New York, Aug 1 (Newswire): 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.
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.
"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.
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.
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