Berkowitz Sees Hidden Potential at Microsoft

Speaking at the Search Engine Strategies conference in New York last month, Steve Berkowitz, SVP of Microsoft’s Online Services Group, and SES Conference Chair Danny Sullivan discussed Microsoft’s goals for its search program, and what Microsoft needs to do to get there.

Berkowitz, who joined Microsoft from Ask.com about a year ago, spoke of the hidden potential in Microsoft. He is sure that somewhere within the mammoth organization lies the innovation and technology that will allow Microsoft to succeed in search and advertising, if only it can be harnessed.

“When you open a door [at Microsoft”, you find an incredible amount of ideas, and talent, and actually even products that we have to figure out how to unlock the potential of.” Berkowitz said. “When I look at what I have to do now, it really is just about unlocking that potential.”

For Berkowitz, the path to success requires Microsoft to leverage the assets it has, to use its ability to touch consumers in different ways, and then “crack open the vault” of Microsoft’s new and experimental technologies. He described a recent executive retreat that included an in-house Demo-fest, which highlighted more than 100 different projects that are being developed inside Microsoft by various groups.

“This company has so much innovation, so much creativity, and so much talent. And yet we haven’t as a company done a very good job of making ourselves cool. I was amazed by the level of technology innovation that sits behind the scenes that we haven’t yet been nimble enough, or creative enough, or bold enough to bring to the forefront. You’re going to see us do that in ways we haven’t before.”

Unlocking Innovation in Search & Advertising

Berkowitz hopes to bring some of that technology to bear on Microsoft’s search and advertising offerings. Microsoft has already created some innovative products through its adCenter Labs (adLabs) initiative [http://adlab.microsoft.com/”. AdLabs has been testing tools that can automatically classify a page by its content, analyze users’ search funnels, forecast impressions and demographics by keyword, or detect commercial intent based on a search sequence.

But not all of the improvements in search will come directly to Microsoft Live Search at Live.com. That’s what Berkowitz calls “destination search,” where a user goes to a specific site to search, and it’s not going to continue to be the dominant way people find things online. More and more searches are taking place away from a box on a search engine’s site, which Berkowitz calls “convenience search.”

That is the area that Microsoft hopes to conquer, by leveraging its MSN network of sites, its Xbox gaming console, and its online mail, messaging, and blogging applications. According to Berkowitz, the future of search will require integration into the user experience, wherever a user may be.

“I believe it’s going to be about where you take the experience of search. I think that’s more of what you’re going to see us continue to do. To create innovative ways to deliver search in the experience you are. I see Microsoft having a great ability to do that,” he said.

One example of Microsoft experimenting with the way it delivers results is the Ms. Dewey search engine. The site was launched six months ago, both as an example of a new interface and as a marketing program. The site delivers results via the character of Ms. Dewey, portrayed by actress Janina Gavankar. Gavankar, in character, joined Berkowitz on stage during his keynote discussion, interrupting the line of questioning with some lighthearted banter, as she does on the MsDewey.com site.

While there are many more interesting and useful interfaces and innovations than the Ms. Dewey site, it does prove that Microsoft is willing to extend itself outside the traditional search box.

Reaching Critical Mass

The top priority for Berkowitz and his team right now is to drive toward critical mass from an advertiser perspective, he said. That won’t require any big acquisitions or mergers, such as the oft-rumored Microsoft-Yahoo tie-up. “My goal in the next 12 months is to focus on the organic audience that we have. We have 500 million people that use our products globally. They just don’t use them enough,” he said.

If Microsoft can increase the engagement of those users; take those MSN users and turn them into searchers, or Windows Live Hotmail users, or Windows Live Messenger users, it will have a large, loyal audience that it can monetize through search.

Microsoft already has an advantage over Google in the display ad space with MSN, even with Google’s potential acquisition of DoubleClick. It plans to extend the value of MSN by adding more social media features, with both programmed content and user-generated content.

Microsoft began making an investment in advertising about 18 months ago, when it created the Windows Live brand and began building its adCenter platform. While the MSN unit had always been dedicated to advertising, those moves marked a larger Microsoft commitment to an ad-supported strategy.

The adCenter platform launched in the U.S. a year ago, and so far advertisers seem to love it or hate it. Those that love it are seeing a return on investment (ROI) from advertising with Microsoft, but all agree that there is not nearly enough traffic going through the system. Those that hate it criticize the quality and relevance of ads that show up in search results. Many of these issues are mere growing pains, as Microsoft tweaks its quality-based ranking system for its ads. That excuse will only hold out for so long, though.

Microsoft likes to say that the search space is still young, but if it doesn’t begin to offer relevant results, and decent levels of consistently good traffic to advertisers, the opportunity could pass them by.