Microsofts Search

Group-2
ANSHOO SAINI (15PGP008)
RUCHA BADHE (15PGP043)
BALAKRISHNA CHAITANYA AMARA (15PGP072)
RAHUL RANJAN (15PGP097)
AKSHAY SINGH (15PGP128)
ADITYA PRATAP DHALL SAMANT (15PGP146)

Development

Initially Inktomi powered MSNs search engine and Overtune

served up advertisements

In 2003, Microsoft decided to include both capabilities within

Microsoft

Switched over to internal search ingine on February 1,2005

Switched over to AdCenter, the internal advertising network on

March 16,2005

Major competitors

Google

Yahoo

Microsofts Business Segments

Client; 28%
Entertainment & devices division; 13%

Microsoft business division; 31%

Online services business; 5%

Server & tools; 22%

Why is Microsoft pursuing the market

for search and search-related
advertising?

Search marketing Industry

2007

2012
40%

20%

2007

2012

Total online advertising

45

98

% of total advertising

8%

13%

Search marketing as a % of
total advertising

3.55%

5.30%

Exponential growth of Internet Search & Search advertising

business
- Search advertising had soon grown into a $20 billion business
by 2007 and $40 bn by 2012

- This market showed a huge future potential for profitability

and was a highly attractive business opportunity for any
organization.

Googles Success

- The massive success of Google led Microsoft to build its own

search capabilities and leverage its technological prowess.

Competitive necessity

- Microsoft pursued this strategy was due to the competitive

necessity of the prospect.

- These projects are undertaken by an organization in order to

remain competitive in the market against its rivals.

- Microsoft if failed to do so, might very well drop out of the

competitive race.

- Microsoft tries to pursue a further unique ability to gain

competitive advantage.

Cloud Computing

- It was predicted that software industry would move to "cloud

computing",

- It was feared that users would subscribe to centrallymaintained software or would pay for access to software services
by viewing ads.

- So, there was a scope that Search & Search advertising will
play a greater role in the future.

How large is MSs competitive

disadvantage in Internet search and
search-related advertising in 2008?

Discrete Option
Competitive
Advantage
Increase the
WTP

Decrease
the cost

Cost to Supply

Microsoft WTP Google WTP

Microsoft - Competitive Disadvantage?

Average price per click for Microsoft = $0.59 and that of Google
= $0.71

Similarly, Google is the market leader with 63.5% market share

and the market share of Microsoft is only 8.3% by Nov 2008.

Revenue per search as per Exhibit-6 is higher for Google and

this is a key indicator which suggests that Microsoft has a
competitive disadvantage.

Competitive Advantage of Google

Vicious cycle - Microsoft

Short of
revenue
targets

Lose the
existing
customers
and
revenue

Display of
more ads

Cluttered
site

Focusing on revenues alone that gave

the upper hand to Google.

How large is the disadvantage?

Average price per click of Microsoft is around 80% of Google

The total number of advertisers is 15% (400,000 advertisers for

Google and 60,000 for Microsoft in 2007).

Hence Microsofts total revenue can be estimated as only 12% of

Google in the search industry.

If the industry remains on its current

trajectory, how will MSs disadvantage
evolve over time?

100% Growth in 5 years

Number of active searches increase.
Number of people relies on Google increase
Increase the WTP of Google.
Downfall of Microsoft in this industry