Microsoft Finds A New Way To Use Its Market Muscle

If at First You Don’t Succeed, Write a Check

Microsoft--notorious for muscling its vendors, suppliers, partners and customers--has found a new way to exercise its marketing power... buy the loyalty and interests of the marketplace. After all, what corporate CEO has the integrity, ethics or guts to refuse money that doesn't require much work? It really doesn't matter that there might be some ethical issues regarding anti-trust involved, does it? Even if it does, Microsoft has a lot of money and a lot of lawyers, and is quite comfortable sitting through ordeals in court.

Of course, none of Microsoft's competitors are all that ethical either. Google, which is seen as the most ethical by many in the search engine game, has taken some steps regarding G-Mail and the way it handles consumer accounts that call into question its ethics. Yahoo, in my view, lacks any credibility when it comes to spam and advertising (so much spam gets through on Yahoo! e-mail that they suggested turning it into a profit making enterprise by forcing consumers and spammers to pay for either limiting spam or allowing it to go through).

SIX months ago, Microsoft stood in front of the world and rather bravely stated the question on everyone else’s mind: Why on earth does the world need another search engine?

Before supplying the answer, the company acknowledged in full-page advertisements that, yes, it was late to the game, and, yes, it was confronting the prospect of “becoming a footnote in search history.” But it had decided to forge ahead and “write a few new chapters.”

It cast the competition — read: Google — as eggheads whose “complicated mathematical equations” retrieve all too many results, which overwhelm the average user. Microsoft’s copywriters boasted that its employees had developed entirely new ways to filter and display search results that would set its service clearly apart. It could not resist adding that those new features had been developed, in part, by those who “didn’t even pass calculus. Imagine that.”

Nowhere outside of a high school lunchroom would this pass as biting criticism. But Microsoft deserves credit for trying to compete on the basis of the intrinsic quality of the search experience. The tag line for this campaign was: “Algorithm. Meet Humanity.”

Microsoft would soon learn, however, that those amusingly incomprehensible mathematical equations used by Google produced a search engine that grew ever stronger. While the quality of results among different search engines is hard to judge objectively, Google enjoys the benefits of a network effect. Its software is tuned to learn from the clicks of its users, and the more users it attracts, the smarter the software evolves, the more users are drawn in, and on the virtuous cycle revolves. Humanity. Meet Algorithm.

In that matchup, algorithm wins. Google had a 50 percent share of searches in the United States in October 2006, while Yahoo had 24 percent, and Microsoft, 9 percent, according to Nielsen/NetRatings. The most recent data, for February of this year, show that Microsoft had climbed a bit, to a 9.6 percent share, but that Google had jumped much farther ahead, to 56 percent. (Yahoo’s executives had something to ponder, too: its share slipped by three points.)