Microsoft's Search Engine Ambitions: A Path Forward

Strategic Insights -

As the search engine market continues to dominate the web, Microsoft Corp. CEO Steve Ballmer has acknowledged the company's past mistakes in not pursuing a search engine product more aggressively. In a speech to executives, Ballmer expressed regret over the company's failure to invest in internal R&D efforts, leading to Microsoft's reliance on licensing its search product from Yahoo!. However, Ballmer is now committed to developing its own algorithmic search engine, dubbed MSNBot, and plans to launch a natural language search tool called Answerbot.

Key Takeaways:

  • Microsoft is developing its own algorithmic search engine, MSNBot, which is expected to be released within the next 12 months.
  • The company plans to launch a natural language search tool called Answerbot, which will enable users to ask plain English questions rather than plug in specific key terms.
  • Microsoft is also working on a technology called Blogbot to allow users to search through blogs, or online diaries.
  • The company plans to terminate its paid-search-results relationship with Yahoo! and offer its own comparable search technology.
  • Analysts believe that Microsoft will need to do some acquisitions to become a search giant alongside Google and Yahoo!, but the company has the resources to make an immediate impact within the next 12 months.
  • Microsoft is considering the acquisition of FindWhat.com, a provider of sponsored search, to expedite its push into search advertisements.
  • The company is also interested in acquiring Ask Jeeves and its Teoma search tool, but such a deal would be very pricey.

Statistics:

  • $7 billion: The amount Microsoft spends annually on R&D.
  • $575 million: The amount Yahoo! paid to acquire Paris-based Kelkoo SA, a European shopping search engine.
  • $160 million: The proposed acquisition price of online yellow pages company Switchboard Inc. by Bellevue, Wash.-based InfoSpace Inc.
  • $360 million: The acquisition price of Interactive Search Holdings Inc. by Ask Jeeves Inc.
  • $1.7 billion: The price Yahoo! paid to acquire Overture Services Inc. in October.
  • $1.8 billion: The market capitalization of Ask Jeeves, currently valued at 31 times 2005 estimated earnings on the Nasdaq Stock Market.

Sources:

  • The Deal.com, "Microsoft Said to Be in the Hunt for FindWhat," unpublished article.
  • The Deal.com, "Yahoo! to Buy Kelkoo, Publisher of Shopping Guide," unpublished article.
  • HPC Capital Management, "Speed Up Your Web Site: Web Site Optimization" by Andy King.