Microsoft, Yahoo! announce new search platforms

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The latest round in the search wars occurred this past week as Microsoft Corp. and Yahoo! both made search advertising-related announcements.

Yahoo! On Monday announced plans for a redesigned search advertising platform that it said will give businesses more control over ad campaign management. The rollout is to begin in the third quarter. New features and capabilities will include enhanced geo-targeting, ad campaign testing, forecasting tools and a simplified user interface.

Meanwhile, Microsoft last Thursday officially launched adCenter, a paid search bidding platform that had been in test phase with select advertisers for a year. The platform will serve all Microsoft’s paid traffic going forward.

Microsoft’s paid search was formerly handled through a partnership with Yahoo!

The announcement was expected by industry gadflies, but not until June, so Microsoft actually came in ahead of schedule for once.

The adCenter launch is central to Microsoft’s bid to wrest market share away from search leader Google, which currently commands 57.2% of search ad spending, according to eMarketer.

“We are committed to building an advertiser network that serves a wide spectrum of needs,” said Kevin Johnson, co-president of Microsoft’s Platforms & Services Division, in a statement.

Taking share away from Google will clearly be part of that goal.

In Ziff Davis Media’s e-mail newsletter “Microsoft Watch,” Editor Mary Jo Foley said, “Despite the number of times Microsoft officials insist that IBM, not Google, is Microsoft’s No. 1 competitor, no one really believes them.

“The reason? Microsoft might be hiring more salespeople to sell direct and be beefing up its Microsoft Consulting Services unit. But it is in add-on Web-based services where the company is really making its most visible [and, presumably, its most expensive] push.”

Microsoft has said it will invest more than $2 billion in new-product marketing, and most industry-watchers believe the bulk of that money will go towards search.

“We expect a significant share of the incremental spending to go to MSN Search,” said Justin Post, research analyst at Merrill Lynch in an industry overview report.

“Search investment at Microsoft is not new news,” Post said. It has been anticipated by both Google and Yahoo!, he said, adding that the investment won’t necessarily pay off, at least in the short term.

“Despite investment, we expect Microsoft to continue to lose advertising share in calendar year 2006,” he said. “While the Microsoft threat is a long-term concern, MSN search revenue declines in calendar first quarter and are not expected to grow significantly in calendar second quarter. Google and Yahoo! are likely to have a two-to-three quarter opportunity to gain share as Microsoft transitions its ad network from Yahoo! to adCenter.”

Eric Karson, an assistant professor of marketing at Villanova University, said Microsoft and Yahoo’s main challenge is brand positioning and the need to change minds.

“It’s about mind share,” Karson said. “It’s not hardware; it’s not software. It’s the ability to grab eyeballs. If you say to people, ‘What’s Microsoft?’ what pops into their minds? Search? No. When you say, ‘Google?’ people think search. They own this spot. All their execution focuses on reinforcing that.”

Either way, Post said, the three search engines’ technology innovations will help continue to expand the Internet ad market.

Carson agreed: “Competition is good,” he said. “I think competition always has a very pleasant effect for buyers on prices. As soon as anyone in this space comes up with a model of delivering customers, the competitive knockoffs will be immediate.” He said that can only benefit advertisers.

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