, it came out that Google was supposedly refocusing on core product and cutting new releases -- and that all the frenetic activity had been hurting core search there.

Fully recognizing the challenge ahead, Erik's still optimistic

Hopefully the chaos that starts out with a new Senior VP turns into increased efficiency sooner versus later. I know I’m working as hard as I can to make this happen sooner versus later, but nevertheless, it’s gonna be a stand-up fight against someone who has reach over us. Time to be smart.

Posted by Danny Sullivan at 9:18 AM | Permalink

November 21, 2006

Steve Berkowitz Of Microsoft (Windows Live) News.com Interview

News.com has an extensive interview with Microsoft's Steve Berkowitz, who formerly worked at Ask.com. He goes over the current market, Microsoft's advantages and challenges, and how they want to compete with Google.

Posted by Barry Schwartz at 9:47 AM | Permalink

Google Beats Microsoft, Yahoo As College Grad Choice

Online Recruitment reports on a CollegeGrad.com poll showing Google is the most desired place for technology students to work for. The poll asked 1,600 respondents in October "Who would you rather work for?" The results:

• Google - 49%
• Microsoft - 29%
• Yahoo - 12%
• IBM - 10%

Posted by Barry Schwartz at 9:30 AM | Permalink

October 31, 2006

Google Asks Microsoft To Give Users A Choice

Forbes reports that Google meet with the European Union the other day about antitrust issues. They asked Microsoft to give users a choice when selecting their default Internet search engine. The article explains, "Google refused to say if changes Microsoft has already made to its upcoming operating system, Vista, have gone far enough." You may also want to read Danny's long write up on the release of IE7 and search engine default battle.

Posted by Barry Schwartz at 9:50 AM | Permalink

October 19, 2006

Searching Via Internet Explorer 7 & The Battle To Be The Default Search Engine

Now that Internet Explorer 7 has been released in final format, I wanted to look at how search is being handled within the browser. There's been lots of discussion and worries about this in the past. Speculation time is over; reality is here. In this article, how the IE7 search box works, how you can change it and how Google and Yahoo's toolbars behave within it to try and maintain their default status, once gained.

The biggest difference with Internet Explorer 7 is the one that's been most discussed, a visible search box built into the "chrome." In the picture below, you can see the search box, complete with the word "Google" in light text to remind me what search engine is my default.

(NOTE: I've used a lot of screenshots, drawing off my Flickr account and picked a day when Flickr has became sluggish after I wrote this. Apologies if the pictures don't show when you view the page. Try reloading or checking back).

Google is my default search engine because it was that way in Internet Explorer 6. It became my default there with my permission, when I installed the Google Toolbar on my laptop (where I did today's testing) ages ago.

I removed the Google Toolbar for the purposes of testing IE7. That didn't cause the IE6 default settings to change, and to Microsoft's credit, they didn't try to override it when I upgraded to IE7.

Microsoft had previously said that if it detected a particular search engine was set to be a default, it would respect that. So, IE7 did -- sort of. Notice however what comes up in the main window of Internet Explorer 7 when I relaunched it:

Here, I'm notified that Google's my default, and I'm asked to confirm this or make another choice. Overall, I think that's fine. Yes, it's Microsoft hoping to change some minds. Maybe "Keep my current default search provider" should be ticked already. But I'd say most people who have Google as their default now will confirm keeping it that way. It's hardly anti-competitive.

Google, in particular, has disagreed. On a new machine, where Google has no presence or partnership, Microsoft Live Search will be the default. Google had suggested that users should be explicitly asked to make a choice from one of several providers. In my past article about this, I wrote about not being sympathetic to that idea, given that Google has had no problem paying to override consumer choice to gain the default position through deals with Firefox or through Dell installations.

Since then, deals have only accelerated. Yahoo partnered with Acer and also with HP. Google cut a deal with Adobe. It's difficult to know how a consumer is going to buy a "virgin" machine where the defaults haven't already been decided or influenced by some business deal.

Given this, let's focus on how consumers can make their choices after the fact. That's pretty easy. From that opening screen that IE gives after installation, tick the "Let me select from a list of other search providers" option and then choose Save Settings at the bottom of the page.

That will brings up this page (other pages might come up for other language/country configurations):

Very fairly, Microsoft isn't positioning themselves at the top of the list or more prominently than others. In fact, I think Microsoft is making a terrible mistake by just saying "Live Search" rather than "Microsoft Live Search." I think relatively few people know the Live brand right now. I can well imagine some people thinking, "Live Search -- what's that?" and skipping the search engine from consideration.

I selected Live Search from the list. That made a pop-up box appear:

Notice the option to make the choice as my default is NOT ticked. This allows you to add several search engines to the search box, which you can then selectively use while still maintaining your default search engine. You can add a bunch of different providers, and I'll come back to this more below.

It's worth noting that the Search Provider page links to information about the OpenSearch system, a way for anyone to easily create search engines that can be added to IE7. Of course, that doesn't mean you get added to the all-important Search Provider page. It just means someone visiting your site might be able to use a button that you promote to them to change their IE7 settings.

That Search Provider page also has an interesting box allowing you to visit any search engine, then do a copy-and-paste action to make your own search box. It's very clever. You simply search for TEST on anything that gives you a search box. Copy-and-paste the resulting URL, and IE7 will automatically create the right way to access that search engine for you. I added Search Engine Watch as a search engine to my IE7 installation easily by doing this.

In the example above, I didn't change my default search provider. Now let's say I want to, perhaps some time after I've initially installed IE7. Google has previous spun the idea of changing settings in IE7 as some complicated task. It even cited research saying only one third of users could figure it out. I have more faith that people can do it, so let's go through the steps.

1. Click the Tools button in IE7's menu, then pick Internet Options  
2. On the General tab of the Internet Options window that appears, there's a Search area. Click on the Settings button here.  
3. That brings up a Change Search Defaults menu: (FYI, I wish the "Find more providers" link was much more visible here. If you didn't pick more providers from when IE was initially installed, you won't have any choices in the main selection area -- and you might miss that link. This is handled in a better way through an alternative method I'll cover below).  
4. Choose the search engine you want, push the Set Default button, then OK. Now you're done.

Well, not necessarily. After I did this, Google was shown as my choice within the search box in the chrome. Evil Google! No, it seems more an IE thing. When I closed and restarted IE7, the default was changed to Live Search.

Let's go back to that search box in the chrome. Obviously, you can use it to search. Enter some words, hit return or click the magnifying glass icon/button, and the browser will pull back results from your default search engine.

The box also allows you to temporarily or permanently change your default search provider. Next to the box, use the down-arrow to get a drop-down menu like this:

From it, any search engine you've added to your providers list is shown. You can see how several providers I've selected are added, including the custom choice I made for Search Engine Watch.

Choose a provider, and then your search will go to that provider for that particular search, similar to how the box in Firefox works. It stays this way until you change it back or until you close IE7 entirely.

Look at the bottom of the menu. The drop-down box lets you get to the IE7 search providers page or bring up the Change Search Defaults box I showed in step 3 above. That makes changing providers a two step process.

Next up, I wanted to see how the search engines competing with Microsoft were reacting to a freshly minted copy of IE7 showing up at their doorsteps. Would I get prompts to change, as we've seen in the past from both Google and Yahoo?

Google and Yahoo surprisingly did nothing. I wonder if this might because the final release of IE7 has made some type of browser agent change that the two have set to identify. We'll see. Meanwhile, Ask gave me this box enticing me to change:

Next up, time to deal with concerns that Google might be too aggressive in protecting itself once installed as the default via the Google Toolbar. I loaded up a fresh copy. In short order, Google asked me if I wanted to make it both my default search provider and notify me if something tries to change that:

To help avoid controversy, Google ought to make these separate options. But from a usability perspective, I can well understand the logic of making then a single choice. If I want Google to be my default, I probably don't want something to try and change that behind my back -- and many have had bad experiences with adware and spyware doing exactly that.

I told it Google fine, then I was surprised that the next screen made me decide whether to have PageRank display enabled or not.

In the past, I recall this as an option you were never prompted to enable. Instead, I recall it as something that search engine optimization folks (about the only ones who care) would enable by diving into the advanced options and switching it on.

I could be wrong in my recollection. If so, my apologies. But even with Google's clear "in your face" warning that enabling PageRank will send data to them, I still wonder if perhaps the screen should be different.

Maybe PageRank display should be disabled by default, rather than making you choose. The screen that appears would then ask explicitly if you wanted to change to enabled. It would explain what it provides to the user (the screen itself tells you nothing, not even a short description such as here). It would then warn, as it does now, that enabling the feature allows Google to see every page you are visiting.

All installed, Google gives me a big notice to let me know I'm ready to go with the toolbar:

I then tried to change search providers using the steps above. That seemed to work, but then I got this small notification in my task bar, along with an audible signal:

My task bar is at the top of the screen (where it belongs, in my opinion!). By default, the task bar is at the bottom of Windows machines by default, so the notification could be less noticeable there. The sound helps, but frankly I don't know why this was blocked at all.

There's a big difference between spyware changing your default setting and users themselves trying to change the default using the options within Internet Explorer. Google ought to be able to distinguish the two. Changes made by a user shouldn't be blocked. Moreover, any blocking ought to ask me for confirmation that it's going to happen, not just be done on my behalf.

In other words, consider this. I'd consented for Google to notify me if something was trying to change my default settings, as shown on that earlier screenshot. I did not consent to it doing the blocking on my behalf, which is what it did. It would have been far better if Google had produced some type of pop-up box telling me that something wanted to change my defaults and asking me if I wanted to allow this. Leave the choice with me.

I'll follow-up with Google about this. Meanwhile, what to do if you want to override the decision Google made for you? When that notification happens, you have to click on the little G button in your task bar (if the notification is gone, try changing again to make it come back). Clicking on the G brings up a box like this:

That box is what I think Google should actually show you, rather than processing it behind the scenes unless you manually make it appear. It tells you something wants to change your default, asks if you want to allow that to happen and lets you override what Google wants to do, remain the default, if that's your decision.

If you override, that should disable Google from doing any future monitoring, as it tells you will be the case:

That's what I found to happen. In fact, I see no signs that Google is still monitoring despite being told not to. That's what happened in July, when the GoogleToolbarNotifier.exe program continued to run. Google said this was a bug, which got some dubious laughs in some quarters. Bug or not, I certainly don't see it happening now.

To further test it, I went back to Ask.com and let it make it my default search provider. That worked fine.

Once you've disabled monitoring, what if you want it back? Use the Settings menu of the Google Toolbar, then on the More tab, you'll see two options:

The two different options intrigued me. What was the difference between:

• Set and keep Search settings to Google
  • Notify me on settings change

I enabled only the first. Bad, bad choice. If you do this, you simply cannot change your settings at all unless you go back into the Google Toolbar and override the option. Google will silently keep any settings from being altered. If you enable them both, then you get back to the behavior where at least Google will give you a notification.

Overall, here's what I'd like to see. The Google Toolbar should ask if you want to be notified about changes. If something tries to make a change, it should then ask you for explicit permission whether to override this, at least the first time -- perhaps it gives you an option to let Google handle these changes without notifications behind the scenes after that. But yes -- get in the users face more about what you're going to change initially, so they know what's going on.

Having played with Google, I next loaded up the Yahoo Toolbar. Ugh, not fun. First, Yahoo by default wants to cram Norton Spyware scan down your throat. Yes, right under the big Download Yahoo! Toolbar button in smaller text is an option to get just the toolbar without it. I'd rather see that option get equal play.

After the installation, like Google, Yahoo stands ready to be both my default search engine and help me get back to Yahoo if something changes my default settings:

Like Google, Yahoo makes it clear you've got the toolbar with this big pop-up window:

Decide to personalize the toolbar, as Yahoo suggests? To do that, you've got to have a Yahoo account. That means the toolbar does more than drive searches for Yahoo. Unlike Google, Yahoo's trying to generate user registrations, as well. The toolbar works without registration, of course -- but it no doubt encourages some people to sign up.

I manually changed my default provider from Yahoo to Google, using the steps above. Yahoo didn't block this. But when I closed the browser and relaunched it, I got this:

Fair enough. Unlike Google, Yahoo didn't silently switch itself back. It asked me to make that choice. It was also a one time thing. I told it to allow the change, then closed my browser and reopened it. Yahoo didn't come back and try to get me to switch back to Yahoo again.

Actually, I wouldn't have minded that. I find it very helpful that Firefox or Internet Explorer will keep asking me if I want them as a default unless I explicitly use the offered tick box not to be asked again. That's because it's easy to accidentally hit the wrong button. It's harder to both hit the wrong button and enable a tick box.

All this effort by the toolbars to maintain default status comes off the fear that the IE7 search box is going to somehow gain Microsoft tons of search traffic. I've been pessimistic about this actually happening. I've noted for ages that despite Microsoft long having hooks into IE for its own search, Google and Yahoo have both survived and thrived. My Google Worried About Microsoft's Browser Advantage? What Advantage? article goes into much more depth about this.

It's uncertain to me that the search box in the "chrome" is going to make that much of a difference, but I haven't seen much user behavior data here. I could be completely wrong, and Microsoft's competitors are certainly worried about it. We'll know in short order. IE7 is being rolled out in a mandatory fashion to Windows users beginning November 1 through the Windows update system. If Microsoft's search share rises, the chrome search box may be working.

However, I think many people will still fire up their browser and go back to the search engines they regularly use. Google and Yahoo might not have the enticements to switchover today up, but those will come. And I think those will help them to largely preserve their shares despite the IE7 rollout.

Posted by Danny Sullivan at 10:16 AM | Permalink

October 12, 2006

Ballmer: YouTube Overvalued & Google Transferring Wealth From Content Owners

The Web According to Ballmer from BusinessWeek has Microsoft CEO Steve Ballmer questioning the value of the Google-YouTube deal and oddly warning that Google is transferring wealth away from rights holders. It's an odd statement, since that's what Microsoft wants to do as well.

First the questioning of the YouTube value:

[You've got to ask] could Google do whatever it is they're hoping to buy without paying $1.6 billion? Is YouTube really some permanent, long-term thing, or is it a fashion?....Right now, there's no business model for YouTube that would justify $1.6 billion.

Though strangely, when BusinessWeek tries to pindown what seems a clear statement that Google overpaid, Ballmer says:

I'm not saying it is overvalued. I'm not trying to say that. It depends on a set of factors. I'm not saying I wouldn't write a check for that amount of money. I might.

And back to the controversial statement about Google's relations with content:

And what about the rights holders? At the end of the day, a lot of the content that's up there is owned by somebody else.

The truth is what Google is doing now is transferring the wealth out of the hands of rights holders into Google. So media companies around the world are all threatened by Google. Why? Because basically Google is telling you how much of your ad revenue you get to keep. They better get some competition. Us. Yahoo! (YHOO). Somebody better break through or you can short all media stocks right now. As long as there are two, you can hold onto media stocks. Google understands that. And that's one reason why they're willing to lose money up front.

Microsoft has its own video sharing service up, Soapbox. It has a question answering service, Q&A. It has an entire search engine that crawls the web like Goo