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Looking Ahead: What Impact
will Microsoft have on the Search Industry? |
As a follow up to
our look at what Microsoft's new search tool could look like, Rob
Sullivan, our Head of Organic Search, and I locked ourselves in an
office and tried to tackle some big questions about what will happen
when Microsoft enters the search industry. We suspect these questions
have been on a few people's minds.
Q: Given what Microsoft is working on for Search, what do you see
Microsoft doing between now and the release of Longhorn?
Rob: Version 1.0 of search will be out by the end of the year;
Bill Gates has already stated this. It will look the same as everybody
else, however; nothing too different or radical. They will be playing
catch up for the time being, offering similar features to Google, Yahoo,
etc. Trying to get MSN competitive with other portals.
(Note: as a follow up to this, you can see a beta MSN search portal
at beta.search.msn.com.
Hmmm..notice any similarities in the results to Google's layout?)
Their deal with Overture lasts until 2005 so we won't see too much
change with that. Likely after their current contract expires they will
go with yearly renewals only. Nothing too long term, and with the option
to bail. This is for when they are ready to launch their own PPC.
By next year, I wouldn't be surprised to see Microsoft buying some PPC
outlet, like a LookSmart or Enhance.
Gord: I think Rob's right. Microsoft has to start building a name
for their own search product, so they'll introduce it on the MSN portal.
It will be introduced with a lot of hype, but little in the way of
functional advantages. Ideally, Microsoft will be able to add one or two
features that would give it a distinct user advantage over Google and
Yahoo.
Another important thing to remember is that Microsoft is probably trying
to recoup their investment in search as soon as possible. I don't think
they are prepared to sink hundreds of millions of dollars in a search
black hole without a return for years. They've played this game in the
past to capture market share and I don't think they want to go there
again. That's why you'll see them hang onto an agreement with Overture
for the foreseeable future.
Q: Why Buy a PPC Outlet?
Rob: Buying a PPC provider is quicker than building one. The
current PPC suppliers already have developed the back end systems, such
as the database, reporting features, and so on. Also, in some cases
(particularly Looksmart) the price is right. At least by buying a PPC
supplier they can quickly monetize the purchase. After all, look at how
much money Yahoo made this quarter alone, the first full quarter since
the Overture purchase, because of the PPC supplier.
Gord: We have to remember that Microsoft will be throwing a lot
of resources at developing their own search technologies. I agree with
Rob. It makes more sense to buy an existing PPC provider and get access
to the technology. The one caveat here is the Overture/Yahoo portfolio
of patents, which currently has some PPC portals paying them license
fees. Microsoft will be looking to steer around this. And this brings us
back to Google. Google AdWords uses a system sufficiently different from
Overture that it doesn't infringe on their patent. Could this be one of
the reasons Microsoft was originally looking at Google?
Bottom line: Microsoft will want their own paid search channel as
soon as possible, but will be looking for short cuts to get there.
Q: Why won't Microsoft hold off on unveiling their search until
Longhorn?
Rob: The problem will be winning people over. Microsoft results
are not the best right now. MSN search doesn't have a very good
reputation. It has traditionally been confusing for most people, what
with sponsored listings, organic listings, web directory listings,
featured sites and so on. They're already changing their default search
to something that has more reliable results but Microsoft will have to
overcome this bad quality perception to convince people to use search.
Also, as they roll out with new search features, they will continue to
change their results pages, displaying more or less ads, more or less
free listings to find the right balance between monetizing the paid
listings and the integrity of the results. And during the process, they
have to build their market share.
One way they could attempt to win people over would be a side by side
comparison of results with other sources. If they could prove to more
advanced web users (the early adopters, so to speak) that their results
are at least comparable, but more than likely superior to other
providers, they can start winning people over. They will have to do this
specifically before Longhorn comes out. Microsoft has to convince people
that MSN search provides quality. If they can't win people over with MSN
search, they won't likely get them to use Longhorn's search
capabilities.
Gord: Microsoft has never built a search brand. Right now, Google
owns that outright. Even if Longhorn ships with its default set to
Microsoft search, people have to have sufficient reason not to change
it. It remains to be seen what the Antitrust overloads will do to
prevent Microsoft from monopolizing search (like they did with browsers)
but we can be sure that the user will have to at least have the
appearance of a choice.
Microsoft simply can't allow Google to continue to own the search
business outright for the next few years. They have to start
establishing their own brand identity. For the next two years, the
search fight will be fought on two fronts: through the portals (Google
vs. MSN vs. Yahoo) and through toolbars and desktop search apps.
Microsoft doesn't have to win these outright, but they have to put up a
good fight to build a position as a contender. If they can do that, they
can eventually crush the competition through OS integration with
Longhorn.
Q: Of all the functionality we looked at in the
last NetProfit, how much will ship with Longhorn?
Rob: The WinFS part is a given, that has to happen. They need to
incorporate the XML features of the new file system with its ability to
easily perform local searching. It will also give people the ability to
see what MSN Search could become in the coming years; i.e. being able to
search for a song based on genre, performer, songwriter, and so on. Once
people learn of the power of the WinFS search feature they will likely
come to rely on it for web search. This is key to Microsoft search. If
people don't buy into the power of the WinFS search, they won't buy into
Microsoft search.
They will have the Avalon desktop because of the cool factor. Microsoft
hasn't changed the desktop since Windows 95. While they've added a ton
of great features since then, they haven't improved on the desktop.
Having a desktop with the ability to render in 3D definitely contributes
to the cool factor.
In addition, I see the subscription portion of MSN being more tightly
integrated into the new OS. The ability to stream audio and video to
subscribers will be a huge money maker for Microsoft. The subscription
service will offer more features than the regular MSN portal.
Gord: In addition to what Rob has mentioned, I believe Microsoft
will also introduce an iterative search interface, that will allow the
user to tweak and filter their search and have the results update in
real time. I believe this functionality is in complete alignment with
how people actually search and will be a big factor in winning over
users.
Q: How about Implicit Query?
Rob: Not right off the bat. That will be likely wrapped into
further enhancements. Also, the ability to anticipate queries, and aid
in queries means that the computer has to know more about the user.
Therefore it will have to monitor the user both locally and on the web
to see how they search, what they search for, what results they picked
and so on. Until the computer can understand the user, Implicit Query
won't work.
Gord: I'm not so sure. Microsoft is testing Implicit Query pretty
aggressively now, and I wouldn't be at all surprised to see some version
of it included in the first release of Longhorn. That, and the fact that
the marketing possibilities of Implicit Query are staggering. I'm sure
Microsoft is fully aware of that.
Q: How much of a selling feature will Search be in the Longhorn
release?
Rob: It won't be the major feature; Microsoft will be pushing the
desktop features and functionality more than the web search feature,
because of convenience. The ability to get information from formats such
as sound and graphic files will be appealing to users. I think that
initially many people may even change their default search preferences
to a site like Google, especially if MSN search doesn't perform. This is
why they HAVE to get search right early on.
Gord: Right now, all Microsoft's talk about the search
functionality they're developing is about its application on the
desktop, not on the web. This leads me to think that they want to nail
it as a localized search tool first, and then extend it to the web. For
this reason, I think there will be a lot of marketing about ease of use
and the ability to work more intuitively with your files without having
to become a librarian. The web search implications will be rolled out
later, as Microsoft moves their search focus online.
Q: What's Google going to do?
Rob: Google has to get into the portal business. They need a
built in traffic stream that's looking for other features over and above
search. That's why they're having an IPO - to raise money. Think about
this for a second. You already have a hugely popular, highly profitable
web property. Estimates are that it takes in a billion dollars a year in
revenue with anywhere between $250 and $500 million in profit. Why would
you IPO? Because you need to raise money. And with that money, they're
going to buy AOL or Netscape.
Why buy AOL or Netscape? Well, either of these properties will give them
a dedicated customer base, a portal, the ODP, a chat program (ICQ) Movie
listings, mapping capabilities and so on. It puts them on a somewhat
equal footing with MSN and Yahoo offerings. Not to mention that Time
Warner has had nothing but headaches with the AOL branch since the two
companies merged.
Gord: Google has to make a bold move forward in search
functionality. They came out so far ahead of any search engine in 1998
that once the competition caught on, it took them 5 years to catch up.
Now, that competition has caught up, and Google hasn't been able to
raise the bar that significantly since.
Google has to jump ahead of the pack again, and based on past
experience, that jump on functionality will be squarely focused on
providing web users with a better search experience. While I like Rob's
portal theory, I think such a move would split Google's focus in so many
areas that they'd lose sight of their core competency, which is search.
In my mind, Google only has one slim chance to win the upcoming war with
Microsoft, and that's by continually focusing on providing the best
search tool on the web.
What Impact will Yahoo dropping Google have?
Rob: Google will lose a substantial chunk of traffic, obviously,
but it won't have much of an impact on Yahoo regarding quality of search
results. Yahoo will still have 1/3 of web users after they switch. They
can replace with Inktomi, or a mix of AltaVista, Fast and Inktomi. How
Yahoo will work is they will build features and test the new features on
AltaVista. When they're satisfied that the features do what they want,
and are useful, they will implement the new features on Yahoo. The
average Yahoo user won't likely notice much of a difference from the day
before they dropped Google to the day after.
As far as search functionality, they're refining their semantic
processing. They have had a year since they bought Inktomi, and Overture
has had Alltheweb and Altavista for six months. It isn't inconceivable
that they have a huge amount of research and development going on to
make a search product capable of replacing Google. (By the way, semantic
search will also be a feature with MSN search therefore it's safe to
assume that Yahoo will be developing it as well)
Gord: The loss of Yahoo has been looming for ages, and I would
hope Google has a Plan B, as well as a C, D and E. Really, the Yahoo
arrangement has been a bonus for Google from the beginning. The fact is,
Google still owns a huge chunk of search traffic outright, and they have
to concentrate on this before anything else. If we've learned one thing
in the past few years, it's that you can't depend on partnership
arrangements for your success.
Google will be finding ways to build search traffic directly to Google.
The launch of the Google Toolbar was the first move in this direction,
and a brilliant one, in my opinion. I think toolbars and other desktop
search apps will be the next hot battleground of the search industry.
Rob: The down point to that is people have to agree to download
from Google. With Microsoft, it will all be built in. Again, a huge
competitive advantage to Microsoft.
The thing is, if Google does do something revolutionary, and offers it
as a free download, all Microsoft has to do is build it and release it
as a patch or service pack to get it implemented.
Gord: And that's why I think Microsoft can't be beat in the long
run.
Rob: I think Google can get back on top, and the application of
the semantics db is just the first step. They have to get that working
first. I think they are close and getting closer all the time, but they
still have some tweaking. Once they do get it fixed they have to get in
front and then stay in front, so the competition is always aiming for a
moving target. Even then I don't think superior search is enough to keep
them in front. They have to offer more.
Google will keep trying to introduce ways to make search more intuitive
and useful. For example, the slide show search at Google labs is kind of
cool, if they find a way to make it more applicable to people.
Q: What about Yahoo?
Rob: Yahoo is in the most unique place right now. They have
nothing to prove and a solid customer base. Anything they do is an
improvement, so they have no where to go but up.
I think they'll have to go into semantic search, like Google and MSN.
The first roll out of a pure Yahoo search will be vanilla organic
search, but they'll be changing that as time goes on. By this fall
they're going to want have something out before MSN. MSN is the key in
Yahoo's formula. Yahoo will want to be ahead of MSN, and Google wants to
be ahead of everybody else.
Gord: I wouldn't want to be Yahoo right now. I can't see how
they'll win in the long run. The one area that's interesting is the
Yahoo shopping search engine. Perhaps Yahoo will eventually have to
concede the general search contest, and become a niche player providing
specialized search functionality. But they're not going to go quietly.
It's going to be a huge battle in the coming few years.
Q: Does Yahoo offer anything unique or superior?
Rob: They're just relying on their brand. They really don't have
any features that set them apart. That's not to say that they won't
develop these products, but I think with Overture making so much money
for them, at least in the short term, they don't need to innovate to
stay in the game. Once they realize that they are getting left behind
(or at least are simply status quo) they will invest more into organic
search R&D. If it will be too little too late is anyone's guess at that
point.
Gord: Overture may provide another key to survival for Yahoo. In
addition to the revenue Rob mentioned, Overture has always been ahead of
Google in providing better management and reporting tools to PPC
marketers. I think it would be a smart move on Yahoo's part to build
this advantage aggressively over the next two years. We know search
marketing is a hot market, and if Overture can build some loyalty, it
will give them some high ground to defend their position from.
Q: Does Yahoo have a chance?
Rob: Microsoft's marketing power is huge - as is their budget.
Yahoo is also a big company, but they can't compete head to head with
Microsoft. MSN is going to crush Google and then aim for Yahoo. They'll
be competing portal to portal. MSN has to beat Google at search first.
Once that does happen (and I do believe it will, provided they can get
that crucial version 1 search right), MSN will set its sights squarely
on Yahoo.
Gord: As I mentioned before, I don't think Yahoo can win the
search battle head to head with Microsoft or Google. They're going to
have to rely on their strengths in other areas to survive.
Q: Does Google have a chance?
Rob: Not really, and that's why Google needs a portal. They can't
compete on search alone. If it's not a portal than Google has to offer
other unique features.
Gord: The only way you can compete on search is to be best of
breed. And Google isn't the clear leader in search any more. To be
honest, Google impressed the hell out of me in the beginning, but I
don't think they've done anything noteworthy in a long time. I think
they're showing the stress fractures inevitable in a young company that
suddenly has to compete in the big leagues. I don't think they're up to
taking on Microsoft head to head. I can't think of many companies that
could.
Rob: But if Google is building in semantics and a constantly
improving relevancy feedback mechanism, they should continue to improve.
After all, they are already collecting data on the number of abandoned
searches, the number of returned results, the average clicked on
position and so on. It shouldn't be too difficult to integrate this data
into the ranking algorithms to make them better (if they haven't done so
already). Remember that if this is Applied Semantics technology being
applied by Google, then the software is supposed to "learn" based on
what results were picked or not picked. It is supposed to be able to
refine results for the next time.
Q: Does anyone else have a chance?
Rob: They will become niche players..fighting over the scraps
that are left. And there will always be an element of the population who
are anti-big business. Many people adopt Linux because they are anti
Microsoft; I think you will see similar sentiments towards the search
engines if they become too commercial. Already we are seeing signs of
open source search engines, and other smaller engines trying to compete.
Gord: It may seem ironic, but the biggest potential losers in
this will be the ones that go head to head with Microsoft, namely Yahoo
and Google. The smaller players will probably benefit. The profile of
search will grow, along with the profitability. The small players will
be able to move quicker to identify niches and capitalize on them. And
theyll probably be able to strike new partnerships, providing
specialized services to the big 3 in the upcoming battle. As niche
players, I think the future looks good for some of these services.
Q: When Microsoft enters search - will the industry grow?
Rob: Yes, search volumes will continue to grow, so we should see
search continue to grow. After all, markets outside of North American
and Europe are growing faster than anywhere else. In addition, broadband
usage is growing, hardware prices continue to come down, and more people
are getting hooked up to the 'Net. There will be a point where internet
growth tapers off, and search plateaus, but I think that is many years
away.
Gord: I think we'll see incremental growth in search as a whole,
with a possible jump coming with OS integration. But I see exponential
growth in the commercialization of search, and therefore the revenue
generated. Implicit Query and other "push" search channels will change
marketing all over again. Search, in its eventual evolved and converged
form, will be one of the biggest marketing channels, bar none, in 5 to 6
years.
Q: What will Microsoft do on the paid search side with the release
of Longhorn?
Rob: I think this is where implicit query kicks in, and the
sponsored results will be shown first. Consider this: How much would one
ad across the tool bar in an application be worth to an advertiser? That
advertiser essentially has a captive audience. We've talked about this
before - the application "watching" what you are doing and offering help
- by way of sponsored (or other search) listings - appearing
conveniently in the application you are using. Another resource for
listings could be the desktop sidebar (another of Longhorn's new
features). It is also built on XML so it should be flexible enough to
display "best picks" listings -whether paid or organic. Combine this
with Longhorn's ability to learn from you and refine its ability to
provide what you want and you have a powerful new advertising medium.
Gord: It's a different pricing model...a different delivery
technique. It would be very easy for Microsoft to serve up as much
advertising as they want, they have to know where they start irritating
people. It will be a whole new paradigm, and it remains to be seen how
people respond to it.
That said, Implicit Query changes all the rules for advertising. It
introduces huge considerations for privacy and online intrusiveness.
We're getting to the online equivalent of the personalized ad message
that we saw in the movie Minority Report.
Rob: But Implicit Query and result returned don't have to be that
obvious. Microsoft has already experimented with inconspicuous helpers.
Remember Smart Tags? They are still used by Microsoft applications. They
appear as a little box with an "I" in it. There could be a time where
Longhorn recognizes a phrase and associates it with a smart tag which is
linked to a search result which provides more information via organic
results, or paid search listing. This type of system opens the door to
many different types of web marketing we haven't considered before.
Conclusion
Microsoft, Yahoo and Google will take search in totally new directions
in the next few years. That means search marketing will also change
dramatically. The medium will become more powerful than ever, probably
prompting new investigations and concerns by consumer groups, and new
legislation by government. I hope the questions we posed and tried to
answer help clear up a very fuzzy future just a little bit. One thing is
for sure. The way you search today will be significantly different from
the way you search in 2006. |
Gord Hotchkiss
President and CEO
Enquiro Full Service
Search Engine Marketing
Search Engine Positioning by Searchengineposition
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