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Microsofts Search

2014. 5. 23
Sungwoo Park, Hyunjong Yu, Junhyuk Hur

Which Search Do You Use?

Were chasing Googles taillights


and are losing money as we do so
- Jay Girotto, a member of Microsoft team search

Whats the matter with the IT Giant?

Microsofts Business Segments

Microsofts Efforts to catch up with Google

WHY couldnt catch up with Google

(1) Learning Curve

New Entrant

Early Mover

(2) Network Externalities


Dynamic analysis reveals that if this market continues on its natural
trajectory, Microsofts position is likely to deteriorate even further.

Winner-take-all tendency of market

(2) Network Externalities


Users and advertisers are willing to be part of the biggest
network, to increase the value they derive from the platform.

(3) Experience Good

Experience Good leads to Reputation

(4) Switching Cost

Because of Switching Cost users locked-in


Google Search

(5) Google has ability to deal with

Managing large farms of thousands of servers,


Designing customized OS for them and
Ranking an increasing number of documents.

The Reason to cling to Search

Why is Microsoft pursuing the market for


search and search-related advertising?
The first is an offensive rationale: Search is an
attractive business for Microsoft.
Google threat Microsofts business field :
Microsoft must be in search in order to protect
other businesses.

Why is Microsoft pursuing the market for


search and search-related advertising?

Attractive market search and serach advertising


and its still in its early day
Global($bn)

2007

2009

2012

Search
marketing

20

40

Total online
advertising

45

67

98

Percent of
total
advertiding

8%

11%

13%

Lets look back on MSs success

Microsofts Strategy - Application Software


1. They targeted on Apple first, so Word and Excel soon became
leading application on the apple Standard, where WordPerfect
and Lotus made less effort. Microsoft used its Apple-based
development of Word and Excel to learn about graphical user
interfaces and to enhance the GUI of its Windows operating
system.
2. Arround 1990, Microsoft began to bundle Word, Excel, and
Powerpoint into a popular suite, Microsoft Office and began to
offer "competitive upgrades" - discounts for customers who were
switching from WordPerfect and Lotus 1-2-3.
3. The popular Windows operating system standardized and
simplified the user interfaces of applications and made it easier
for users to switch between applications.

Microsofts Strategy - Internet Browsers


1. IE and its matching server product were offered for
free.
2. IE came bundled with Windows on new PCs.
3. Versions of IE were soon available not only for
Windows, but also for the Apple and UNIX
operating systems.
4. Microsoft also struck deals with Internet service
providers(ISPs), who agreed to install IE as they
provided Internet access to consumers.

Microsofts Strategy - Summary

Microsoft is a dominant player in the market.


They achieve large number of users and create
a network effect that makes them successful.

What integrated strategic option should


Microsofts executives pursue?

Satya Nadella
(CEO of MS)

What integrated strategic option should


Microsofts executives pursue?

A real breakthrough
A disruptive innovation

A game changer

1. One-Stop Platform

2.

Strategic Alliance with Yahoo

Passive way : Offer search engine to Yahoo


Active way : Pushing ahead M&A of Yahoo again

3.

Full-scale War against Google


Spear and Shield

Battle Field