Microsoft's Supreme Search Screw-Up

If Microsoft (MSFT) is back at the table trying to buy Yahoo's (YHOO) search business, an outside observer can only conclude that Microsoft has failed miserably at search. The question then is: How can Microsoft have tried so hard to crack the search market and fallen down so completely?

Let's see... here's Microsoft Chairman Bill Gates quoted in a story out of the World Economic Forum in 2004. Yes, four long years ago -- an eternity on the Web. From the story, talking about Google (GOOG): "'They kicked our butts,' (Gates) said, while promising a better next-generation Internet search engine from Microsoft, due as early as next year." No next-generation search engine from Microsoft appeared in 2005.

Later in 2004, a Microsoft researcher both promised a Google-beating search engine and, at the same time, downplayed its importance. From a story that ran then:

One Microsoft technologist said web search technology will be a big money maker for Google and others in the short term but he predicted the party won't last long. Speaking before about 100 gathered for the Emerging Technologies Conference at MIT in Cambridge, Mass., Eric Brill, a senior researcher at Microsoft Research, said the "monetization" model of web search technology is at risk. Brill's comments come on the heels of Google's highly successful IPO last month and bullish Wall Street reports this week that sent Google shares soaring to a high of $127.

"There's tons and tons of money to be made," said Brill. He acknowledged that Microsoft is intent on playing catch up with its own web search engine later this year yet projected that both companies could hit a fiscal wall.

Some of those promises might have come out of early-2000s research -- after Microsoft specifically targeted the development of search and contextual advertising technologies. A 2003 report says Microsoft tripled its staff to go after search. In November 2003, the company told reporters it was coming out with a new search product to compete with Google. What happened there?

In 2005, Microsoft launched a "Search Technology Center" in Beijing. You'd think maybe the Chinese might have some fresh ideas about how to beat Google -- but apparently not. Otherwise Microsoft wouldn't be so desperate to buy Yahoo.

In January of this year, Microsoft even went out and bought an enterprise search outfit called Fast Search for $1.2 billion. Just last week -- last week! -- a Microsoft exec demonstrated "next-generation search" based on Fast Search at Gates' annual CEO Summit.

If Microsoft has been investing heavily in search-related research since 2003, thinking it had a major search product in 2004, founded a new search center in China in 2005 -- why would its next-generation search demo be based on a company it bought five months ago?

Even if Microsoft has internally developed whiz-bang cool search technology, the company has failed to widely deploy it or use it to win traffic and advertisers. The more Microsoft seems to desire Yahoo's search business, the more search seems like Microsoft's supreme screw-up.

Well, maybe its second worst screw-up, after Vista.

Comments

[MarcelMcSweeney]

"screw up" is too mechanical; you need a more up-to-date metaphor. Like: I don't have any answers either.