Meeker Doubts Microsoft Impact on Search Market
Speaking Nov. 5 at The Kelsey Group's Interactive Local Media conference, the Morgan Stanley Internet analyst downplayed Microsoft's potential to steal sizable market share from search industry leaders Google and Yahoo.
"This is a more competitive market for Microsoft to have an impact on than they've encountered in a long time," said Meeker, who was dubbed by Barron's in 1998 the "Queen of the Net" for championing then-hot dot-com stocks.
Morgan Stanley was a lead underwriter of Google's $1.7 billion stock offering in August.
After 14 months of work, Microsoft is expected to release its search technology in December to replace Yahoo. The release could come in midmonth, when Microsoft's MSN Search sponsors the Search Engine Strategies conference in Chicago. Even after the launch, MSN will continue to rely on Yahoo's Overture Services to provide paid search listings. That agreement runs through 2005.
Microsoft has earmarked $100 million to develop its own Web crawling technology to compete with Google and Yahoo. Microsoft chairman Bill Gates has admitted the tech giant "dropped the ball" by ignoring search while Google built a sizable lead in the market.
In that time, Google and Yahoo continued to innovate. Both have developed local search engines, while Google has expanded into desktop search and begun work to organize offline content such as books into a searchable online database.
"The good news, from the user standpoint, is there's a lot of things going on to improve the user experience," Meeker said.
To illustrate the difficulty Microsoft faces in chipping away at Google's market share, Meeker cited the direction the search market has taken since Yahoo launched its competing search technology in February. Yahoo Search enjoyed a brief rise in market share before settling back to its previous level.
"The challenge is: Can it be much better than Google?" Meeker asked. "Can it be much better than Yahoo?"
For Microsoft to improve market share significantly, she said, it must release a search technology that is 50 percent better than Google and Yahoo. For that reason, Amazon's A9 is also unlikely to pose a serious threat.
"I don't think [A9] is 50 percent better," she said.