Hot Stocks: Microsoft Takes Aim at Google’s Web Dominance With New Search Engine

By William Patalon III
Executive Editor
Money Morning/The Money Map Report

Microsoft Corp. (Nasdaq: MSFT) is expected to unveil its new Internet search engine to the public next week, an attempt by the software heavyweight to grab back some of the Internet search market from behemoth Google Inc. (Nasdaq: GOOG).

The site of the coming-out party for the new Web search engine apparently will be a high-tech conference called "D: All Things Digital," which is sponsored by The Wall Street Journal. The conference, slated for The Four Seasons Aviara in North San Diego, Calif., begins Tuesday and ends Thursday, and features as speakers some of the top executives in the media, entertainment and high-tech fields. Interestingly enough, Microsoft Chief Executive Officer Steven A. Ballmer is one of the scheduled speakers.

According to a Journal report, the new Microsoft search engine - code-named "Kumo" -has been in private tests inside the company for months. Kumo is aimed at consumers and is supposedly designed to achieve two goals:

  • Decrease the amount of time they spend clicking their way across the Web in search of information. The technology is designed to cut down on the length of typical Web searches by grouping the results of a search for, say, a particular model of car into helpful categories like parts, used car listings, online discussion forums and videos showing the vehicle.
  • Offer better ways of organizing search results. For instance, the search results for a special-interest car might be grouped into more-helpful categories such as sales listings of that type of car, parts distributors, car clubs and online discussion forums, and even videos of that model car, published reports state.

Microsoft is planning a major promotional push and advertising campaign to boost the search-engine's visibility and has hired the agency JWT (formerly known as J. Walter Thompson), a unit of London-based WPP PLC (Nasdaq ADR: WPPGY), to develop a campaign for the product, people familiar with the matter say.

Microsoft has a tough road to travel in order to overcome Google's massive market-share lead in the Internet-search arena. On Monday, research firm comScore Inc. (Nasdaq: SCOR) reported that Google's share of the U.S. Internet search market during April was 64.2%, an increase of 0.5% from March.

In fact, Google was the only major search engine to post a market-share gain for April. Microsoft and Yahoo! Inc. (Nasdaq: YHOO) both saw market-share declines of 0.1% for the month. That left Yahoo with 20.4% of the market and Microsoft with 8.2%, according to a report by - part of IAC/Interactive Corp. (Nasdaq: IACI) - saw its market share hold steady at 3.8%, while AOL LLC experienced a 0.3% decline to finish April with a U.S. market share of 3.4%, comScore and ITProPortal both said. AOL is a subsidiary of media heavyweight Time Warner Inc. (NYSE: TWX).

A look at actual search queries underscores the huge lead enjoyed by Google. There were 14.8 billion search queries in April, a 3% increase from March. Google accounted for 9.5 billion of the searches, followed by Yahoo (3 billion) and Microsoft (1.2 billion).

This huge chasm between the leaders and the laggards is a key reason Microsoft and Yahoo are still pursuing a possible partnership, even though Microsoft's proposed $45-plus billion acquisition of Yahoo went sour due to founder ego, greed and internal shareholder disputes, Money Morning has reported. The two tech firms continue to discuss a tie-up in which Yahoo would divest its search and search-advertising technology to Microsoft, in return for an upfront payment and a percentage of the search-ad revenue the partnership generates, sources familiar with the talks reported.

It isn't known how far the talks have progressed or whether any deal is imminent, as spokesmen for both Microsoft and Yahoo declined comment on the negotiations.

Google search - originally developed by by Larry Page and Sergey Brin in 1997 - remains the most-widely used search engine on the Web, and receives several-hundred-million queries a day via Google's assortment of services.

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About the Author

Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning at Money Map Press.

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