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July 24, 2008, 9:53 pm

Microsoft’s “circular conundrum”

By Yi-Wyn Yen

To compete with Google (GOOG), Microsoft must get more search traffic so it can sell more advertising.

An analyst kicked off the Q&A session that wrapped up Microsoft’s (MSFT) daylong meeting with Wall Street on Thursday by asking CEO Steve Ballmer how he plans to both increase search queries and relevant ads at the same time. Earlier in the day Ballmer referred to the situation as a circular conundrum because advertisers don’t want to sell on Live Search unless there’s more people using the site, and people don’t want to search on the site unless there are more relevant ads.

Ballmer explained there are three ways to increase Microsoft’s search ad performance. First there’s the Live Search algorithm, and Ballmer says he feels pretty good about that one. Next is building brand reputation, which Ballmer admits is “not going to be easy.” Then comes the toughie: Solving the ad relevancy issue.

“We have some ideas about that,” said Ballmer as he nodded his head and stuck his hands in his pockets. “We are going to have to go way out of the box to get into the box.” Ballmer said the Live Search team is working on “two or three different concepts.”

Ballmer didn’t want to get into the details of how it’ll solve its chicken or egg dilemma for online ads, which means Microsoft still is struggling to hatch a plan.

Huh? You mean google does searches? I use it entirely to find ads for products that I don’t even care about. I thought “google” was a synonym for “find meaningless ads”. Where have I been? I also love all of the extraneous features of Microsoft products and am anxiously awaiting a better “ad display” product from them. Maybe they can make it pop up like my favorite Netflix popup. Ballmer is trying to give Bawlmer a bad name.

Posted By Greg, Baltimore, MD : August 2, 2008 2:09 am

No, Ballmie, damn it. Please get a clue: we dont search with msft because google offers better results, not ads. Nobody searches for ads…do you watch TV for commercials? Or use that time to take a dump? Is it really so lala land there in Redmond? JC…and I bet those Wall Street Mc-Wheres-My-Cain types actually bought that crap. I swear you ever built a rocket it would be pointing straight down…but the algorithms would be cool.
Yippee.

Posted By theantibush, honolulu, hawai’i : July 29, 2008 12:07 am

Microsoft is creating a B2B search and trying to market it as an end user product. They are competing an inferior product in a mature market. It’s a flawed strategy. MS needs to learn the lessons from their Zune player and re-market live as an integrated business solution.

Posted By Tom, Newport, Rhode Island : July 28, 2008 12:28 pm

the ONLY reason ANYONE would EVER use MSN search is because it’s the default page on the default browser on the defunct computer they bought.

Oh, and yea, Ballmer is delusional… not the first time.

Posted By Danzo, Phoenix, Arizona : July 28, 2008 11:49 am

Obviously, Microsoft’s approach has been and always will be to cram what users don’t want down their throats and this seems to be no exception. How disinterested are you and how much have you disenfranchised your users when you infer that it’s the ads that bring people to search engines. I have NEVER clicked on a search engine ad and I NEVER will. I use GOOGLE because it provides THE MOST RELEVANT information, which is why I went there in the first place. Maybe this is one of the two or three concepts that the Live Search team is working on?

Posted By Brandon, Muskego, WI : July 28, 2008 10:33 am

Its amazing how corporate officers eat their own BS. I used to use microsoft search, now I use google. Why ? Because it gives better results. I never look at ads on a web search. In fact I avoid them.

Posted By John, Cambridge MA : July 28, 2008 10:22 am

If Ballmer thinks that the reason people uses searches to look at the ads, then he needs to step down and let someone else take the helm. I have never meant or talked to anyone that searches for ads! Geez. Have the top brass at MS gone absolutely out of touch with the real world or are they so obsessed with being number one at everything they lose focus?

Posted By dawg in TX : July 28, 2008 8:43 am

I agree. I usually DON’T click on the ads, because they are ads. I stay away from many of the other engines because they are filled with ads.

Posted By Larry, Sherwood, OR : July 25, 2008 12:56 pm

I was going to point out that nobody uses a search engine based on the ad relevancy; users are interested in the actual search results’ relevancy… but it seems lots of other people have already beaten me to it.

If Ballmer actually thinks people are using Google instead of MS Live Search because the ads are better, then Google has absolutely nothing to worry about.

Posted By Kai MacTane, San Francisco CA : July 25, 2008 12:37 pm

Wow.. Ballmer really thinks its ad…

Personally I hardly look at the ads.. It’s the result that matters and obviously Google is better than live.

Posted By Anonymous : July 25, 2008 9:29 am

Hey Yi-Wyn, take a look at these comments… do you see a theme emerging here? Newsflash: we use Google to search, not to look at ads. You’ve written an article about complete and utter nonsense. Next time Steve Ballmer makes a pronouncement about Google, think it through for a few seconds before using it as the basis for an article.

Posted By Jeremy, Burlington, VT : July 25, 2008 7:36 am

“…people don’t want to search on the site unless there are more relevant ads…”

Wow – does he really believe people use Google because of the ads?

Posted By Bob, NY, NY : July 24, 2008 11:53 pm

Ballmer’s premise is wrong. People don’t use a search engine based on whether or not it shows relevant ads. People would prefer to have no advertising. People use whichever search engine returns the most relevant search results. Right now, that’s Google.

Posted By Anonymous, City, ST : July 24, 2008 11:33 pm

How about some more relevance to the search results first? Relevant ads are nice, but people don’t search based on the ads. They search based on the search engine returning good results.

Posted By Christopher Stith, Quincy IL : July 24, 2008 11:27 pm

Does Ballmer REALLY think that people choose a search engine based on the relevancy of the ads it contains?

Posted By James Parker, Columbus, OH : July 24, 2008 11:22 pm

“advertisers don’t want to sell on Live Search unless there’s more people using the site, and people don’t want to search on the site unless there are more relevant ads”

Do people really pick their search engines based on what ads they’re going to see? I think that factor is limited to how -few- they’ll see, but not how relevant.

Posted By Matt, St. Joseph, MI : July 24, 2008 10:44 pm

The solution is obvious and easy. Produce relevant, good quality search results with no ads whatsoever for two to three years. Problem solved, all it takes is deep pockets — and Microsoft has those.

Posted By Randy Jensen, Seattle, WA : July 24, 2008 10:44 pm
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