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Microsoft Pri0

Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times reporter Sharon Chan.

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February 1, 2008 11:32 AM

MSFT-YHOO: It's all about search... or is it?

Posted by Benjamin J. Romano

The easy analysis says Microsoft is angling to acquire Yahoo to knock Google off its Internet search throne. That's definitely part of it. Both Microsoft and Yahoo have struggled to gain market share as Google has run away with the game. But it's not necessarily a winner-takes-all proposition.

"I think this whole Google vs. Microsoft thing can be kind of overplayed," said Kip Kniskern, a close-follower of Microsoft's Windows Live efforts for the blog LiveSide.net.

"As Americans, we're all about who wins the Super Bowl and nothing else counts," he said, adding that a strong second place in the lucrative business of selling ads next to search results is still a huge business. What's important to advertisers is scale -- not necessarily being with the No. 1 player, he said. Microsoft is buying scale. Combined with Yahoo, its share of Internet searches in the U.S. would grow from about 10 percent to about 30 percent (less depending on whose metrics you use), compared with Google's 60 percent.

"The big boys are going to go where they can get more bang for the buck. If you're 10 percent vs. 30 percent, you have that much more," Kniskern said.

Ellen Siminoff, a former Yahoo executive who now runs Efficient Frontier, a search-advertising agency in Mountain View, Calif., said she recently did a study that found 97 cents of each additional dollar advertisers are spending on Internet search advertising is going to Google, with Microsoft and Yahoo scrapping for the rest.

"I'd rather have a strong No. 2 [in a combined Microsoft and Yahoo] than a two and a three that aren't growing," she said.

Some of the best analysis of how the search engines at Microsoft and Yahoo stack up is being done by Danny Sullivan at Search Engine Land:

"Practically no one seems to know about the 'flagship' Microsoft Live Search brand. Hitwise stats, for example, show that of Microsoft's 7.1 percent share of the U.S. search market in November 2007, only 1.6 percent of those searches happened at Live Search. The bigger chunk happened at MSN, 5.5 percent.

"In contrast, Yahoo has an excellent search brand. It existed before Google and was THE search engine for many years. Today, it still arguably remains synonymous with search. Abandoning Live.com as the flagship and putting efforts behind Microsoft's Yahoo might keep the company's efforts more focused and effective.

"The challenge is that both Yahoo and MSN -- the strongest search brands in a combined company -- are weighted down by being littered with portal features. The Yahoo home page is heavy compared to the clean Google home page, though Google continues to play its long-standing "stealth" portal conversion by showing more people its iGoogle portal page and offering a "classic" option for those who dislike it."

Microsoft has recently downplayed the actual value of Internet search, arguing that it gets too much credit for influencing purchasing decisions when in fact a series of advertisements in various places influence consumers. Brian McAndrews, who would play a key role in monetizing the Yahoo acquisition, discussed this issue in an e-mail Thursday.

"While search has been the main driver of the blistering growth of online advertising in the past, at least partially because of the 'last ad clicked' performance measurement standard ... we do not believe this will necessarily be the case in the coming years. The current system for tracking ad conversions, while the best available for years, is not optimal because it gives all credit to that last ad seen or clicked -- often a search engine -- and not any credit to other ad units the consumer may have seen prior that helped influence the user to seek more information about the advertiser. ... [T]hat's starting to change. We'll be making significant inroads here in 2008 through our continuing ground-breaking work in the area of 'conversion attribution.'"

Beyond Internet search advertising, the competition is fierce for other types of digital advertising -- such as online display ads -- the banners and towers that appear on Web pages -- where Yahoo and Microsoft rank ahead of Google.

Here are the latest figures from comScore for November 2007 online display advertising market share:

Yahoo! Sites: 18.8%

Fox Interactive Media: 16.3%

Microsoft Sites: 6.7%

Time Warner Network: 5.8%

FACEBOOK.COM: 1.5%

eBay: 1.2%

Google Sites: 1.0%

Beyond display advertising, all three companies are pushing into areas such as online video, mobile ads, in- and around-video game advertising and other small, though fast-growing categories.

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