WAC 2 – Individual

Home Assignment 1
Microsoft’s Search

Submitted to:

Prof. MD Ashraf Rizvi

By:

Group # 9

Saurabh Khare | Srivatsa | Manish P | Saurabh Jain | Nachiket K | Faiz

Rehman | Shashank Verma
 Ans. 1:
Yes, the search advertising has current revenue of $20 billion currently and is
expected to grow to $40 billion by 2012. Thus the growth potential of this
industry is huge. As stated by Mr. Yusuf Mehdi (Senior Vice President at
Microsoft) “Despite all the sophistication and complexity the search industry
is still in early days. “. The current search technology is at a very nascent
stage as users feel that half of their search queries go unanswered and the
average time required to complete a query is 30-50 minutes.

Ans. 2:
Yes, from exhibit 4, by 2007 the search advertising has grown into a $20
billion business globally and is expected to grow to $40 billion by 2012.
Moreover the total global online advertising is expected to grow steadily from
8% to 13% of total advertising. In this segment the search advertising has
grown from 3.6% to 5.3% over the same period. Thus there is a lot of scope
for search advertising if the industry comes up with new efficient
technologies, it can expand the total online advertising business as well as
its own share of the pie.

Ans. 3:
From exhibit 5, Microsoft has been able to improve the quality of its search
results and thus has been able to close the relevance gap between it and
Google between 2005 and 2007. Despite of this, from exhibit 3, it can be
observed that its market share for the search engine business has declined
from 12.3% to 8.3 % between July’ 2007 and Nov’ 2008. There seems to be
contradictory results, and it means that it is not only the relevance that
brings in the business but also the speed with which the search results are
achieved. If Microsoft improves the speed of its search engine, it can
probably make good money in this business.

Ans. 4:
Fast delivery of searches depends not only on a firm’s ability to scour its
index of the web rapidly but also on the physical proximity of the user to the
firm’s data centres. Google has 15 centres while Microsoft has four. Google
delivered search results within 100 milliseconds, while Microsoft did so within
200. Thus if Microsoft wants to compete, it should employ another 11 centres
and should incur $5.5 billion on this. This will make it equally competent with
Google thus the active searches in case of Microsoft will increase.
Furthermore, the revenue per search depend on the firm’s ability to attract
enough advertisers and to target the right users. Thus Microsoft has to
increase efforts to increase its advertisers’ base from 65,000 to 2, 00,000.

Saurabh Khare | Srivatsa | Manish P | Saurabh Jain | Nachiket K | Faiz

Rehman | Shashank Verma
 Ans. 5:
In 2008, Google had the highest market share (63.5) and Microsoft’s share is
as low as 8.3 and was decreasing. The market share of MSN is driven by
passive search whereas that of Google is driven by active searches.
The emphasis was on pursuing revenue only which led cluttering of website
and driving away users. However, with focussed effort the “relevance gap”
between MSN and Google has decreased. The number of data centres by MS
is also low (4) which make the search speed slower than Google. Features
like cash-back have attracted the users to use this site, but they also have
serious impact on the revenue. Such schemes may not be feasible in the long
run as the business unit is already facing negative operating income.
Moreover, Google employed twice as many engineers as Microsoft. So there
are a few competitive disadvantages.

Ans. 6:
Exhibit 6, depicts that Average price per click for Google is 0.71 $/click, while
for MS, it’s 0.59. Thus the WTP for MS is only 83% of Google. The major
reason for this is the WTP depends on the relevance and the speed with
which the search results are delivered. Though MS has achieved the same
level of relevance as that of Google, it takes twice as much time as Google.
Because of this the WTP is less for MS.

No hard data about costs has been given in the case, but could be estimated
that the costs for Google should be higher as compared to MS. This is
because of two reasons. One, Google has employed 15 data centres due to
which it has increased fixed costs. Second, Google employs double number
of engineers as compared to MS, due to which the variable costs are high.

Ans. 7:
Observers in late 2000 predicted that the software industry would move to
software as a service and cloud computing. This also led to heightened
interest in search and search related activities. The personal computer
would be used to access these software’s, files and processing power on the
cloud rather than on the local pc itself. Users would pay for the services by
subscribing to the software’s on the cloud or pay for access by viewing ads.
So a future where all the services would be on the cloud and the information
there would be increasingly accessed by search engines would entail that
Microsoft be in search to protect other businesses and create a platform to
generate more revenue through search advertising.
Saurabh Khare | Srivatsa | Manish P | Saurabh Jain | Nachiket K | Faiz
Rehman | Shashank Verma
 Ans. 8:
Satya nadella, the leader of Microsoft’s search efforts, pursued several routes
to improve the company’s position.
 A group of program managers and engineers pursued brainstorming to
compete with Google.
 Two-Pizza development team housed in Live Labs having a motto to
incubate radical breakthrough technologies within Microsoft.
 Innovation in three areas: the user experience, the business model, and
the ecosystem of the industry.
The best integrated approach would be for innovate in all 3 areas of
experience so that the company takes a holistic approach to the problem and
the solution is longer lasting in nature.

Saurabh Khare | Srivatsa | Manish P | Saurabh Jain | Nachiket K | Faiz

Rehman | Shashank Verma