July 30, 2009, 12:00 AM

The Bing Bang

Search is key to online retailers and Google’s dominant. Microsoft’s new search engine is big news—and potentially good news—for e-retailers.

Search engines account for much of the traffic to retailers’ web sites, and Google dominates search. That means any challenge to Google’s near-monopoly position in search is big news-and potentially good news-for e-retailers.

Google today faces a big challenge indeed, from software giant Microsoft Corp., which threw down the gauntlet June 3 with the launch of its new search engine, Bing. Microsoft is backing up Bing with a major national advertising campaign, has cut deals to make Bing the default search engine on millions of PCs and mobile phones, and says it’s willing to spend billions more to gain search market share.

And there’s one more reason to believe Google finally has a worthy competitor: Microsoft just might have built a better search engine.

Instead of just providing a list of links to web pages, Bing’s search results page categorizes results, makes it easy to refine queries, lets users track queries, provides a glimpse into the web page listed, and summarizes the content of consumer and expert reviews from across the web.

“It’s very cool to see someone making a bold move forward in search,” says Eric Archuleta, CEO of online musical instruments retailer Musician’s Hut. “I’m a fan of Bing. It’s helpful to me to find more information, instead of just an index. It’s going to be a great tool for shoppers.”

He’s not alone in praising Microsoft’s work. Bing “will so improve the search experience that users will demand other engines follow suit,” wrote analyst Shar VanBoskirk of Forrester Research Inc. in a recent report entitled “Bing: The Next Big Search Thing.”

Retailers are also high on Bing for another reason: It could give them an alternative to Google for paid search, and prompt Google, Microsoft and Yahoo to court marketers’ dollars with innovations and better pricing.

“We’re very excited at the way Microsoft’s been aggressive with Bing,” says Reggie Geissler, Internet program manager at Mason Companies, which operates ShoeMall.com and other e-commerce sites. “Google does very well for us, but it’s nice to have other avenues to pursue.”

“I don’t think they’re ever going to knock Google off its pedestal, but Yahoo’s not doing a good job of pushing Google right now,” says Andy Schepper, vice president of operations at multichannel retailer Summit Sports Inc. “I’m excited that somebody’s trying to be innovative, and not just copying Google.”

But even e-retailers who find Bing appealing say it will only be significant if it can cut into Google’s market share. “It’s a good search engine,” says Eric Klose, vice president of marketing at online retailer CSN Stores LLC. “The real question is can Microsoft get consumers to use it.”

Billion-dollar budget?

Microsoft executives say they will, but that it will take time. Meanwhile, they are backing up those assurances with money. Big money.

CEO Steve Ballmer, speaking before the Executive Club of Chicago shortly after Bing’s launch, said Microsoft is willing to spend 5% to 10% of its operating income over the next five years building its search business. Given that the company’s operating income for its most recent fiscal year was $22.5 billion, that translates to an annual investment of at least $1 billion, and possibly more than $2 billion.

While those are big numbers, they pale before the $47.5 billion Microsoft offered last year to buy Yahoo Inc., including Yahoo’s second-ranked search engine. Rumors spread last month that Microsoft and Yahoo were again discussing a deal that would give the combined companies a 25% share of the search market, enough to mount a credible threat to Google. Such a deal would likely mean Bing becoming the search engine on Yahoo’s popular web properties, says Danny Sullivan, a search engine expert and editor in chief of the Search Engine Land blog.

Whatever happens with Yahoo, Google and Microsoft have each other in their sights. Google is going after Microsoft’s core business by introducing web-based applications that compete with Microsoft Office and announcing plans for a PC operating system to challenge Windows. Microsoft is trying to grab a big slice of Google’s core search franchise with its efforts to buy Yahoo-and now with Bing.

With these two companies both ranking in the top 10 among publicly traded U.S. companies in stock market value-Microsoft was second at $215 billion in mid-July and Google tenth at $135 billion-the battle unfolding for search market share could be the most expensive in the history of the Internet.

Bing, by default

Well before Bing’s launch, Microsoft began reaching into its deep pockets to cut important deals to make sure its search engine would be the one that automatically comes up when consumers fire up new PCs.

While many assume that Microsoft’s search engine would automatically appear in the company’s dominant Internet Explorer browser, which controls 66% of the market according to software provider Net Applications, that’s not the case. To avoid antitrust complaints, Microsoft makes it easy to change the default search engine in Internet Explorer, and Google and Yahoo in recent years have paid PC makers to make their search engines the one that ships with new computers.

But Microsoft has been outbidding competitors recently, signing a deal with Hewlett-Packard last year and with Dell this year to make Microsoft’s search engine-previously Live Search and now Bing-the default on more than half the new PCs purchased in the U.S. And Microsoft announced a five-year deal in January with Verizon, the No. 1 provider of mobile phone service in the U.S., to make Microsoft the default search tool for Verizon’s 86 million subscribers.

While tech-savvy consumers will download competing browsers, notably Firefox, or switch the default search engine on Internet Explorer to Google or Yahoo, consumers who are older, less educated or recent immigrants are more likely to use the default engine when they launch Internet Explorer on a new PC, says Bill Leake, CEO of search marketing firm Apogee Search.

“That means retailers that cater to older, more diverse and subprime categories of consumers will probably do disproportionately well on Bing,” Leake says.

More of The Daily Show

Microsoft also aggressively promoted Bing during the Internet Retailer Conference & Exhibition in June, with a prominent, 400-square-foot booth and several event sponsorships.

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