Microsoft's challenge to grow its share of the search business isn't just a global issue. It's also a challenge within its own walls.
Despite investing five years and hundreds of millions of dollars on its search product, Microsoft has struggled to get people to use its service, even those whom it employs. Microsoft Senior Vice President Yusuf Mehdi said the company's share of the search market - even internally - has been disappointing.
"That's true," Mehdi said in an interview last week.
At a company meeting about a year ago, one Microsoft worker recalls hearing that four-fifths of the company's search traffic was going to Google. Although he uses Live Search personally, the worker, who asked not to be named, said plenty of his co-workers still use Google.
"We are still fighting that battle," the worker said. Among its full-time U.S. workers, Microsoft says that, for February, Live Search and Google had roughly equal share, at around 48 percent apiece, with little search traffic going to Yahoo or any of the other search players.
Mehdi said that Microsoft has won some internal support for specific products, such as its Live Search Cashback feature, which gives people a rebate on certain products purchased through its search engine. But, he said, broader adoption, even internally, is still really something that is in the company's future as opposed to its present.
"I think some of that is predicated on us talking broadly about some great experiences and promoting it heavily, which is something I think we are going to do soon," Mehdi said.
And, of course, Microsoft's lackluster search share isn't limited to Redmond. The latest monthly statistics, released Friday, show Microsoft with just 10.3 percent of the U.S. market, according to Nielsen Online, compared with 64.2 percent for Google and 15.8 percent for Yahoo. More importantly, the company had year-over-year growth of less than 1 percent compared to 16 percent growth for the market as a whole.
Microsoft is hoping that the next version of its product, code-named Kumo, will prompt more people both within and outside the company to give Microsoft another chance. The company has been testing it internally since last month, Microsoft hasn't said much about Kumo, but several screenshots obtained by CNET News provide a glimpse.
Another screenshot, of an Audi search, breaks things down into an initial result with facts such as price and fuel economy pulled out in bold, followed by general Web results, then results by category, such as Audi parts, used Audis, and Audi accessories.
The company is also expected to rely heavily on technology from the many search companies it has purchased. The health search engine from Medstory and travel engine Farecast are already part of Microsoft's search products. The next version of Live Search, which may or may not use the Kumo name, is expected to draw on those as well as semantic search technology from last year's acquisition of Powerset.
Mehdi said the new product reflects the fact that roughly half of all queries are actually repeats of earlier questions as well as the fact that people would like to get more out of a search query than just a link to a page that might have the answer.
"It is an awesome keyword-to-URL-mapper," Mehdi said, referring to the search engine of today. "What it is not well-suited for is cases where you are looking for more than just a URL, (if) you are looking to get some insight or you want to actually make a decision. Our interpretation of the data is there is a lot of unmet need."
Microsoft has been saying for years, though, that search could be dramatically better than it has been. But, at least thus far, the company has failed to deliver a product that consumers feel proves that thesis to be true.
Mehdi said that the company thinks this time it may be able to make its case. Plus, he said, the company doesn't need to persuade the whole world to drop Google. What Microsoft does need, he says, is for some vocal minority to decide its search engine is better than its rival's.
"We need a fan base of people that love what we are doing," Mehdi said. It doesn't even need a lot of fans, he said, just a loyal following that can serve as the service's champions.
But the company also needs to grow faster than it can just by working on the product itself. That's where the company's giant cash hoard comes in handy.
For starters, the company is reportedly planning a $100 million ad campaign to accompany a mid-year release of the product. Beyond that, Microsoft has been paying heavily to make its search engine the default on new computers and devices, including deals with Dell and Lenovo.
Mehdi didn't confirm the ad spending or say when the new service will debut, but did say that Microsoft is putting more resources into the coming launch.
"We felt like we had enough now with this effort to get behind it and make a big push and that's what we are going to do," Mehdi said.
The biggest potential for growing Microsoft's share, though, would be some sort of tie-up with its nearest rival, Yahoo. Microsoft has been pushing for a search deal ever since it failed to buy all of Yahoo last year. It has had occasional talks with Yahoo since then, although things had been relatively quiet in recent months as Yahoo replaced Chief Executive Jerry Yang with Carol Bartz.
Last week, though, it was reported that the discussions were back on again in recent months, including a face-to-face meeting between Bartz and Microsoft CEO Steve Ballmer.
By Ina Fried