March 22, 2004

comScore Networks estimates 3.5 billion online searches are conducted in the United States each month, making it the second most pervasive online activity behind e-mail.

For the first time since Web browser pioneer Netscape Communications Corp. hit the market in the mid-1990s, Microsoft's stranglehold on computer desktops is being threatened.

Microsoft faces two rivals — Google, the world's most popular Web surfing vehicle, and Yahoo, the Internet's most popular destination.

Its dominance may seem unassailable, given that its Windows operating system controls all but a small fraction of the world's personal computers. But as the Internet consumes an increasing amount of people's computer time, the plumbing provided by Microsoft is becoming less important than the online agenda that increasingly is being set by trailblazing Web companies like Yahoo and Google.

Kenneth Insana depends on Microsoft Corp.'s Windows operating system to make his computer run, but Yahoo! Inc (NasdaqNM:YHOO - news). and Google Inc. have become the guiding forces on his desktop.

Yahoo has been Insana's online home page for the past two years, largely because the Web site serves as a one-stop source for information, e-mail, entertainment, shopping and social networking. When he can't locate what he wants with Yahoo, Insana invariably heads over to Google.

"If I can't find something there, I figure I'm not going to find it anywhere," said Insana, a 29-year-old entrepreneur in Bellerose, N.Y.

Millions of other computer users are following a similar path on the Internet. "The Web has created the equivalent of an operating system layered on top of the computer's operating system," said John Battelle, a former high-tech magazine publisher who is writing a book on the rise of online search. "There is some question how important that underlying operating system is going to be in the future."

The stakes of this brewing battle extend beyond the computer screen. By establishing their products as essential services on personal computers, Google and Yahoo are vying to become even more ubiquitous as wireless technology proliferates and encourages more people to connect to the Internet wherever they are.

"We are still in the early innings of a very long game," said Geoff Ralston, Yahoo's chief product officer. "In the end, the services we provide on the Internet will separate themselves from the personal computer as we become more entrenched in people's lives."

The three foes already have a broad reach. Through February, Yahoo and Microsoft's MSN ranked as the Web's favorite spots with 87.3 million and 86.2 million unique monthly visitors, respectively, according to Nielsen NetRatings.

Microsoft.com, which attracts much of its traffic by repairing flaws in the Windows operating system, ranked third, with 64.2 million visitors, followed by Google with 60.8 million visitors.

The market shares of Yahoo and MSN haven't changed much in the past three years while Google has emerged as a juggernaut without spending anything on advertising. Google's audience is nearly six times larger than it was in early 2001, when it was the Web's 26th most popular destination.

As they jockey for position, Yahoo, Google and Microsoft say they will continue upgrading their services — competition that bodes well for Web surfers.

For now, search engines are shaping up as the most potent weapons in the desktop dustup. That's because search engines are huge crowd pleasers. About 114.5 million Americans, or 39 percent of the population, now use search engines, according to Nielsen NetRatings.

The rising demand is producing ever-bigger profits for search engine providers that have developed tools to link ads with search requests. In some cases, they've even begun charging Web sites to have more of their material included in search indexes.

Businesses last year spent an estimated $2 billion on search-related advertising and some analysts expect the market to triple during the next three years.

Hungry for more success, search engines have been adding more bells and whistles, offering consumers easier ways for doing everything from tracking their United Parcel Service shipments to finding a local pizza parlor.

Google's single-minded devotion to search since its 1998 inception has given it an early edge over its rivals, but analysts say it's an advantage Yahoo and Microsoft can overcome with heavy investments.

The rival search engines "may not end up being as good as Google's, but they could be good enough for most people," said analyst Charlene Li of Forrester Research.

That possibility has helped keep Google from becoming complacent, said Craig Silverstein, the company's director of technology. "If someone should come along and do a better job than us, we know people will switch in a heartbeat."

Both Yahoo and Microsoft are wagering they will be able to build a better search engine than Google.

During the past year, Yahoo has spent more than $2 billion to acquire more search technology and established a research lab to remain on the cutting edge. In a show of confidence, Yahoo is cutting its ties with Google, which had been feeding Yahoo's search engine since June 2000.

Microsoft also has been spending heavily on the development of a new online search engine that will debut on MSN.com this year. MSN currently licenses most of its search technology from Yahoo.

A sophisticated system that will search computer hard drives and corporate networks is supposed to be a key feature in the next version of Windows, which may come in 2006.

Meanwhile, there's no guarantee that the big three won't be outfoxed by brainy startups also pursuing the next big search innovation.

"Our customers tell us that no one is doing a very good job with search right now," said Lisa Gurry, MSN's director. "Our own internal data indicates 50 percent of search questions go unanswered, so we think there are some great opportunities ahead."

Source: Yahoo News

        

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