• Illustration: Search Results Evolving

MSN will change the way it displays search results so that the most relevant results are more prominent. It will also introduce several new search tools, including one to search personal Web logs (or "blogs") and another that answers natural language queries. The moves continue a year-long effort to compete with Google and could signal a coming shift in the status of MSN's search partners.

Algorithmic Results Above the Fold

When users run a search on MSN today, the relevance of the results varies widely, depending on the term entered. For some search terms, like "auto insurance," the top half of the page consists entirely of search listings that have been paid for by advertisers (some paid directly to Microsoft, but most to Overture, now a division of Yahoo, which shares the revenue with MSN). Users must scroll down to see results selected solely for their relevance to the search request ("algorithmic" results). In addition, the way MSN labels the results—with small gray text and confusingly named categories—can make it difficult to tell which results are paid and which are algorithmic. Google, in contrast, places all paid results in their own box on the right side of the page, with algorithmic results occupying the center.

At a Mar. 2004 conference for MSN advertising partners, Microsoft said it will change the way MSN Search results are displayed. Beginning in July 2004, MSN will limit the number of paid results on each page, and they will be more clearly separated from algorithmic listings. The goal is to have algorithmic results appear "above the fold"— the part of the page that users see first—on every results page. (For a more detailed discussion of the changes, see the illustration "Search Results Evolving".)

Although these changes could initially reduce the number of click-throughs to advertisers' sites, Microsoft has found that users are more likely to return to MSN Search and spend more time using it and other MSN sites when searches return algorithmic results above the fold. This increased site traffic will more than make up for any short-term decrease in click-throughs, Microsoft believes.

Next Up: New Features, Less Outsourcing

At the partner conference, MSN Vice President Yusuf Mehdi also revealed plans to introduce Blogbot, a specialized tool for searching blog content; Answerbot, which will return search results based on simple questions (such as "What's the capital of South Africa?"); and Newsbot, which aggregates headlines from various news sources. (For background, see "Personalized News Service Tested" on page 16 of the Jan. 2004 Update.) These actions shore up MSN's competitive position against other search providers. For instance, Google offers a news search function, as well as blogging software gained in its 2003 acquisition of Pyra Labs (Google makes money by selling targeted advertisements on members' blogs), and AskJeeves specializes in answering natural language queries.

The next likely step for MSN Search is to replace algorithmic results from partner Inktomi (which, like Overture, is owned by Yahoo) with results from MSN's own algorithmic search engine, currently under development. MSN is also interested in expanding its paid search business, Mehdi has admitted. The company hired former Overture Chief Technology Officer Paul Ryan to oversee search "monetization" in Oct. 2003. Although Ryan has now left Microsoft, MSN's paid search efforts will likely continue in his absence. If these efforts are successful, the partnership with Overture will probably end—perhaps as soon as 2005.