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Google's Leap May Slow Rivals' Growth

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Nearly a year after Google's IPO marked the start of a new phase in Web search competition, the upstart is making industry giants Microsoft's MSN and Yahoo! look like also-rans. Google's share of U.S. searches hit 52% in June, up from 45% a year ago, according to Web analytics firm WebSideStory Inc. By contrast, Yahoo's and MSN's share slipped to 25% and 10% respectively. Says Mark S. Mahaney, an analyst at Smith Barney Citigroup: "People haven't been given a good reason to switch from Google."

Does that really matter? The two businesses still attract more total visitors, thanks to their broad offerings of games, music, personals, and much more. Ever-profitable Microsoft Corp. has oodles of cash to lavish on MSN, while Yahoo! Inc. delivered record revenues of $1.2 billion in the first quarter. That's providing the resources to fund new forays into easier-to-use sites and more advanced search technologies.

Still, MSN's and Yahoo's search problems could come back to haunt them. Many analysts see search as a crucial entrée for everything else online, where consumers go to begin their travels. Assuming that continues to be the case, MSN's and Yahoo's eroding search shares could slow their growth rate in the future. Research shows that Web surfers increasingly use search as a means to navigate the Web, often in lieu of the URL box -- the space in a browser where users type in a Web address. "From online dating to travel to banking, we see that search is often a starting point for people," says Bonny Brown, director of research at Keynote Systems Inc., which measures the performance of Web sites.

Google's search lead, moreover, looks pretty unassailable, at least for now. Despite many studies indicating the near-parity of rival search technologies, changing searchers' habits is more difficult today than in the Web's early days, when surfers hopped from Yahoo to Excite to AltaVista and back. One familiar yet persistent reason for this loyalty is Google's spartan home page, which includes just 13 links or so -- less than a tenth of the number at MSN and Yahoo. "People are on a mission when they come to a search site," says Jared M. Spool, founding principal at researcher User Interface Engineering. "The last thing they want to know is what's happening with Tom Cruise."

MSN and Yahoo are trying to match Google's uncluttered approach as they push ahead with new technologies. An example: Conceding that less can be more, search.msn.com and search.yahoo.com have long mimicked Google's minimalism. Now both companies are trying to market these little-trafficked, bare-bones sites. To lure new surfers to these and other services, Microsoft spent $44 million marketing various MSN services in the first four months of 2005, while Yahoo spent $14 million -- vs. just $2 million for Google, says TNS Media Intelligence.

DIGGING DEEPER

The incumbents are also meeting Google's vaunted search technology head on. Microsoft, for instance, has focused on providing answers to questions directly in its search results. Plug in the query: "What is the population of Bangladesh?" and MSN puts the answer -- 144 million -- atop the list of search results.

Yahoo has gone further. It has impressed research professionals with a steady stream of new sources and smart tools. In June it announced a trial feature that scans the content of subscription sites, such as Wall Street Journal Online and ConsumerReports.org. And Yahoo's My Web 2.0 social search service looks at search through an entirely new lens. Common to all Web search today is a heavy emphasis on "link analysis": the more incoming links to a given site, the greater its weight in search results. Yahoo's social search shifts the emphasis to the opinions of a searcher's friends and colleagues rather than the links of other Web publishers.

This three-way race has already turned Web search into a hotbed of innovation that has delivered huge gains to consumers. But if Yahoo and MSN want to keep up their torrid growth, they've got to figure out a way to get more heat out of their search engines.

By Ben Elgin
Business Week

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