Microsoft scores deals for Live Search

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Ina Fried CNET News

Published: 08 Jan 2009 18:29 GMT

Microsoft is hoping two new distribution deals will give its Live Search a much-needed boost.

The company is announcing on Wednesday a global deal with Dell, which will see Live Search be the default search engine and a Windows Live toolbar bundled on the bulk of consumer and small-business PCs sold by the computer maker over the next three years. That deal is in addition to a five-year deal with Verizon Wireless, which leaked out earlier on Wednesday.

The deal is the latest effort for Microsoft, which has been trying — and struggling — for the past four years to build a search business that can offer a substantive rival to Google. But the latest market share numbers indicate Microsoft is falling even further behind. Searches at Windows Live Search fell 16.7 percent year over year, giving Microsoft 9.1 percent market share in the US in November, according to Nielsen Online figures released earlier this week. Google's searches rose 21.7 percent, for 64.1 percent market share, and Yahoo's searches dropped 1.4 percent from November 2007, for 16.1 percent share.

In an interview, Microsoft senior vice president Yusuf Mehdi said the search product is now good enough that the time is right to start promoting it more heavily. Microsoft has already struck deals with HP and Lenovo to increase the distribution for Windows Live and Microsoft's search engine.

"We've gotten to a point where the product is now in a good enough state that we want to start to get it out more formally in front of more customers," Mehdi said. "These two partnerships are very significant for us, because it... gives an opportunity to put our search offering out before a broader audience now in a pretty mainstream way, and I think you should think about it as the first step of us slowly bringing up the dial on how we start to promote our product."

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Microsoft has also made other moves, including building its own ad-serving engine, spending billions to acquire Aquantive, and trying promotions such as its Live Search Cashback and other efforts designed to give consumers a financial incentive to use its search engine.

The Dell deal will kick off next month, while the Verizon deal will begin in the first half of this year and includes both mobile search and other mobile-advertising services. "It's a big win for us and by far the largest search and mobile display relationship we've entered into with any mobile operator," Mehdi said.

Mehdi acknowledged that Microsoft needs more than distribution deals to truly compete with Google. "These distribution partnerships are part of our strategy," he said. "We know we have to do a lot of other things, including improve the product, including being able to market direct with consumers, and build loyalty and brand around our offering."

Mehdi wouldn't say how much market share Microsoft expected to gain with the Dell deal or talk about Microsoft's other plans, including a rumoured rebranding effort. He did say the Dell deal is flexible enough to accommodate a name change.

Microsoft had supposedly been in a bidding war against Google for the Verizon deal, according to earlier reports from The Wall Street Journal. Verizon Wireless and Microsoft have declined to discuss financial details of the deal. But a source close to the company said the five-year arrangement is worth a minimum of $650m, with Microsoft paying Verizon on a per-handset basis.

This is believed to be the largest mobile search and advertising deal to date. The Journal reported last year that Google's deal to offer search on Sprint Nextel phones was about half what Microsoft was willing…