“FT: …Search: where are you going further with search?

BALLMER: It’s one of these areas where we are clearly not the market leader. The market leader is clearly doing well in the market. It’s perhaps even more dramatic in Europe than in the United States, in general. Google has a higher share in Europe. The share numbers that usually get cited are US share numbers, but if you take a look it will be more dramatic. And yet the experience leaves a lot to be desired.

Something like 50 per cent of searches don’t actually result in an answer to the user’s question. Interesting factoid. The average search I think is 2.1 words. Isn’t that odd? Why don’t people type more into search queries? Because they’ve learned: the more you type, the more false positives you get. But isn’t that ultimately ironic, the more you’re willing to tell the computer, the less good job the computer does. That’s not very acceptable. The more I’m willing to type in, you would think that ought to get me a better answer back than a worse answer.

The chance to innovate in the experience is quite dramatic. We believe in that. We’re investing in that. We’re going to have to be long term – we count that as a value – we’re going to have to be long term, patient, disciplined, really in our thinking and just keep after it, keep after it with new innovations, continue to try to change the experience for the user.

In some senses, it’s one of the dullest experiences in the technology world today – ours and Googles and Yahoos – it’s not a shot at anybody else’s. But you’ve got to believe with user interface changes and technology you can do better than today’s search user interface. It’ll be an area we continue to invest in and push forward.

FT: In terms of winning this battle, how much of it is about the actual underlying technology, and how much about the way it’s packaged and branded. To what extend are you losing share at the front end and not necessarily getting as far at the back end for technology reasons, and how much of it is because of the other skills required.

BALLMER: Let me put it in three buckets.

Bucket number one is the base of the base of the base: how good are our results compared to other guys’ results? And I would tell you that in blind tests we’re pretty close. I can’t say we’re better, but I can say we’re pretty close. In blind tests.

Number two is: how does anybody innovate in the user interface, the user experience? How accessible, if you will, is it and how simple is it to get the answer to the question given the back end technology? And that’s an area where we have small innovations, but you should expect to see more from us.

And probably it’s an area where frankly, if you’re the market leader it’s a little harder to break out of your pattern than if you’re not the market leader. Let me just say it that way. As market leaders we have more of a temptation not to…

FT: As an underdog, you can invade…?

BALLMER: You would think so.

And then number three, is the brand. And brands can be tough of course, but as I point out to our people, the brand for search five years ago, six years ago, wasn’t Google, it was Yahoo, and now it’s Google. So it’s with the right technology innovation that people can really see a difference. It’s with the right business model innovation. Right now, the business model is fine, on the other hand there’s a lot of money that just sits there in Google between the merchants and the advertisers, the people who provide goods and services. A lot of it just sits there instead of flows through. It’s a bigger pot. Take the FT. You do not get to keep as high a percentage of what you take in relative to your user community as Google does relative to it’s user community. There’s opportunity for business model innovation as well.”

Establishing a brand name in the search market place has not been easy for Microsoft so far, as CNET reported:

“Microsoft’s Live branding has been tremendously confusing and has hurt the company, and it is very likely contributing to the situation they are in right now,” said David Smith, an analyst at Gartner. “They’ve created another brand and have not differentiated it.”

No wonder, Google is still the king of search…

• Google – 48.2% (in January 2006) vs. 47.1% (in January 2005)
• Yahoo! – 22.2% (in January 2006) vs. 21.2% (in January 2005)
• MSN Search – 12.8% (in January 2006) vs. 12.8% (in January 2005)

comScore Networks, on the other hand, measured lower but growing market share for Google in January 2006:

• Google – 41.4% (in January 2006) vs. 35.1% (in January 2005)
• Yahoo! – 28.7% (in January 2006) vs. 31.8% (in January 2005)
• MSN Search – 13.7% (in January 2006) vs. 16.0% (in January 2005)
• AOL – 7.9% (in January 2006) vs. 9.6% (in January 2005)
• Ask.com – 5.6% (in January 2006) vs. 5.1% (in January 2005)

These percentages are based on an estimate that 85% of the total U.S. internet user base, or 146 million people, visited a search engine at least once in January 2006.

While the shares of the main search engines haven’t changed much since last year, the total search traffic in January 2006 has grown by 39% (according to Nielsen/Netratings) or by 11% (according to comScore) since a year ago. Whether you use the Nielsen/Netratings’ numbers (5.7 billion searches) or the comScore’s ones (5.48 billion searches in a single month), an average of 3 searches per user on a typical day (based on the 60 million daily search engine users in the U.S., estimate by the Pew Internet & American Life Project) begs the question: do search engine marketers overpay for their traffic, and if so, what is there to do?

The growing importance of search engines as a marketing channel would explain the growth of search engine marketing (SEM) spending only partially. When you compare the SEM annual spending growth, estimated at 277% by MarketingSherpa at a recent web seminar, to the 39% growth of search engine traffic, it becomes obvious that as many as the search engine users are they are not enough — too many of the search engine marketers are competing, and overpaying, for too few eyeballs.

While the fear of the competition might be a big factor for the keyword bidding craze, my guess is that the biggest reason why marketers so willingly part with their dollars is because they do not measure the return on their marketing investments. This is where the importance of web analytics and organic search engine optimization come. One enables the other. Unless you grow (organically), you cannot sustain your business. Unless you measure, you cannot manage. Unless you manage, you spend your online marketing budget at your own risk.

Among the other high tech companies Apple Computer ranks number 9 (up from position 42 in 2004) boosted by its iPod, Intel at 31 (up from 38th in 2004), and Cisco Systems reached number 30 (up from position 61 in 2004), the networking equipment company. No other internet pure-play made it to the top 50.

In addition, Google is number 9 among the most innovative companies as ranked by fund managers, up from 14th place in 2004. eBay was ranked number 7 for innovation but is not listed in the general ranking of the most respected companies. Similarly, Amazon.com is ranked 12th for customer service but is not listed among the most respected companies. Yahoo is not mentioned in any of the lists.

Here is a current list of official search engine blogs:

• Google Official Blog
• MSN Search Blog
• Yahoo! Search Official Blog

And here, few unofficial blogs dedicated to the major search engines, added by me:

• Google Weblog
• theunofficialgoogleblog
• John Batelle’s Searchblog

AOL continues to serve both organic and sponsored search results from Google’s search engine and AdWords pay-per-click program. In unrelated news, Google launched Google Advertising Professionals program and AdWords Learning Center in responce to Overture’s Ambassador program.

Online Holiday Shopping to Exceed $15 Billion This Year According to comScore Forecast

comScore Networks today released its forecast of online consumer spending for the 2004 holiday season. comScore reports that consumer spending on non-travel goods at U.S. Web sites will exceed $15 billion during the November through December holiday season, representing growth of approximately 23% to 26% over the 2003 season.

comScore Networks’ press release quotes “consumers’ growing familiarity and confidence with online shopping, coupled with a dramatic increase in broadband penetration and continuing efforts by retailers to simplify the shopping process across channels” as the major reason behind the optimistic forecast of substantial gains for online merchants in 2004. In a separate forecast, Jeff Bezos anticipates the 2004 holiday season to be a record one for Amazon.com.

WebSage is preparing to publish a checklist of search engine marketing best practices to help e-commerce businesses prepare their web sites for the holidays. Let us know if you would like to receive a free copy of this search engine marketing guidebook.

• Paid inclusion was not satisfactorily disclosed or explained by any of the search engines tested. The credibility of this practice is of such concern to the industry itself that, after Consumer Reports WebWatch testing had been completed, two of the top five search engines announced plans to terminate paid inclusion programs.
• Meta-engines, which present results from several search engines simultaneously, repeatedly failed to adequately disclose the presence of paid placement and paid inclusion within search results.
• Disclosures are generally hard to find, accessible by headings and hyperlinks that often blend in with the page, making them easy for consumers to overlook.
• Information disclosed by the sites on business practices with advertisers — and how these practices may affect search results — was often confusing and jargon-laden.
• Some engines, like Google – one of the few majors not named in the original FTC complaint – took pains to visually segregate paid results from non-paid results. Consumers may want to avoid others, like 1st Blaze, because of inadequate or absent disclosures that undermine the integrity of search results.

Sequentially, online ad spending rose 6 percent over the first quarter of 2004, which the IAB and PWC revised downward to $2.23 billion from an earlier estimate of $2.27 billion.”

Search engine marketing accounted for $947 million or 40 percent of all online ad spending, up from only 29 percent a year earlier, making it the most important driver for online marketing growth.

Ads by Goooooogle

Along with these AdSense formatting changes, Google is running a new branding test by expanding the name on the served ad units into ‘Ads by Goooooogle’ ad units. Tara Calishain’s ResearchBuzz blog, with too much free time on her hands, is quick to point that any Google-resembling domain name with more than three Os in the name, i.e. Goooogle.com, Gooooogle.com, Goooooogle.com does not belong to Google.com. Talk about risky branding tests

“Search engines are the archetypical embodiment of the mastery ideology. They place users firmly in the driver’s seat and take them where they want to go. You can get anywhere on the Web using a subservient interface that accepts any words you throw at it and serves up a simple, linear list of rank-ordered choices.

Not coincidentally, ever since the WebCrawler debut in 1994, users have proclaimed search as one of their main activities on the Web. Being in control feels good…”

Nielsen further lists search engine advertising among the champions of web empowerment, by stating that “most successful Web ads empower — rather than annoy — users.”

• More than 107 million Americans — around 84% of Internet users — have used search engines to find information
• An average Internet user performs 33 searches per month
• Users of the 25 most popular search engines perform a total of 3.9 billion searches per month
• 35% of searchers perform a search at least once a day and 2/3 of them use the search engines several times a day
• 44% of the search engine users use a single search engine, while 48% use 2 or 3 search engines
• Using search engines is the second most popular Internet activity after checking email

Furthermore, the Pew Internet Project reports familiar distribution of searchers among the most popular search engines. When the interviewed Internet users were asked the following question, “Which search engine do you use MOST OFTEN?”, the most popular answers were:

• 47% use Google
• 26% use Yahoo
• 7% use MSN
• 2% use AskJeeves

Further insight on search engine use gained by the Pew Internet Project survey and comScore’s online tracking is available in the full PDF report.