After falling behind in Internet search, Microsoft vowed to surpass Google. The Redmond, Wash., software giant is now putting its money where its mouth is, spending an estimated $150 million-plus to tout its new MSN search engine.
MSN Search, unveiled last week, is positioned to do battle by providing users with direct answers to certain queries in addition to lists of Web pages like the ones Google offers. MSN's challenge is to stop searchers from leaving its site to search on Google. In December, MSN drew 16 percent of Web searches, compared with 35 percent for Google and 32 percent for Yahoo!
"Google's rise came at the expense of MSN, not Yahoo!" said Niki Scevak, a search-industry analyst with Jupiter Research. "There is a direct cannibalization of MSN users to Google."
At stake is the lucrative search-advertising business, which Jupiter forecasts will generate $3.2 billion in 2005 in the U.S. alone. And that estimate may be low. Paid search at Google generated 99 percent of the company's $1 billion in sales and $204 million in profit in the fourth quarter.
Microsoft chairman Bill Gates made search a priority, admitting at the World Economic Forum two weeks ago that the company was "stupid as hell" to allow Google to establish a clear lead in the industry. Microsoft worked furiously to build a search engine in less than 18 months, at a cost of $100 million.
MSN Search, which was released in a test version in November, is the result. It replaced Yahoo! Search on MSN's properties in 25 markets. The search engine draws on MSN's Encarta encyclopedia database of some 1.5 million facts and figures and can include answers from that stack of data in its search results. In addition, its Web index includes more than 5 billion documents.
To make up ground, MSN said it would launch a bigger advertising campaign than the 2000 effort that promoted MSN. That has been estimated at $150 million. MSN officials would not confirm exact spending levels.
"We think there's a hunger in the marketplace for another search competitor," said Bob Visse, director of information services at MSN.
The MSN Search ad campaign, designed by Interpublic Group's McCann Erickson in San Francisco, broke last Tuesday. It uses online and offline media to generate awareness and use of the new search engine, the company said. MSN said it would shift ad spending in 2005 away from MSN's dwindling business as an Internet service provider.
"It's a business in its sunset years," Visse said of MSN's Internet-access service. "The future of MSN is much more centered around search and our ability to answer questions for consumers."
McCann's new "Shapes" campaign includes TV spots that show the MSN search bar changing shape to match searches. For example, one ad shows the search bar morphing into a palm tree in response to a search about the weather in Honolulu. The spots will run in local markets during such high-profile events as the Super Bowl and the NCAA men's basketball tournament. MSN will air national spots during the Grammy Awards and the Academy Awards. Other spots will run during top-rated prime-time TV shows such as Law & Order and The O.C.
Courtney Buechert, general manager of McCann in San Francisco, said the target environment was "search-conducive programming"—shows that viewers might be more likely to supplement with Web usage. The campaign will roll out in a dozen countries.
"When everyone thinks of search, they think of Google," said Jeff Huggins, co-executive creative director at McCann. "The primary task is to make people aware that there's more than one way to search the Internet."
McCann made the search bar the star of the ads in order to put the focus squarely on search. The familiar MSN Butterfly character is "going on vacation," Huggins said.
The offline campaign, which also includes print and guerrilla components, complements a heavy online spend that will blanket the Web. MSN executives say the online and offline ads would reach 90 percent of Internet users. "You will not be able to hide and not know MSN is there," promised Jane Boulware, vp of global marketing for MSN.
American Technology Research stock analyst Mark Mahaney said MSN Search could develop into a credible alternative to Google and Yahoo!, and that Microsoft's dominant position with the Internet Explorer browser and Windows operating system could enable it to gain market share.
Even with its new search engine, however, MSN will continue to rely on Yahoo!'s Overture Services division for search-advertising listings, at least for now. A Microsoft recruiting firm in December posted job listings for paid-search experts to work at Microsoft. Visse declined to comment on plans to start an exclusive MSN paid-search program.
In the face of the MSN Search marketing onslaught, Google officials vow to continue funneling their money into product development to retain users. According to TNS Media Intelligence, Google spent just $2.5 million on advertising in the first 11 months of 2004. During the same period, MSN spent $125 million.
"We do not see a need to change the way we market our products and services," Google CEO Eric Schmidt said during the company's recent conference call with investment analysts.
A Google representative said the company is not conducting any agency reviews, and it only hires agencies for specific campaigns, which target advertisers or publishers.
The idiosyncratic approach seems to have paid dividends. Google has built the No. 1 brand on the Internet, according to a survey conducted by consulting shop Interbrand, an Omnicom Group agency.
"What we have learned is people value the trust of our brand," George Reyes, the company's CFO, told an investor conference in December. "It's going to be very hard for some of our competitors to compete on that basis."
MSN's Visse downplayed that advantage, noting that Internet-search technology is evolving quickly. He pointed out that Yahoo! grew its share of searches in the past year from 27 percent to 32 percent.
"We don't think folks are particularly loyal yet," he said. "We feel like there's a great opportunity to innovate and move people to new services."