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Ballmer rues Web-search decision

By Kim Peterson
Seattle Times technology reporter

	Steve Ballmer
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Internet searching is a hot technology business, but you wouldn't know it from looking at Microsoft.

The company doesn't use its own technology for Web searches. Instead, it relies mostly on a competitor, Yahoo!, for search results. And another company, Google, wears the search-engine crown.

That's going to change within the next year, Microsoft Chief Executive Steve Ballmer said yesterday in a speech to marketing executives at Microsoft's headquarters. The company is working on its own search engine, and is expected to debut the technology within the next 12 months.

Ballmer also said he regretted not directing more of Microsoft's resources earlier to developing search.

"That's probably the thing I feel worst about over the last few years — not making our own (research and development) investment," he said.

Ballmer had little to say about Wednesday's announcement from European regulators that Microsoft had violated competition laws and gained an unfair advantage over competitors in the media player and server businesses. Microsoft said it will appeal the finding by the European Commission, which also fined the company about $612 million.

Ballmer said he would not comment on rumors about Microsoft's possible acquisitions, including talk of buying out rival America Online. He said he has been too busy paying attention to rumors coming out of Europe.

Microsoft's MSN division is hosting more than 500 marketers this week to discuss how companies can reach audiences online. Yesterday, MSN released the results of a survey it sponsored showing a direct correlation between online advertising and product purchases at physical stores.

Researchers showed one group of test subjects various online advertising campaigns from Nestlé, Kraft Foods and Procter & Gamble — three companies in what is known as the consumer packaged-goods industry. A second group of test subjects saw only online ads from the American Red Cross.

Researchers then tracked the purchases of both groups through records kept by supermarket frequent-shopper cards. The online advertising appeared to increase sales of the packaged goods by 7 to 12.5 percent, the study said.
 
Companies spend only about 2 percent of their marketing dollars on online ads, experts say. The study could show what kind of results online advertising can bring, said Eric Hadley, advertising sales marketing director for MSN.

There's no doubt that MSN's sponsorship of the study could raise doubt about its legitimacy. But a marketing consultancy hired to design the study's methodology defended its credibility.

Rex Briggs, managing partner of the company, Marketing Evolution, said he insisted at the beginning of the study that Microsoft agree to make the results public, no matter what the outcome. Microsoft didn't know the results until last week, after it had already committed to publicizing the study at this week's conference, he said.

"I'm certainly not going to risk my reputation on pushing data that in the long term will turn out not to be true," he said.

Material from The Associated Press is included in this report.

Kim Peterson: 206-464-2360 or kpeterson@seattletimes.com

Copyright © 2004 The Seattle Times Company