Newsmaker: Microsoft's new search guru talks strategy

newsmaker When it comes to Web search, Microsoft is the undisputed underdog, a position it doesn't usually find itself in.

The company has anywhere from a 8 percent to 13 percent market share in the United States, depending on who is collecting the traffic data, putting it behind Yahoo (20 percent to 23 percent share) and far behind Google (54 percent to 64 percent share). And Microsoft's share seems to be slipping, nearly 4 percentage points from a year ago, according to Hitwise.

How does Microsoft propose to narrow the gap? Earlier this year, the company launched a program called Microsoft Search and Win that rewards people for using the Live Search site. The program bumped up Microsoft's market share this summer. But while compensating people to use your search engine may provide a temporary market share increase, it isn't a good long-term strategy to build market share.

Microsoft is hoping that it can catch up to rivals in overall search and find a few key areas where it can go into more depth, by offering tailored searches. For now, it is eyeing celebrities and entertainment, product searches, local search and health care as fertile areas worth having specialized results.

CNET News.com talked to Satya Nadella, corporate vice president of search and advertising at Microsoft, about how the company plans to improve its market share and improve search for the long haul shortly before the company launched new features in its Live Search site at a "Searchification" event Wednesday.

Q: How much of your search traffic is coming from search embedded within other Microsoft Internet properties versus people going directly to the main Live.com search page?
Nadella: The search bar on MSN is where we get a lot (of traffic), and we do get even a bunch from people who choose to use us as the default provider on their browser, as well as people who install our toolbar. So, those are the top three sources.

Some folks have said it's about 1 percent of your traffic that comes from people typing in the Live.com Web address?
Nadella: That's probably true. We've not really marketed Live.com. In fact, we've really focused, even with this release we'll be very, very focused on basically having the Live search experience power MSN, and that's a fairly explicit strategy of ours, if you will, because we feel that that's the place where we can gain a lot by showing a better search experience, and getting the customers and the consumers who are doing searches with us on top of MSN to do more.

The 70 million users we have is a substantial number, and if we can get them to do more searches, we will have gains.

So, you're not going to be trying to narrow the gap with Google and even Yahoo on just general Web search and trying to attract people to Live.com?
Nadella: Yahoo is very much like MSN. People type in Yahoo.com, and they go to a portal, and MSN is one such portal, so it has search, and we'll keep innovating on how to highlight that. Whereas when we think about Google as just a destination site, we have that with Live, and we think that with Windows Live and other places we'll start building some organic traffic. But I would say that in the fall you will see us, just because these 70 million users today are our lowest hanging fruit in terms of being able to increase the engagement with them, that we will put a lot of energy in just marketing ourselves through MSN.

Microsoft has turned to paid programs, either direct-to-consumer promotions or promotions with businesses, in the last year to gain share, or really recoup lost share. Is that something you expect to increase, stay level, or decrease in the coming year?
Nadella: We believe that we will sustain that. We built a generalized loyalty program/platform called the Live Search Club, which helps us raise awareness to the fact that we are in this search game and helps us get more engagement and then builds loyalty through things like prizes. We'll do more of that, and generally use this as a loyalty program going forward, and experiment with multiple ways to engage users.

What about paying businesses to use you?
Nadella: So, we have some pilots that you've seen us talk about. We will definitely move that. But I would say the core focus at least in the fall would be for the consumer push through MSN.

Some of the new features launched this week are already offered by your rivals. Is catching up really much of a game changer at this point?
Nadella: That's a good question. You have to be in the game with the core (relevance), and then you have to differentiate in these high-value vertical domains. If we have 70 million people using our search engine today, if we are getting better at core relevance, and delivering some differentiated experiences in verticals, what can our share position be?

In some sense, it's perhaps not the position we'd like to be in, but we are in a position where quite frankly we have nothing to lose. We want to be able to come out, take some risks, do some innovation, get to a place where we have parity on some of the table stakes, and differentiate. The 70 million users we have is a substantial number, and if we can get them to do more searches, we will have gains.

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