Microsoft competitive position in the search industry is highly critical since search engine business is a segment in which there are immense economies of scale. When a search engine gives improved performance in comparison to other search engines, then millions of users flock to the search engine increasing the associated advertisement revenues by huge margins. The opportunities in search industry is immense, however the competitive positioning of Microsoft Search is much weaker than its major competitor Google. Even though, MSN Search offers the search vertical search option of websites, images, videos, shopping, news and maps, similar to Google Search, yet, in each of the above category, the number of users of the formers are comparatively low.
The case narrates that Microsoft has made efforts lately to improve its search engine in terms of innovativeness of algorithms, which gives results which are more relevant, better organized and classified into thematic sections. Yet, Microsoft Search is at third place in competitive positioning, followed by Google at 63% of industry market share and Yahoo! Microsoft’s market share of active searches is estimated at a mere 3.69% of a billion dollar industry. The goal for Microsoft in the search engine segment is to better compete with the supremacy of the industry giant Google. Also, the competitive positioning of MSN search is weak because it does not operate under a single name rather it is divided under the names MSN and Windows Live. This also weakens the recall of the search engine in the minds of the consumers.
The competitive positioning of a search engine can also be evaluated in terms of the relative efficiency with which three distinct operations of a search engine are performed. In terms of the crawl operation, the web is systematically explored by a robot which recursively indexes all links it finds. The crawl or exploration is launched from a resource hub, as a page of web directory. Google bot is termed as more efficient crawler than MSN’s bot because of the higher frequency of visit on internet pages. Indexing consists in extracting resources recovered considered significant words of the corpus to explore. The extracted words are stored in a database organized as a giant reverse dictionary. In this operation, both Google and Microsoft can be termed as equal since both organizations possess huge financial resources to operate their databases.
When competitive positioning of Microsoft is evaluated in terms of the density and number of advertisers, then Google has greater number of advertisers and its policies for advertisers are much more lenient than Microsoft as mentioned in the case. Both Google and Microsoft do not integrate advertisement with search results because it is detrimental of the relevance of the results and can have a negative impact on the perceived quality of the engine. Therefore, all engines do not sell placement within the results.
There are two competitive strengths of Microsoft Search, as well, which provide an edge to the search engine over others. A competitive strength for this search engine is that MSN Search toolbar is installed by default in the Internet Explorer of Windows Operating system, which comprises of more than ninety percent of personal computers. Also, MSN Search has been integrated with the encyclopedia service of Microsoft which helps in answering certain short-string search queries with factual responses. The potential in the industry is also termed as very high because it is estimated that only fifty percent of searches are able to meet the needs and expectations of the users, while an equal proportion of users are unable to find the information they are looking for.
Since Microsoft’s competitive position is disadvantaged in comparison to Google, the assessment of Microsoft’s willing-to-pay gap shows is very wide. Microsoft is willing to pay a fairly large amount to gain competitive positioning in the search industry. Microsoft even offered to acquire Yahoo (which is the second largest company in search industry) to bridge the gap between the two companies, however the merger deal didn’t go through. This acquisition attempt did exhibit the widening of willing-to-pay gap between Microsoft and Yahoo.
- How is the dynamic analysis of competitive advantage (relative gap between WTP & cost) likely to evolve over time?
The dynamic analysis of relative gap between willingness-to-pay and cost gap is likely to increase over time because the total market value of search business is likely to increase in both short- and long-term. The number of web users round the globe is proliferating at a rapid pace, and at the same time mobile internet is being adopted at a very rapid place round the globe. It is estimated that a large proportion of web search results are non-satisfactory for the users. Due to the above mentioned reason, the willingness-to-pay and cost gap will widen for Microsoft because the importance of the industry in terms of a steady revenue stream is likely to increase and so is the gap.
The advertising model of Microsoft is also in evolutionary phases. In case, the number of advertisers increases for the Microsoft, then the gap between willingness-to-pay and the cost of acquisition will decrease because Microsoft would be less eager in such case. The future of search lies in anticipating both passive and active searches on the net, and creating an algorithm which interact with the user in a human-like manner. The willingness-to-pay will get higher for Microsoft if Google is able to gain the above mentioned ability of finding exact answer of what is in the mind of the user.
The number of data centers of Google through the world is said to be greatest among all search companies. This gives the company a much needed competitive advantage of quick response to user search queries. However, the dynamic analysis of competitive advantage predicts that the competitive advantage in future will comprise of contextual searches – that is specialized searches in specific areas. For instance, a finance-specific search engine which specializes in searches relates to stock quotes and trend identification.
The dynamic analysis of competitive advantage also shows that earning from third-party websites is also a method of generating revenues, which Microsoft has not tapped into yet. In future, the competitive advantage will belong to the organization which is able to extend its advertising network as wide as possible.