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By Stefanie Olsen, 1 February 2005 09:10

NEWS

Microsoft on Monday replaced Yahoo!'s search technology with its own homespun software and will kick off a huge advertising campaign to supplant Google in consumers' hearts.

As expected, MSN, a unit of the software giant, has taken its web search technology out of the laboratory, and placed it on MSN's newly redesigned home page in 25 countries. Two and a half years in the making, MSN Search will now be the focal point of the updated, lighter-weight site; and it is the subject of Microsoft's newest ad campaign, which includes television, print, internet and outdoor promotions.

MSN Search vice president Christopher Payne would not disclose ad spending, but he estimated that 90 per cent of Americans, as well as UK and Japanese residents, will encounter the campaign. Television ads, for example, will run during the Super Bowl, the Oscars and the Grammys. "Oh, you're going to notice it," he said.

With the ads and the new site, Microsoft will begin to flex its powerful marketing muscle in the competition to woo web searchers and advertisers away from reigning champ Google. Though Google has ballooned in power over the last five years, the company has already started to see its search lead shrink as Yahoo! and others have entered its market. Now that Microsoft is launching its own technology, the software giant will be working hard to outpace rivals, using its Internet Explorer browser and its desktop dominance to make a lasting impression.

Danny Sullivan, an industry expert, said: "They'll be trying to get people to say "I MSN Search'ed it'," referring to the commonly mentioned practice of "Googling" something or someone.

The change also marks the beginning of a likely end for MSN's relationship with rival Yahoo!. Yahoo!'s Inktomi search technology has powered MSN for more than three years, and its commercial subsidiary Overture Services has provided targeted text ads for several years, too. MSN will continue to license Yahoo! search technology for its Korean and Japanese sites, until later this year. MSN's Payne would not comment on any plans to replace Overture, but their contract runs out in 2006. Also, MSN has made a greater push to sell sponsored listings itself.

Search-related advertising is the impetus for the development and marketing frenzy among portals. This year, analysts expect commercial search sales to reach about $5bn. And while MSN commands 10 per cent or more of that market - $500m - it will be reaching for a greater piece of the pie if it can lure more people to its search engine.

Google is still at the top of the heap, but its lead is shrinking. In December 2004, Google served about 34.7 per cent of the market, down 0.3 per cent from the previous period in 2003, according to ComScore Networks. During the same period, Yahoo! jumped from serving 27 per cent of the market to 31.9 per cent. And MSN added a point to its position, going from 15.4 per cent to 16.3 per cent from December to December.

Key to MSN's strategy to win over the web population is providing "answers" to queries, rather than millions of links, Payne said. While Yahoo!, Ask Jeeves, Google and smaller sites like Answers.com have sought to fill in search requests with answers to questions on the weather, entertainment and package tracking, MSN believes it can do one better with its encyclopaedia software Encarta.

MSN will make 40,000 articles available free with its search service, in addition to 1.5 million other facts contained in Encarta. It will also play up streaming music, local search called "near me", and a newly added RSS feature that lets third parties syndicate its results.

All in all, the project has cost Microsoft well more than $100m, Payne said, and the company still sees this as only a first step.

"What we're most excited about is now we've got this platform and we can do rapid-fire improvements," Payne said. "You should expect a ton of improvements from us."

Stefanie Olsen writes for CNET News.com.