Microsoft's recent reorganization, in which the company dropped from seven business units down to the three, is fairly transparent in its attempt to get the large, slow moving company into shape to compete more effectively with newer, faster-moving competitors such as Google. But new data suggests that Microsoft's internal changes were hardly prescient. In fact, several recent studies suggest that Microsoft is losing ground rapidly to Google in the critical Web search market.
That this slippage has come in the months since Microsoft began using its own search technology, as opposed to the Yahoo! search technology it previously used, must be alarming to the software giant. Microsoft switched its MSN Search portal to Microsoft-based search technology in February. But since then, its share of the Web search market has slipped from 16 percent to 15.5 percent, according to comScore Networks. In the same time period, Google grew from 35.1 percent to 36.5 percent.
A report in the "Wall Street Journal" suggests that Microsoft's problems stem directly from problems users have had with the service. Citing sources familiar with a Web search study that was conducted earlier this year, the Journal reported that MSN Search delivers less relevant search results than Google. Additionally, Google has been able to sharply increase its average ad revenue per search, surprising Microsoft.
Internal Microsoft documentation states that the software giant is embroiled in an "expensive game of catch-up" with Google and that "Google threatens Microsoft's position on the Internet, and could potentially lock Microsoft out of its existing distribution channels and reduce the value of Windows." Indeed, there's some concern that Google may succeed where erstwhile competitors such as Apple and Netscape had failed, thanks to its unassailable position on the global Internet.
I will say this. Whether you're interested in Microsoft succeeding or not, the company does seem to do its best work when confronted with a strong foe. For too many years, Microsoft has faced negligible competition in the OS space, leading to a series of fairly uninspiring upgrades--a problem faced by the Microsoft Office and Internet Explorer teams and other product groups at the company as well. It's unclear how Microsoft will ultimately fair against Google, but if its products become better as a result, that should benefit most computer users.