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Microsoft Exec: Still Early in Search

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SAN JOSE, CALIF. Speaking before hundreds of search marketing pros, Microsoft's Satya Nadella readily admitted Google is currently the gold standard in the market. Yet, like other Microsoft executives over the past two years, the svp of Microsoft's search, portal and advertising platform group vowed Microsoft would catch up.

Of course, the quickest route to catching up -- the acquisition of Yahoo! -- did not pan out. Nadella did not address the Yahoo! deal in his presentation or the Q&A period. Instead, he laid out Microsoft's strategy of improving on the user search experience, experimenting with new advertising methods and spending heavily on capacity.

"We are going to take a long-term perspective," he said during a keynote presentation at the Search Engine Strategies conference here. "We clearly have the wherewithal to invest. If we can hunker down and come at it again and again, we will have the opportunity to gain our fair share."

Microsoft is a small player in the search landscape, attracting about 10 percent of searches and only 5 percent of the search ad market. It risks being further marginalized by the pending Google-Yahoo! deal for Google display ads for an unspecified number of Yahoo! search terms. Microsoft contends the deal could result in Google having 90 percent of the search market.

Nadella said Microsoft is at near parity with Google when it comes to search relevancy. Now, it is concentrating on differentiating its experience by presenting information beyond search's initial iteration of simply links to other Web sites. It is leaning on technology acquired in a pair of recent acquisitions. Search startup Powerset has brought to Microsoft the ability to execute "semantic search," i.e., understanding user intent and presenting information in return, rather than links. Nadella showed how Powerset can return biographical and other information in response to a "Dali" search. Another differentiator shown is the integration of Farecast to Microsoft's search engine. With Farecast, a travel-related search will get data shown from Farecast about the best time to buy a ticket.

The examples are part of efforts by Microsoft, Google and Yahoo! to move to "blended" or "universal" search. In that mode, users are provided information directly on the search results page rather than only links.

Nadella also trumpeted the progress Microsoft has made in changing search economics. In May, it introduced a rebate scheme, Live Cashback, in which users are given discounts from merchants advertising with Microsoft. It is a way to share the benefits of search ads with users, Nadella noted. The program, which is still in beta, has about 700 merchants participating.

"We're learning a lot and we plan to scale this out to all advertisers," he said.