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Monday, December 11, 2006

Looking for a Gambit to Win at Google’s Game

There is a lot about the way Microsoft has run its Internet business that Steve Berkowitz wants to change. But he is finding that redirecting such a behemoth is slow going.

“I’m used to being in companies where I am in a rowboat and I stick an oar in the water to change direction,” said Mr. Berkowitz, who ran the Ask Jeeves search engine until Microsoft hired him away in April to run its online services unit. “Now I’m in a cruise ship and I have to call down, ‘Hello, engine room!’ ” he adds with an echo in his voice. “Sometimes the connections to the engine room aren’t there.”

The pressure is on for Mr. Berkowitz to gain control of Microsoft’s online unit, which by most measures has drifted dangerously off course. Over the last year, its online properties have lost users in the United States. The billions of dollars the company has spent building its own search engine have yet to pay off. And amid a booming Internet market, Microsoft’s online unit is losing money.

Google, meanwhile, is growing, prospering, and moving increasingly onto Microsoft’s turf.

Microsoft lost its way, Mr. Berkowitz says, because it became too enamored with software wizardry, like its new three-dimensional map service, and failed to make a search engine people liked to use.

“A lot of decisions were driven by technology; they were not driven by the consumer,” he said. “It isn’t always the best technology that wins. It is the best experience.”

It is no small task to run an Internet operation that can move as fast, be as popular and make as much money as Google. (That explains why Yahoo announced this week that its chief operating officer was leaving, and why the chief executive of AOL was fired last month.)

But Mr. Berkowitz’s job is made far more complicated because Microsoft is also counting on its Internet operations to breathe new life into its gargantuan but aging Windows and Office franchises.

In a strategy developed largely by Ray Ozzie, who has succeeded Bill Gates as the company’s chief software architect, Microsoft is trying to create online services that are the equivalent of an operating system — a platform that other companies can use to develop their own Web sites using Microsoft’s powerful data centers. It wants to sell advertising that will appear on these independent Web sites and in Microsoft’s own software and video games, as well as its own Web site. And it wants to use its online services to freshen up its own software.

This thinking led Microsoft to create a new brand, Office Live, to incorporate the online extensions of Word, Excel and other business services. And it repackaged its e-mail, instant message, blogging and Web search services under the brand Windows Live, supplanting the venerable if musty MSN.

“There are a billion Internet users in the world, and a lot of those PC users are running Windows,” explained Kevin R. Johnson, who oversees the 20,000-employee division responsible for the Windows operating system as well as the online unit.

Once traditional software is complemented by services delivered online, he said, “it’s a pretty logical thing that people would say, Hey, I’ve got Windows and here’s a set of Windows Live things that extend those services.”

Yet what seems logical at Microsoft seems like a marketing gaffe to most of the advertising and search industry.

Kevin Lee, the chairman of Did-It, a search marketing agency, said neither MSN nor Windows Live would appeal to consumers in a market where Google has become a synonym for Web search. “People don’t see Microsoft as the place you search,” Mr. Lee said. “MSN is not a verb, and neither is Windows Live.”

Mr. Berkowitz does not defend the brand choice he inherited.

“I don’t know if Live is the right name,” he said, saying he had not decided what to do about it. But before he gets around to deciding whether to change the brand, he wants to make Microsoft’s search engine itself more appealing to consumers.

What he did decide was to keep the MSN name afloat, too, as it is well known and its various services have 430 million users around the world. He promoted Joanne K. Bradford, Microsoft’s head of advertising sales, to oversee and revive the MSN portal.

“I have all these users who come to MSN and a very small subset of them use our search,” he said. “My No. 1 strategy is to keep these people from leaking.”

So for now, Mr. Berkowitz has decreed that Microsoft will promote at least two Internet services. MSN, in Mr. Berkowitz’s conception, is a conventional portal with links to programming on various topics that competes with Yahoo and AOL. Windows Live, which uses the site, is meant to look much like Google, a spare-looking page that can be customized with modules from various services and news feeds. Read More >>>

Published By: NewYork Times
By Saul Hansell

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