Look out Google and Yahoo, Microsoft is getting very serious about search.
The Internet search-advertising wars are getting hotter: Vowing to catch up to industry leader Google, Yahoo lately demonstrated an overhauled advertising system that promises to generate higher revenue and enlist more clients.
The software giant rented Safeco Field, home of the Seattle Mariners, to fete 700 online advertisers. The party capped two days of hard-sell pitches, including celebrity testimonials from hip-hop impresario Shawn "Jay-Z" Carter and British advertising mogul Martin Sorrell.
On May 4, Microsoft unveiled its own search advertising program and said it would invest up to $6 billion in a bid to catch up with Google.
The company officially launched AdCenter, a system that lets advertisers bid to have their ads displayed alongside search results. AdCenter is modeled after Google’s highly successful AdSense and a similar system used by Yahoo.
The pitch: Buy more MSN Search ads. Yet Microsoft’s search engine drives just 13.2% of online searches, trailing Yahoo’s 28% and Google’s 43%, according to ComScore Media Metrix. What MSN Search lacks in eyeballs, it intends to make up in cool tech tools – and an ambitious strategy to extend search and search ads into free e-mail, instant messaging and online video games.
"It is a pretty holistic strategy," says Kevin Lee, chairman of search marketing firm Did-it. "They understand all those locations can stimulate new search activity."
Microsoft knows it has to do more than merely match its rivals. So it has dispatched hundreds of researchers to redefine search and online advertising. One project seeks to give PC users the ability to click on an image of a celebrity’s dress and get whisked to a website that sells the dress.
While Yahoo, recently demonstrating its revamped program at a meeting with analysts in San Francisco has added two major refinements relating to speed and costs. Its new search marketing system will begin operations in the fall.
In the old system, advertisers could buy their way to the top position, by bidding higher for a keyword. The sponsor who offered $10 for "New York hotel" would be No. 1 if the next-highest bid was $8.
Now, Yahoo has adopted a system similar to Google’s: Positioning is based on a dollar bid combined with the effectiveness of the ad and website. An advertiser who offers less, but whose ad is clicked more often, can get to the top.
Yahoo Senior Vice President Steve Mitgang says advertisers can also get their ads online much faster. "Now they will be up within the hour," he says. Before, it had taken as long as 24 hours.
Yahoo provided search advertising for MSN until Microsoft decided to do it on its own. Its AdCenter is similar to Google and Yahoo with one big exception: MSN says it can target ads demographically, based on its huge base of Hotmail and MSN users.
Search advertisers love having another option for search marketing, but the new AdCenter "is really buggy," says Chris Winfield, president of search-marketing firm 10e20.
Yet Google still easily dominates paid search ads — those little text ads that appear near search queries. The Internet powerhouse has made several enhancements to its search program as well.
Google says it has not heard anything from Yahoo or MSN to make it worry.
There has been nothing that is announced that makes me want to change what we do, says Richard Holden, director of production management for Google’s paid search programs.
Google brought in over $1 billion in profits in the first quarter primarily from text-based ads. Advertisers love search ads because they pay only if someone clicks on them. Holden says Google stays on top by upgrading its AdWords search program every two weeks to bring in new clients or to give existing ones more options.
Recent enhancements made are:
Starter Edition: Small advertisers griped that it was too confusing and took too long for them to sign up, create an ad and begin advertising on Google. So Google now offers a "starter edition" that promises to get clients up and running in less than five minutes, with a minimum of clicks.
Local Business Ads: Now advertisers can go beyond a simple search ad by offering image ads, with pictures, directly within Google’s local maps.
Search is truly in its infancy, and we have so many plans to innovate for consumers and advertisers, says Karen Redetzki, an MSN product manager. “Other projects are investigating ways to deliver extensive demographic profiles to online advertisers,” he says.
Danny Sullivan, editor of the SearchEngineWatch, says Microsoft and Yahoo should spend more time worrying about attracting users to their search engines. "MSN can have the most wonderful advertising program in the world, but if it does not have the traffic, nobody cares," he says.
Still, scores of past Microsoft initiatives to diversify have fizzled. And getting consumers and advertisers to break their Google and Yahoo habits would not be easy.
Why switch if what you are currently using is not broken? says tech reviewer Chris Pirillo of Lockergnome. "I’m not going to switch to another advertising network unless I know my returns will be greater than what they currently are."
As that market gels, and as online advertising prices rise, "Then some of the neat things that Microsoft is in a unique position to offer may make a difference," says Sullivan.
Jeff Lanctot, general manager of interactive advertising agency Avenue A/Razorfish, believes Microsoft’s round of investments "gives them a chance to make up ground with Google — off the PC."
Microsoft is loath to let Google and Yahoo dominate an online advertising market that Forrester Research projects will grow from $11.9 billion this year to $18.9 billion by 2010.