• by Kate Kaye , July 1, 2004

Microsoft Corp.'s unveiling this week of a revamped home page for its MSN Search service, among other features, wasn't nearly the attention-grabber that the online network's snub of paid listings served through Yahoo!'s paid inclusion program proved to be. Also registering high on the interest meter--the trial launch of Microsoft's own search technology. MSN says it will debut its own algorithmic search technology within the next year.

New MSN Search features include a drop-down menu that enables users to refine searches to specific sources such as articles from its Encarta encyclopedia, an online dictionary, stock quotes, movies, shopping, and news sources. The revamped MSN home page also offers prominent icons linking to MSN Hotmail and Messenger services.

In an effort to improve a search listings results display that consumers found muddled and confusing, paid links to advertiser sites are now labeled as Sponsored Sites, and presented above and to the right of algorithmic results. The maximum number of paid listings has also been reduced.

MSN's decision to drop the use of paid inclusion listings served and sold through Yahoo! has been construed by some as an attempt to appease consumers. Denise Garcia, media research director at GartnerG2, sees it as part of an ongoing trend among search engines "to re-establish trust with users" by dropping paid inclusion listings. As part of research she conducted with Consumer WebWatch, Garcia notes that when users who participated in the survey were told about paid inclusion, "the majority were shocked. ... They thought search tools were a service to consumers, and felt violated."

Jupiter Research Analyst Niki Scevak believes that MSN's decision is less philosophical, and based more on the fact that its paid inclusion listings were delivered and sold by another company." They don't have control, since it's through a third-party vendor," he suggests. Scevak estimates that MSN could lose a total of $50-$60 million this year as a result of blocking the paid inclusion revenue stream.

Indeed, even MSN has not exactly slammed shut the door on paid inclusion. According to Justin Osmer, product manager at MSN, the company has yet to conclude whether paid inclusion listings dilute or improve the relevancy of search results, and has not ruled out the possibility of offering them in the future.

While MSN will continue to employ Yahoo!'s search technology for the time being, the firm expects to launch its own technology within the next year, according to Osmer, who implies that the company's relationship with Yahoo may continue in some capacity after that point. Microsoft's technology has been made accessible on the MSN Sandbox Web site, allowing testers to provide feedback on the quality of search results. The trial site is "just the motor itself," says Osmer, adding that MSN is seeking feedback on the system's Web crawling capabilities, what's missing, and what needs improvement.

Jupiter's Scevak calls the tech release "an incremental update rather than a milestone," and predicts that the company could take as long as two years to launch its completed search technology--about double what Microsoft has forecasted.

Still, the shift toward bringing search engine technology in-house--as Yahoo! did through its acquisition of Overture Services late last year--or developing proprietary technology as Microsoft is, is "big news" as far as GartnerG2's Garcia is concerned.

"If every site brings it in-house and others follow that trend ... Search will also look very different from the business-to-business side," she comments. "I wonder what will happen to the accounts Google and Yahoo! have," she follows, suggesting that today's dominant search engine feeders could lose revenue if the trend continues.

Clearly, Microsoft's overall goal is to gain ground on the likes of Google and Yahoo!, each of which account for about double the percentage of searches performed by U.S. Web users on MSN. In February, 15 percent of searches were conducted on MSN, 28 percent on Yahoo, and 35 percent on Google, according to comScore Media Metrix. "The rise of Google came at the expense of MSN," Jupiter's Scevak notes.

But Microsoft could still come up from the rear. The software marketer's integration of search technology with its other offerings, "is a very wise strategy," according to Garcia. "They already have a huge installed base of operating system users and Hotmail users. Those relationships they already have are really what's going to frighten the folks at Google."