By some accounts Microsoft has spent $600 million and five years rebranding its MSN search and changing its algorithm to Live Search. The result? In February, 2005, Microsoft's MSN Search accounted for nearly 14% of all US Web searches, compared with a 46% share for search leader Google, according to research firm Nielsen/NetRatings. Just two years later, Microsoft's rebranded Windows Live Search and managed to slide to a 9.6% share of the US search market, compared with Google's nearly 56%. That amounted, then, to nearly 300 million lost searches per month and things have only got worse since with figures indicating that even Microsoft’s own staff at Redmond only use Live Search at a 48% rate.

Microsoft has always learnt that persistence pays off. The tactic of taking a run at something, falling short and coming back again and again paid off to the tune of $5.9 billion a year for its Windows product and a massive market share for its Windows Server. So why does it not work for search?

Three reasons really and they are a lesson to anyone wanting to start up an online business:

We have covered here before why Microsoft’s attempts to take its business models online are essentially flawed with the failure of its Encarta division but it pays to go over them again for Search.

Comprehension of the medium. This has to be at a deeper level than “I have a product others are making money on online, I too am going to go online and make money from it.” Essentially this is what Microsoft has done with Search. A late entrant in the game it is behind in terms of technology (its search engine can take up to six months to index a new website), in terms of understanding end-user behaviour (echoes of Encarta all over here again) and in terms of how the product will be marketed to the end user Live.com was launched without the usual MSN branding link up with the result that those who might have used it continued to use MSN Search and many were unaware of Live even having been launched.

Comprehension of the business model. Here, on the surface of it at least, Google and Microsoft are on the same page: online visitors use their search engine page. The search engine page serves results. The search engine is monetized through the targeted selling of online ads. All ok so far, except Microsoft makes about $500 million per quarter from its search versus Google’s average of $1.2 billion. The reason for this is simple: speed and relevancy. Google understands this and they constantly tweak their search engine algorithm to deliver relevant results (even if it produces an SEO nightmare) Microsoft are still struggling to deliver relevancy even on their latest algorithm.

Comprehension of the customer dynamics. Here Microsoft falls flat on its face. Google’s seemingly simple dictum “to index the world’s information” comes with the subtext that it then makes it easy to find anything, anywhere. If Microsoft has a pop-vox dictum it certainly is not obvious and its deep understanding of corporate culture dynamics works against it when it tries to find ways to appeal to the average Joe using the web (and on that note do check out Live.com – apart from the windows logo it looks like the kind of cheap knock-off some phishing artist might cobble together).

These three elements make up the formula which takes a product, or a service, from the provider, through the chosen medium, to the end user. Microsoft has the money to keep going at this at least as long as it did for Encarta before it admits defeat, the average online business person usually only gets one run at anything and unless that run has been thought out really well it will only lead to failure.

This also brings another interesting point which does play a part in the setting up of any business. Why doesn’t Microsoft just pack up the search game and either buy out Yahoo (who have got a semi-decent search) or decide to focus on the things which truly make it great?

One reason is pride. Microsoft is sensitive to getting egg on its face and pulling out from Search without having explored every option available is not something it does. This again applies to every online business model. Your ability to keep going until everything possible has been done is crucial and, when you do it, the lessons learnt are important enough to actually help you avoid costly mistakes in your next online business venture. The other reason for Microsoft of course is diversification. In a world where cloud computing is a possibility and where everything seems to be migrating online to admit defeat in that particular area so quickly without being able to offer a viable fallback plan would dent its reputation for being able to deliver tools and solutions business want.

As we are writing this Microsoft is one month into its in-house testing of a new search which is, at the moment, being called Kumo. True to the corporate spirit that guides it Microsoft has taken some statistics which show that "In spite of the progress made by search engines, 40 percent of queries go unanswered; half of queries are about searchers returning to previous tasks; and 46 percent of search sessions are longer than 20 minutes. These and many other learnings suggest that customers often don't find what they need from search today." and has gone on to improve the search experience for users.

The company is expected to rely heavily on technology from the many search companies it has purchased. The health search engine from Medstory and travel engine Farecast are already part of Microsoft's search products. The next version of Live Search, which may or may not use the Kumo name, is expected to draw on those as well as semantic search technology from last year's acquisition of Powerset.

Microsoft can do that because it has deep coffers which makes its sense of pride and persistence all that much stronger. The average online business doe snot have that luxury which means it has to have done its homework and put together its rationale and business plan right from the start.

If we take the name Microsoft out of this article this becomes a valuable list of what to do and what not to in order to succeed in the online world. That one of the world’s most powerful companies is still prone to making mistakes which the average person with nothing more than a three figure budget and a hot idea, makes is a sobering  thought and the strongest indication yet of the web’s ability to be the great equaliser.

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The Web Direct Studio company Blog is penned by a number of our in-house staff from our different areas of activity. They write anonymously in order to free their range of expression, particularly when it comes to criticizing their sector of activity or making observations about their job. They work under a simple edict: What you say must make sense and must fit in with the tone of our online business. Apart from that they are the ones who choose the topic they write about in each Blog post.