Mike Nichols has a poster on his office wall. It shows the young Muhammad Ali glaring down at a fallen Sonny Liston, the bruising heavyweight who had seemed invincible — until Ali (then Cassius Clay) beat him, in 1964, in one of the biggest upsets in sports history, and then beat him again a year later.
“The triumphant underdog,” Nichols says, nodding toward the wall.
The inspirational fight poster is fitting, because Nichols, a general manager at Microsoft, is a lieutenant in an underdog corporate army here. Its daunting mission is to take on the Google juggernaut.
Microsoft’s assault on Google in internet search and search advertising may be the steepest competitive challenge in business today. It is certainly among the most costly. Trying to go head-to-head with Google costs Microsoft upward of $5 billion a year, industry executives and analysts estimate.
As the overwhelming search leader, Google has advantages that tend to reinforce one another. It has the most people typing in searches — billions a day — and that generates more data for Google’s algorithms to mine to improve its search results. All those users attract advertisers. And, there is the huge behavioural advantage: ‘Google’ is synonymous with search, the habitual choice.
Once it starts, this cycle of prosperity snowballs — more users, more data, and more ad dollars. Economists call the phenomenon ‘network effects’; business executives just call it momentum. In search, Google has it in spades, and Microsoft, against the odds, wants to reverse it.
Microsoft has gained some ground. Its Bing search site has steadily picked up traffic since its introduction two years ago, accounting for more than 14 per cent of searches in the American market, according to comScore. Add the searches that Microsoft handles for Yahoo, in a partnership begun last year, and Microsoft’s search technology fields 30 per cent of the total.
More From This Section
Yet, those gains have not come at the expense of Google. Its two-thirds share of the market in the United States — Google claims an even higher share in many foreign markets — has remained unchanged in the last two years. The share losers have been Yahoo and smaller search players.
The costs for Microsoft, meanwhile, keep mounting. In the financial year ended June, the online services division — mainly the search business — lost $2.56 billion. The unit’s revenue rose 15 per cent, to $2.53 billion, but the losses still exceeded the revenue.
Microsoft is a big, rich company. But investors are growing restless at the cost of its search campaign. In May, when David Einhorn, the hedge fund manager, called for Steven A Ballmer, Microsoft’s chief executive, to be replaced, he pointed to the online unit as a particular sore spot.
Qi Lu, president of Microsoft’s online services division, sees the situation this way: “To break through, we have to change the game. But this is a long-term journey.” Lu knows about long journeys — and persistence. His grandparents raised him in rural China, in a home without running water or electricity. A bright student, he won a scholarship to the doctoral programme at Carnegie Mellon.
He was recruited by Ballmer, who assured him that Microsoft was committed to search and competing with Google for the long haul. Paul Yiu came from Yahoo two years ago, impressed by Microsoft’s approach to competing in search. A business and product manager, Yiu had spent most of his career in Silicon Valley, often working for Microsoft adversaries like Netscape and Oracle. He explains in the valley, with its job-hopping and start-up culture, there is a “renters’ mentality”: if things aren’t working out, just move on. At Microsoft, he says, there is a ‘homeowners’ mentality”: A dedication to making things work. “If you’re in the expensive search game, you need to have a homeowners’ mentality,” Yiu says.
Microsoft’s leadership knew years ago that becoming a real competitor to Google would take patience as well as dollars. The phrase that Microsoft uses is ‘decision engine’, as opposed to search engine. New classes of information will help. Social network data, for example. Microsoft has an exclusive partnership with Facebook, and in May it included a feature for linking the ‘Like’ tags of a person’s Facebook friends to that person’s search results in Bing. It might show, say, that 15 of your Facebook friends ‘liked’ a certain restaurant. It is a first step, Lu says, in including trusted opinions in search — and not just the popular ones that conventional search does so well.
©2011 The New York
Times News Service