Can Microsoft Make You ‘Bing’?
BELLEVUE, Wash. — Mike Nichols has a poster on his office wall. It shows the young Muhammad Ali glaring down at a fallen Sonny Liston, the bruising heavyweight who had seemed invincible — until Ali beat him, in 1964, in one of the biggest upsets in sports history, and then beat him again a year later.
“The triumphant underdog,” Mr. Nichols says, nodding toward the wall.
The inspirational fight poster is fitting, because Mr. Nichols, a general manager at Microsoft, is a lieutenant in an underdog corporate army here. Its daunting mission is to take on the Google juggernaut.
Microsoft’s assault on Google in Internet search and search advertising may be the steepest competitive challenge in business today. It is certainly among the most costly. Trying to go head-to-head with Google costs Microsoft upward of $5 billion a year, industry executives and analysts estimate.
As the overwhelming search leader, Google has advantages that tend to reinforce one another. It has the most people typing in searches — billions a day — and that generates more data for Google’s algorithms to mine to improve its search results. All those users attract advertisers. And there is the huge behavioral advantage: “Google” is synonymous with search, the habitual choice.
Once it starts, this cycle of prosperity snowballs — more users, more data, and more ad dollars. Economists call the phenomenon “network effects”; business executives just call it momentum. In search, Google has it in spades, and Microsoft, against the odds, wants to reverse it.
Microsoft has gained some ground. Its Bing search site has steadily picked up traffic since its introduction two years ago, accounting for more than 14 percent of searches in the American market, according to comScore. Add the searches that Microsoft handles for Yahoo, in a partnership begun last year, and Microsoft’s search technology fields 30 percent of the total.
Yet those gains have not come at the expense of Google. Its two-thirds share of the market in the United States — Google claims an even higher share in many foreign markets — has remained unchanged in the last two years. The share losers have been Yahoo and smaller search players.
The costs for Microsoft , meanwhile, keep mounting. In the latest fiscal year, ended in June, the online services division — mainly the search business — lost $2.56 billion. The unit’s revenue rose 15 percent, to $2.53 billion, but the losses still exceeded the revenue.
Microsoft is a big, rich company. But investors are growing restless at the cost of its search campaign. In May, when David Einhorn, the hedge fund manager, called for Steven A. Ballmer, Microsoft’s C.E.O., to be replaced, he pointed to the online unit as a particular sore spot.
Qi Lu, president of Microsoft’s online services division, sees the situation this way: “To break through, we have to change the game. But this is a long-term journey.”
MR. LU, 49, knows about long journeys — and persistence. His grandparents raised him in rural China, in a home without running water or electricity. A bright student, he won a scholarship to the doctoral program at Carnegie Mellon.
After stints at the Almaden Research Center of I.B.M. and at Yahoo, where he was in charge of its search and search ad technology, he joined Microsoft at the end of 2008. He was recruited by Mr. Ballmer, who assured him that Microsoft was committed to search and competing with Google for the long haul.
Paul Yiu came from Yahoo two years ago, impressed by Microsoft’s approach to competing in search. A business and product manager, Mr. Yiu had spent most of his career in Silicon Valley, often working for Microsoft adversaries like Netscape and Oracle.
He explains that in the valley, with its job-hopping and start-up culture, there is a “renters’ mentality”: if things aren’t working out, just move on. At Microsoft, he says, there is a “homeowners’ mentality”: a dedication to making things work.
“If you’re in the expensive search game, you need to have a homeowners’ mentality,” Mr. Yiu says.
Patience as well as dollars ...
Microsoft’s leadership knew years ago that becoming a real competitor to Google would take patience as well as dollars. In 2007, Mr. Ballmer met with Harry Shum, a computer scientist who led Microsoft’s research lab in Beijing at the time. Mr. Ballmer, as Mr. Shum recalls, told him that the company wanted to make a concerted push in search and bring in leading technical experts and business managers.
“You spent 10 years in research, and now you’ll spend the next 10 years in search,” he remembers Mr. Ballmer saying to him.
When Mr. Lu and Mr. Shum, another Ph.D. graduate of Carnegie Mellon, talk of changing the game, they mean making search smarter. Today’s search, they say, primarily finds topics, or noun phrases — a person’s name, a city, a product, a disease and so on.
“Search is still essentially a Web site finder.” Mr. Lu says. “It’s all nouns. But the future of search is verbs — computationally discerning user intent to give them the knowledge to complete tasks.”
The phrase that Microsoft uses is “decision engine,” as opposed to search engine.
New classes of information will help. Social network data, for example. Microsoft has an exclusive partnership with Facebook, and in May it included a feature for linking the “Like” tags of a person’s Facebook friends to that person’s search results in Bing. It might show, say, that 15 of your Facebook friends “liked” a certain restaurant. It is a first step, Mr. Lu says, in including trusted opinions in search — and not just the popular ones that conventional search does so well.
Location data, especially from the growing share of searches on smartphones, offers another rich stream of information. If the engine knows where you are, it can add another layer of context and knowledge to the search.
The ability to write increasingly responsive, full-featured applications for the Web — using the new HTML5 programming language — should also make search more intelligent. The goal, Mr. Lu says, is that someday you will speak a phrase into your smartphone — “dinner for two on Friday and movie after” — and the software will go to work. It will connect to your personal data — your location, your dining and film preferences. It will then connect to dining and restaurant reservation applications, like Yelp and OpenTable, and movie reservation applications like Fandango.
Then the engine will begin a dialogue: “Here’s what is available. Where would you like to eat and when?”
In short, Mr. Lu describes a vision of a search engine that is part intelligent software assistant and part mind reader.
In Bing, the most visible evidence of the decision-engine concept is the ability to aggregate and present specific kinds of information in a search result. Microsoft has invested in travel services, for example. Type “flights to San Francisco” into Bing, and below a few blue-shaded links to ads is a Bing Travel flight database. Click on departure and return dates, and it performs a full search of all flights and predicts whether the fare is likely to rise or fall in the days before the departure date. That feature is based on technology from Farecast, a start-up that Microsoft bought for $115 million in 2008.
Bing also uses technology from MedStory, a health search engine it bought four years ago for an undisclosed price, to pull together information from across the Web and present it in an on-screen box above the conventional search links. Type in “diabetes,” and the gray-shaded information box contains a short definition from the Mayo Clinic, along with a link to the full article. Just below are links to diabetes articles from other professional health publications. Next come links to four related conditions, like high blood pressure and obesity, and four to related medications. At the bottom are links to recent Twitter posts about diabetes.
Technology experts agree that Bing is making innovative strides. “There is so little context in current search, and what Microsoft is trying to do is present users with context and structure, more a map of the world of information instead of just ranking it, especially in specific subject areas like travel and health,” says Esther Dyson, an investor in start-ups and a longtime technology analyst. “Microsoft is trying to beat Google at this different game.”
But while Microsoft may be ahead in some facets, Google is innovating as well — and acquiring specialized technology to fold into its search engine. In April, the Justice Department approved Google’s $700 million purchase of ITA Software, which collects and organizes online data for airline flights. Last year, Google paid an undisclosed sum for MetaWeb, a start-up that used a vast database to better decipher the meaning, and not just the words, of search queries. In 2008, Microsoft paid an estimated $100 million for Powerset, a start-up that is also a specialist in so-called semantic search technology.
“Both these companies are making important steps to make search more intelligent,” says Oren Etzioni, a computer scientist at the University of Washington. “It’s an arms race.”
At Google , the Microsoft talk of a “decision engine” is regarded as a clever turn of phrase that merely describes the long-range ambition of search and information retrieval, as the field was called in the years before the Internet.
“The goal has always been the same,” explains Amit Singhal, a computer scientist who leads Google’s search team. “The progression is from data to useful information to knowledge that answers questions people have or helps them do things. Knowledge is the quest.”
Inside the meetings ...
IT’S a Wednesday morning in June, and Brian MacDonald is presiding over back-to-back product meetings for Bing.
Mr. MacDonald, 49 and a vice president, is a returnee to Microsoft. His first stint began in 1989, when Microsoft acquired a business software company he co-founded; he stayed on, managing the development of a series of programs in Microsoft’s lucrative Office business until 2001. In those 12 years, Microsoft’s share price soared, and stock options for managers yielded the kind of personal wealth that opened up life choices. He left, invested in a few start-ups, spent time with his young children. But his children became teenagers and the appeal of dabbling in start-ups faded, and he was lured back to Microsoft in 2007, when, he says, the company was finally becoming “focused and serious about search.”
The meetings are in a sixth-floor conference room in an office complex here in Bellevue, a Seattle suburb. (Most Bing employees work in Bellevue, needing more space than was available at the headquarters campus in Redmond.) Each meeting involves about a half-dozen designers and engineers ranging in age from the late 20s to 40s. A few others join in by phone and videoconference from Silicon Valley and India.