The threat:
The paper, written by several MSN executives, was titled "Google -- The Winner Takes All (And Not Just Search...)." It made the case that "Google threatens Microsoft's position on the Internet, and could potentially lock Microsoft out of its existing distribution channels and reduce the value of Windows," according to a copy reviewed by The Wall Street Journal. It stated that MSN had failed "to produce better and more innovative products than Google" and was engaged in "an expensive game of catchup."
Buying market dominance:
The executives' suggestions included fighting Google by sharing online ad revenue with computer makers, to motivate them to continue distributing its Windows operating system and its Internet Explorer browser.
AOL talks are "stalled":
This year, Microsoft has begun pursuing another tack: Microsoft had talks, now stalled, with Time Warner Inc. about combining their Internet businesses in a joint venture that could strengthen Microsoft's search traffic and advertising ...
Losing ground:
By summer, market research suggested that MSN's new search engine was losing at least a little ground with consumers. Users conducted 4% fewer searches using MSN during the second quarter compared with the first quarter, according to research firm Nielsen/NetRatings. Its major competitors gained ...
... Majestic Research Corp. of New York, estimates a 7% decline in the number of searches that Microsoft handled during that period. "Everything we've seen has suggested they lost market share since the new Microsoft search engine came out of beta [testing] in February" ...
Replacing Yahoo with MSN Search hurt results:
There is other evidence that many consumers don't view MSN's new search engine as an improvement over Yahoo's. Microsoft dropped to No. 5 after the search technology switch, compared with No. 3 before the switch ... the percentage of users who felt MSN's search results weren't relevant to what they were looking for rose significantly, jumping to 27% from 17% for general search tasks and to 37% from 29% for searches related to specific geographical locations, those people say.
Microsoft tries to silence critical analysts. Conflict of interest?
After getting a preview of the results of the research and Keynote's plans to highlight Microsoft's slip in a press release, Microsoft requested that Keynote not make the results public, a person familiar with the matter said. Keynote, of San Mateo, Calif., says it made a "business decision" not to disclose findings from the study about specific engines. In a December regulatory filing, Keynote named Microsoft among its 10 largest customers by revenue.
Can Microsoft make up for a very late start, a continuing brain drain, and a need to protect their fat-client dominance? Will rearranging executive chairs, bribing computer manufacturers or silencing critics make up for years of little innovation? Stranger things have happened, because we all know that the superior technology doesn't always win in the marketplace.