Search the new ‘killer app,’ says Balmer
Microsoft’s CEO defended the software maker’s decision to invest heavily in its unprofitable online business, but he shed minimal light Thursday on steps it will take to challenge Google in the wake of the failed bid to buy Yahoo.
Analysts arrived for a yearly meeting at Microsoft Corp. headquarters hoping for new details about the software maker’s online strategy, a day after it was announced Kevin Johnson, a key executive in Microsoft’s pursuit of Yahoo Inc., is stepping down.
But the executive presentations offered more cheerleading than fresh insights.
Chief executive Steve Ballmer sketched out how the software maker is thinking about investing in its online business. Last week, the company announced US$500 million of additional spending for its 2009 financial year, but didn’t say how the money would be spent.
Ballmer didn’t disclose dollar amounts Thursday, but indicated Microsoft would focus the bulk of that investment on search technology, data centre infrastructure, web indexing and marketing, and said improving its search capabilities will be crucial to Microsoft’s future success.
Search is “a two-horse race” between Microsoft and Google Inc., Ballmer said, making only passing reference to Yahoo Inc.’s current position as the second-largest search and advertising provider. He said Google and Microsoft are the only two with the resources to play in what he sees as a $1-trillion market.
“Everything you read, everything you watch, everything you want to communicate, all of those experiences are going to happen over the Internet,” Ballmer said, calling search “the killer app, if you will, for this new world. How do I find the merchants? How do I find the people? How do I find the information?”
Ballmer said Microsoft has found itself in a chicken-and-egg bind that’s hampering its ability to compete with Google. To get more search advertisers, Microsoft needs more search traffic. To get that traffic, it needs more advertisers.
Ballmer said there were no new discussions with Yahoo and Microsoft was looking at “alternate approaches around this Catch-22,” though he wouldn’t discuss them.
Microsoft did announce one solid development aimed at increasing search traffic. Facebook, the second-largest social networking site in the U.S. behind News Corp.’s MySpace, plans to incorporate Microsoft’s web search engine into its U.S. site by the end of the year. Microsoft, which already powers Facebook’s display advertising, will provide search ads alongside results.
It’s not clear that such a deal will have much impact on Microsoft’s search share or revenue, however. Even Google, the best so far at search advertising, has acknowledged difficulties making money on social networking sites where users are goofing off, not shopping for shoes or plane tickets.
Ballmer mentioned a few other areas Microsoft has targeted for investment in the current fiscal year, among them the marketing push to improve consumers’ perceptions of Windows Vista and Live Search, and search distribution deals such as the one announced earlier this year with Hewlett-Packard Co.
Under the terms of that deal, HP will preset Live Search as the default search engine on PCs shipped in the U.S. and Canada starting in January. The PC maker will also install a special web browser toolbar, demonstrated Thursday, that can tell when web shoppers are searching on Google for certain products, then lure them to Live Search for a rebate.
