Microsoft Building Search Power to Challenge Google
The world’s biggest software company almost missed the hottest wave on the Internet. Again.
Nearly a decade after the Netscape browser threatened Microsoft Corp.’s dominant Windows operating system, Google Inc. did the same with its search engine, which processes hundreds of millions of queries a day and helped the company generate $105.6 million in profit last year.
But Microsoft has responded, spending some of its $56-billion cash hoard to build its own search engine, which it plans to release by the end of the year and incorporate in the next version of Windows, expected in 2006.
The focus on search is the latest sign that Microsoft’s MSN division has largely abandoned its early mission of just providing Internet access: Nine-year-old MSN is charging for video streams of Major League Baseball games and other content and is planning to launch a store for music downloads this year.
Yusuf Mehdi, the Microsoft vice president who runs MSN, discussed Internet access, search and advertising with The Times this month at the D2: All Things Digital conference in Carlsbad, Calif.
*
Question: You’ve talked about an “end-to-end system” for searching everything from websites to e-mail to the files stored on your personal computer. What’s that going to look like?
Answer: It’s probably too early to talk about all those particular details, in part because we’re still figuring some of them out.
*
Q: Does the dominance of Microsoft’s Windows operating system give you an advantage in search?
A: No.
*
Q: A lot of people think it does.
A: I don’t know why. Windows is an open platform, from our perspective. For a long time, we’ve allowed people to choose the search engine they want, and we’re going to continue to do that. If people have a great search engine, they can use it on Windows. We won’t do anything to prevent it.
*
Q: But if the next version of Windows lets people search through all those things from their desktop without even opening a browser, wouldn’t that make it tough on other search engines that rely on people to visit their websites?
A: Without getting into specifics, people should assume that Windows is going to be a great place where anyone who’s got a search engine can come and add value to consumers. It’s important to the success of Windows.
*
Q: You’re investing heavily to compete with Google. What’s missing now from the Internet search experience?
A: Eighty percent of what’s available out there you can’t get. There’s data behind private databases like Lexis-Nexis or Factiva. If you’re a subscriber to a newspaper and you want to get the premium content, you can’t even get that in your search results.
*
Q: Yahoo has controversially started accepting money from companies that want their websites visited more often so that they are more likely to be included in search results. Will you do that?
A: We’re looking at that model and trying to see if that works. But we think there’s actually an incentive for people to want to give you all their content. The problem with that is it’s hard to do.
*
Q: You still sell dial-up Internet access. How long will companies like MSN be able to charge $21 or more for dial-up service, with discount services like NetZero Inc. gaining customers and high-speed broadband becoming cheaper?
A: It’s hard to say. A lot of people are moving to broadband. But a lot of people are staying. There’s some 25 million people who like narrowband and can’t get access to broadband. There’s a lot of people who say, “I don’t want to pay that money because price is an issue.”
As for access, we have a small team that is running that and managing that as a profitable business. It has not been our strategic focus for quite some time. It’s different than EarthLink and AOL, who have said they continue to believe in that market.
If the price of broadband gets down to about $25 or so, then there will be dramatic change. Otherwise our base is declining, but it’s declining fairly slowly. It’s not like it’s going to evaporate right away.
*
Q: The last 18 months have been busy on the digital music front, with Apple Computer Inc., Dell Inc., Roxio Inc.’s Napster, RealNetworks Inc. and others selling music downloads. Microsoft sells copy-protection software to several of those companies. But why aren’t you rushing to sell music yourself?
A: Part of it was we wanted to do as good a job of balancing with our partner companies, like Napster, to do a service and really empower them with our Windows Media platform. The other part about it is we wanted to take our time and do a great job with it.
There have been a lot of music services that have come out -- we won’t name names -- and they’ve just not done a good job. They’re not very simple. They’re hard to use. They don’t work. They don’t have all the music. A lot of the basics that I think are critical to making a service have not been done, and they take time.
*
Q: Do you worry that if you wait too long, people will get set in their ways?
A: Yes and no. I always like to move quickly and be first. But it’s so early. ITunes has been a fantastic success, but they’re only in 4% of U.S. homes. And thankfully Apple has stuck to a single device, their own hardware device, and I think there’s massive opportunity that’s going to happen when people have a choice of devices.
There’s a lot of things that aren’t yet done that we will enable when we come out that will be big.
*
Q: Google got a lot of heat for serving up ads related to the content of messages in Gmail, its new Web-mail service. Is it a bad idea to put targeted ads in e-mail, or can it be done right?
A: They came out and announced the strategy and didn’t really address a lot of the concerns people had. I think there’s a way to do things well, and I think that’s an opportunity.
*
Q: How much information do you collect on your users? And what can advertisers do with that?
A: Today we do not collect a ton of data. We just don’t have a good system [for targeting ads to users]. It’s a shame. We’ll have it shortly.
*
Q: How do you do that without upsetting people?
A: The most important thing is this is to get the consumer’s trust. One of the things that I think companies like Amazon.com have done well is that when they tell you they start to personalize results and recommendations, you can find out why you’re getting that data. That’s a great way to build trust with the consumer and make them feel more comfortable giving you their data.
*
Q: Being able to opt out is an important part of that?
A: Yes. Giving people control of their data is a key thing.
