• by Gavin O'Malley  @mp_gavin, September 28, 2007

Still intent on capturing market share from Google and others, Microsoft has expanded the scope of pages spidered by its search engine by 400%, revamped its query response technology, and deepened the breadth of its core verticals--including health, local, shopping, and entertainment.

"We know what kinds of things consumers are searching for, and we have invested in those key high-interest verticals," said Satya Nadella, corporate vice president of the search and advertising platform group at Microsoft.

Nadella insisted that Microsoft has made significant inroads to understanding consumers' search behavior. Expected by the end of the month, Microsoft's Live Search service should also better interpret search queries, accommodating misspelled words, for instance, and recognizing variations on words like "read" and "reading."

Now, consumers who type product categories or names into Live Search will receive links to photos, shopping guides and product reviews. Microsoft maintains an "opinion index," which is made up of product ratings aggregated from various sites around the Web.

A health-related search for general diseases, such as Lyme, will now return suggestions for more specific searches along with medical journal articles. Aware of consumer privacy concerns, Microsoft said it plans to erase user data related to health searches after 90 days. Last spring, Microsoft acquired medical search engine Medstory.

In August, Microsoft handled 7.98% of all U.S. search queries, down nearly 3% from August 2006, according to Hitwise. In comparison, Google had a 63.98% share and Yahoo's 22.8%.

Analysts don't expect Microsoft's most recent innovations in search will have much impact on its share of search.

This won't change market share over the short-term," said Greg Sterling of Sterling Intelligence. "The bar keeps getting raised across the board--so, even though this may a substantial improvement for Microsoft, everyone is improving right now."

Earlier this year, Ask.com, which draws less than 4% of all searches, unveiled what it calls Ask3D--introducing multimedia components to search results at the initial return. Google has also incorporated video and other types of searches in one so-called Universal Search. Yahoo, meanwhile, has made its own tweaks.

Despite costly efforts by Yahoo and Microsoft to check Google's search dominance, spending across the major engines has remained flat this year, according to a recent study by RBC Capital Markets and bid-management technology company SearchIgnite.

Google continues to garner a much larger percentage of media spend than its percentage of searches, and thanks to a recent algorithm tweak, now extracts greater revenue per search than any engine. (Specifically, to reduce spam in its listings, Google made a significant change in June regarding landing page relevancy.)

"Google's second-quarter algorithm change continued to propel its leadership in monetizing search for large brand marketers, surpassing Microsoft, who has historically been able to monetize search very well, albeit with fewer eyeballs," said Roger Barnette, president of SearchIgnite.

"People do not like to say that if Microsoft started using Google's algorithms tomorrow, their market [capitalization] would go up immediately," said Sterling. "But Microsoft obviously wants to do search on their own."

Microsoft is running a promotion on MSN to encourage use of Live Search. It offers the chance to earn tickets to redeem for prizes such as ringtones, T-shirts, and games for the Xbox 360. The more searches, the more points earned.