Analysts Discuss What’s Next for Microsoft
Posted on: Friday, 9 May 2008, 00:20 CDT
After talks with Yahoo Inc. ended, Microsoft was forced to withdraw its $47.5 billion takeover bid, causing experts to wonder what the company would try next in its effort to gain traction in the online battle against its rival Google Inc.Some analysts say Microsoft must increase its search traffic to attract advertisers. Others think Microsoft should raise the proverbial white flag, conceding that market to Google Inc., so that it can focus its efforts on other markets.
Analysts are puzzled when it comes to forecasting what Microsoft intends to do next, because the company has already made obvious efforts such as the creation of its own search-ad platform, as well as the $6 billion it spent to buyout online ad company aQuantive.
Microsoft revamped its search engine, and changed the design of its Lie Search service, all in the name of competition with Google.
The company even boasted its new changes in several different markets.
"We've done a lot of work to get clear strategy and focus," Kevin Johnson, who heads the division that includes online services, told a gathering of financial analysts in July. In November, Johnson detailed aggressive goals that included capturing 30 percent of U.S . search queries.
However, by January its share of U.S. search queries held third place at under 10 percent, behind Yahoo's 22 percent and Google's 58 percent.
It was then that Microsoft announced plans to attempt to buy Yahoo earlier this year.
On Saturday, the clock ran out on Microsoft’s offer, as Yahoo continued to deny approval of the bid.
Some analysts say the argument isn’t over between Microsoft and Yahoo, and others say the company may set its sights on companies like AOL, Salesforce.com Inc., or Facebook, the second largest social network on the Web. Microsoft already owns 1.6 percent of Facebook.
In Japan, Chairman Bill Gates told reporters Wednesday that "at this point Microsoft is focused on its independent strategy."
Two days before Microsoft Chief Executive Steve Ballmer walked away from the Yahoo bid, he outlined to employees a four-part plan to "build the most interesting position in the world in online advertising, media, and the kind of social connected search and media experiences that go along with that."
First, Microsoft must do the basics - a huge search index, lots of storage in the cloud for users - very well.
It must innovate in "quick waves" that force Google to play catch-up.
It must "change the basic experiences" of communication and search.
And it must gain scale.
"We have a strategy and we have ideas in each one of those categories," Ballmer told the employees.
Danny Sullivan, editor in chief of the industry news site SearchEngineLand.com, said Microsoft's Live Search has several great functions, but no one seems to know about the service.
"What's Live Search? You don't even know that it's Microsoft," he said, recommending Microsoft raze the Live brand and rename it Microsoft Search.
Ballmer said he recognizes the need of marketing the brand.
"It's not just about search, it's about changing the game of advertising," Goldman Sachs analyst Sarah Friar said.
Charlene Li, an analyst at Forrester Research, agreed. Microsoft should look beyond search, perhaps pushing ahead with plans to deploy software over the Internet and to get marketers to use a Microsoft platform for mobile and display advertising, she said.
"The problem with a definition of success (is that) when this whole acquisition thing began, it was beating Google, and I think that's the wrong battle to fight," Li said. "I'd rather see them hit Google where it's weak."
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Source: redOrbit Staff and Wire Reports
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