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Microsoft Aiming for 30 Percent Search Share

Microsoft's chief financial officer for the Online Services Division fielded questions at the Deutsche Bank Technology Conference in San Francisco on Tuesday.

The audio Webcast ran into difficulty and was still disabled at press time. However, a transcript of the talk can be found at the Microsoft investor relations Web portal here (Word document).

The Online Services Division is a favorite target of financial analysts because of the operating-expense losses that turn up each quarter in Microsoft's financial statements. Microsoft has been trying to catch up for years with frontrunner Google in search advertising, and investors are nervous.

Rik van der Kooi, corporate vice president and CFO of the Online Services Division, addressed the losses question by saying the expectations for the division are "commensurate with the market position that we have." He also explained that the search product can only get better when a company gains more search users, which was one of the reasons why Microsoft inked its recent deal with Yahoo.

Search advertising is all a matter of scale, and the Yahoo deal aims to boost the total number of Bing users. The increased numbers will both improve Bing's search results and meet advertiser demands for more ad viewers.

"On our side, the benefit [will be] from being able to bring in additional advertisers onto one single platform, and that will result in an ability to cover advertiser terms and search keywords better than we've been able to do in the past," van der Kooi explained about the Yahoo deal.

He suggested that the Microsoft-Yahoo deal might amount to a combined search market share "of roughly 30 percent," adding that "the scale disadvantage that we think we are currently suffering from should be mostly wiped out in the U.S. at least, but that's a very U.S.-centric statement."

Regulators in the United States are currently reviewing the Microsoft-Yahoo search advertising deal. The European Commission is also reviewing the deal, according to a Reuters story. The deal could get regulatory approvals by early 2010.

Microsoft did get a bit of good news going into the talk. Nielsen reported a 22 percent bump in U.S. market use of Microsoft's search engine in August compared with July. That result puts Microsoft in third place in the U.S. search market with a 10.7 percent share in August. Microsoft is behind Yahoo at 16 percent and Google at 64.6 percent, according to Nielsen.

(Note: At press time, Nielsen's announcement only seemed to be available here on Bloomberg.com; for a formatted version of the results, see this CNet article.)

StatCounter found a slightly lower number for Microsoft's U.S. search market share than Nielsen, reporting a 9.6 percent share in August. StatCounter also found a far lower bump in U.S. Bing use from July to August, reporting just a 0.2 percent increase in use.

A vastly different picture is presented with worldwide estimates of search share. Microsoft had a mere 2.9 percent of worldwide search market share in July, according to comScore. However, Microsoft has not yet marketed its Bing search portal internationally, according to Charles Songhurst, Microsoft's general manager of corporate strategy.

Microsoft unveiled its Bing search engine in May after hiring several key Yahoo search technical personnel, including Dr. Qi Lu, who now serves as president of Microsoft's Online Services Division.

Microsoft's future plans for improving its search engine is to "build a mind-reader," according to van der Kooi. It would "combine signals from federal search places" -- including Microsoft's network and advertiser network properties, he said.

About the Author

Kurt Mackie is senior news producer for the 1105 Enterprise Computing Group.

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