Staff Writer, CNET News.com
Microsoft is expected to take its first baby steps on the road to Web search independence on Thursday, with the launch of a homegrown Internet search tool and changes to its Internet search engine.
The revamped MSN Search remains a front end for technology provided by Yahoo, offering mainly a face-lift aimed to make it look more like Google. The relatively minor changes signal that—after a year in development and a $100 million investment—Microsoft's ballyhooed search push still has a long way to go.
The new MSN Search features fewer clearly marked sponsored ads. In addition, MSN will host a that the company boasts will out-Google Google in its minimalism. Microsoft also took a step that could distance it from Yahoo, removing search links for now from marketers that pay a fee for inclusion in Yahoo's search index. The changes are expected to improve search results by 50 percent, Microsoft claims.
More significantly, MSN will introduce a homegrown Web crawler and algorithmic search engine in test form, giving Webmasters the chance to vet the system before it is set to launch later this year, according to the timeline of Microsoft Chairman Bill Gates.
"If this is a next-generation airplane, this is only the inside of the engine," , said in an interview Wednesday.
Microsoft is trying to get ahead in a three-horse race with Google and Yahoo in Web search, but it still has a lot of work to do. No. 1 ranked Google fields 35 percent of all U.S. Internet searches, according to market researcher Comscore Networks. In contrast, Yahoo handles 30 percent of the market and MSN handles 15 percent.
In a further handicap, Microsoft effectively leases its search results from Yahoo and its subsidiary Overture Services, meaning it hasn't even gotten to the starting gate when it comes to back-end technology that increasingly stands as a powerful bridge between consumers and Internet content.
Asked whether Microsoft might consider making acquisitions to catch up with its rivals, Mehdi said he was "open" to the idea, although he would not name potential takeover candidates. Previously in the interview, Mehdi singled out the efforts of Ask Jeeves in developing , something Microsoft has said it is interested in improving as a keystone of its pending search products.
Ask Jeeves President Steve Berkowitz suggested he might be open to a deal if it were in the interests of the company's shareholders, although he did not comment directly on any offers coming from Microsoft.
Even though Microsoft is coming from behind, the company can't be counted out. Microsoft has made search technology development a top priority, with plans to unveil its own Web crawler later this year. Numerous executives, including CEO Steve Ballmer, also have that Google has proved by both serving Web surfers and wooing advertisers, and have promised advancements that will change the way people search.
In addition, Microsoft is working to on the desktop, an arena it could well dominate thanks to its PC operating system monopoly. The company has touted the importance of Web and desktop search for the past year, highlighting its new operating system, code-named Longhorn, which will integrate Web and desktop search, but which is still years in the making.
"An important step"
Search experts said Thursday's unveiling is significant because it marks the first tangible signs of Microsoft's search push.
"In the long term, it's an important step because we can finally see the technology, touch it, measure it," said Danny Sullivan, who watches the industry closely and publishes the newsletter Searchenginewatch.com.
Though small, Thursday's move could plant the seeds for a major transformation in the search landscape. Most notably, search leader Google will face pressure from a new front as it prepares to launch a . After all but ignoring search for several years, Yahoo has begun to aggressively target Google's territory. Yahoo purchased search providers and , , and initiated a major marketing and technical campaign to incite user loyalty. Now a refocused Microsoft will join in jockeying for consumer allegiance in the coming months.
Despite its deep reliance on Yahoo, Microsoft is making efforts to differentiate its service in the minds of Web surfers.
MSN's Medhi said the new search site for now will drop Yahoo's paid-inclusion program for natural search results, in a move to answer people's concern about the commerciality of free listings. But he left open the possibility of using paid inclusion in the future.
Yahoo's paid-inclusion program allows Web sites to pay for more frequent updates in the search index. But the service has caused waves in the industry because some critics believe it can skew search results. Ask Jeeves recently said it will , and Google executives have denounced it. Now Microsoft has joined the pack.
Jeff Weiner, Yahoo's senior vice president of search and marketplace, said the company stands by its paid-inclusion program. "We know empirically that paid inclusion improves the quality of results, and reduces spam, so we're going to continue to remain focused on quality."
In regard to the coming competition with Microsoft, Weiner said he welcomes it because it only drives innovation and ultimately improves consumer choice. "It forces us to perform at our best," he said.
On Wednesday, Yahoo also introduced minor changes to its search results pages to make it "easier on the eyes," a Yahoo representative said. Yahoo softened the coloring of certain text, from red to light blue, and replaced some top-page tabs with links to suggested query terms. Yahoo is trying to get closer to the users' intended search query by listing several options related to a keyword; for example, "apple computer," for the term "apple."
Google declined to comment for this story, citing a mandatory quiet period before its scheduled IPO.
In many ways, MSN is using Google's formula to win consumers. It will feature a search site that displays only a search bar, with few links and a drop-down menu so Web surfers can target their searches to news, stocks, encyclopedia information or movies. On the home page, it will urge people to "make MSN Search your home page."
Within search results pages, it will display uncluttered pages with clearly marked sponsored results. It will also continue to use Yahoo's sponsored listings from its subsidiary Overture Services, but it will make a greater effort to display ads it has sold on top of search results.
The timing of Microsoft's search engine may be aimed at taking the air out of Google's upcoming IPO. Google is expected to raise tens of billions of dollars later this year in one of the most widely anticipated tech IPOs. Observers have speculated the war chest could help Google fend off Microsoft's advances.
Yet Microsoft has a long row to hoe, given that it only started building a search engine last year. By contrast, Google has spent roughly eight years perfecting its search engine. Though Gates has denied it, several industry sources say Microsoft has held talks to buy Google and Altavista in recent years, but to no avail. The software maker finally decided to forge out on its own last year, launching a . But that experiment petered out and until now the company has had nothing further to show publicly.
Microsoft suffered a setback earlier this year when its head of search advertising development, Paul Ryan—wooed from Yahoo— on the job. MSN has yet to name a replacement.
Nevertheless, analysts said they expect Microsoft—a company known for its stumbles as well as its persistence—to be a major player in search eventually.
"Microsoft's going to be a significant presence," said Steve Weinstein, research analyst at Pacific Crest Securities. "Once they launch their own product, and put marketing behind it, they'll be material players. But it doesn't make me pessimistic about the market for Google and Yahoo, because there's such a huge market opportunity."
Sales from paid-search advertising are expected to reach $3 billion this year and $4 billion in 2005, financial analysts said. That's in contrast to sales of less than $1 billion just three years ago.
Ask Jeeves' Berkowitz downplayed MSN's new service, saying it's par for the course for any search provider to improve its site and help users find what they're looking for. "I don't think this is going to reshape anything. Microsoft is doing what everyone else is doing, which is to update the site and focus on the user experience."
The bigger event from MSN is its new algorithmic search engine, which sets the wheels in motion for its ultimate replacement of Yahoo Search and a more integrated search product of its own.
The company has demonstrated innovations planned for later this year or early next year that will allow people to search for "stuff they've seen" on the desktop, in an e-mail or on the Web. Also, it will eventually let people use search in the e-mail program Outlook to find movie times, for example, and paste that information automatically into an e-mail message.
Gates and the latest cosmetic MSN Search update in Sydney, Australia, earlier this week, saying the site would be dramatically improved. He said that later this year, the company will finally introduce its own algorithmic search engine.
Microsoft is also seeking to make advancements in understanding Web pages and documents to ultimately deliver more relevant results. Gates said the future of search includes personalization, understanding local information, and having the ability to analyze semantics of a document, browse databases and attach domain knowledge.
"We have a long way to go on our own search engine," Mehdi said. "The tough software problems (of search) are in our house. We're a software company."