Whatever happened to Yahoo! and MSN?

Since its launch ten years ago, Google has grown into a seemingly unstoppable force in search engine marketing, trumping Yahoo! and accelerating ahead of MSN to corner the market with its AdWords sponsored listings service.

The latest figures from Nielsen/NetRatings show that Google commanded a whopping 78.6 per cent share of the UK search sector, compared with 6.8 per cent for its closest rival Yahoo! and just 3.4 per cent for MSN.

Despite already exerting a monopoly capable of making Rupert Murdoch quake in his boots, Google has yet more expansion plans.

In an effort to take a larger slice of the UK search market, the internet giant intends to hire thousands of new engineers to create a research and development team in Europe as big as the one it has in the US.

Meanwhile, as Yahoo! and MSN fight over the scraps that fall from Google's table, industry experts are questioning whether anything can be done to level the playing field.

"Google exercises an extreme form of dominance over the UK search market," says Jean-Paul Edwards, head of media futures at Manning Gottlieb OMD. "If Yahoo! and MSN don't catch up, measures need to be put in place to prevent Google abusing its position of power."

Domination

Google's unassailable success is due in no small part to the fact that it was first to market with an algorithmic search engine that made Yahoo!'s offering look positively antiquated.

Its clean, friendly design and functionality quickly made it a favourite among internet users, while the launch of the Adwords sponsored search service in August 2000 allowed Google to begin cashing in on its rapidly growing popularity.

Less than a decade later, Google's pay-per-click offering now accounts for 99 per cent of the $3bn generated each quarter by the internet giant, placing it light years ahead of rival offerings from Yahoo! and MSN.

"Internet users make a conscious decision each and every time they use Google to search the web," says Jon Steinback, product marketing manager for search at Google. "This means we come out on top of our competitors tens of millions of times each day."

Fight back

With advertisers set to pour well over £1bn into search engine marketing this year, Yahoo! and MSN will not take things lying down. Having been distracted by the portal side of their businesses for too long, both are setting their sights on giving Google a run for its money during 2008.

The prospect of increased competition in the marketplace is already exciting media agencies keen to provide their search clients with a viable alternative to Google.

"No advertiser that I know of wants to see Google assert such dominance over the market," says Robert Horler, managing director of Diffiniti.

"There is an overwhelming desire among agencies and their clients to create a level playing field by supporting Yahoo! and MSN."

In June this year, Yahoo! made its most significant effort yet to raise its game with the launch of Panama, its long-awaited next-generation paid-search platform. Previously, sponsored links appearing on Yahoo! results pages were a direct result of how much advertisers had bid on a specific keywords.

However, the Panama system has changed the way brands compete for ad placements, through the introduction of a dual formula that takes into account the amount of money bid, as well as a new quality index.

The qualitative index is intended to ensure that sponsored links served to Yahoo! Search-engine users are as relevant as possible. In an effort to rival Google, the new Yahoo! search service takes a number of factors in to account, including the relevancy of the copy produced by the brand, the quality of landing experience, as well as how the advertiser has structured its campaign.

Having devoted two years and more than 400 full-time developers to perfecting Panama, Yahoo is confident its investment will pay off.

"I'm not saying that the end of Google is nigh, but its dominance of the UK search sector can't continue unabated," insists Richard Firminger, regional sales director for Northern Europe at Yahoo!. "With the launch of Panama, we are well and truly on track to become a significant force in the market."

Despite Yahoo!'s bullishness, Panama has so far failed to cause a stir in the sector. The internet giant has spent the last few months overseeing the migration of 1,000 advertisers on to the new system, but it is yet to emerge as a viable alternative to Google.

"Panama is never going to tempt advertisers away from Google because it is essentially a poor copy of Adwords," argues Edward Foster, head of search across EMEA at Universal McCann.

Yahoo is hoping to remedy this by extending the system on to mobile in an effort to be among the first allow to advertisers to book web and wireless search campaigns simultaneously.

The internet giant also recently updated its search engine in the US, with plans to roll out improvements across Europe. Yahoo!'s new search engine promises more relevant answers to queries, integrating audio, video and photos into its results pages. It features a new search assistant, which makes suggestions if it detects that a user is having trouble phrasing a search.

Lost time

Meanwhile, MSN is also chomping at the bit to bring the fight to Google. Microsoft was the last of the major internet companies to enter the burgeoning search market in 2004, with the launch of what is now Live Search.

However, it is attempting to make up for lost time by revamping the service with improved functionality, personalisation and a focus on social networks. The move follows research carried out by Microsoft, which revealed that 50 per cent of MSN users were unhappy with its fledgling search offering and wanted to see it deliver more relevant results.

The relaunch comes as Microsoft attempts to justify the hype surrounding last year's unveiling of AdCenter, its paid search platform that serves all paid-search traffic on MSN Search and Windows Live Search.

Key features of the service include a keyword suggestion tool, which recommends relevant keywords to advertisers, based on previous MSN searches, and a cost estimator that helps advertisers stay within their agreed budget.

"I'm absolutely convinced that we can erode Google's share of the UK search market," insists Derrick Connell, global general manager of Live Search at MSN. "We have made more progress in the past three years than Google has in the past ten."

Microsoft has something of a heritage of coming from behind to knock established market leaders of their perch. It did so in 1998 when Internet Explorer overtook Netscape to become the world's most popular web browser, and again this year when its Xbox 360 console began outselling Sony's PlayStation 3.

However, MSN's lack of experience in the UK search sector has put it at a distinct disadvantage, with AdCenter yet to cause any real problems for either Google or Yahoo!.

"MSN differentiates itself through the unique and innovative features it offers its search clients," argues Stephanie Carr, managing director of The Search Works. "It goes without saying, however, that AdCenter only has a very small foothold in the market."

Evolution

The UK search sector is evolving at a rate of knots, with internet users increasingly demanding multi-media functionality from their search providers. While Google has the sponsored listings sector all but sewn up, it is yet to assert its dominance in the emerging disciplines of video, social search and personalisation.

With their established content and digital display businesses, Yahoo! and MSN could steal a march on Google as search evolves into new areas. "As search blends with display, and digital blends with other media, Google will undoubtedly begin to lose its grip," claims Horler. "It faces a number of serious business issues going forward."

The fact that there are three times as many wireless devices globally than PCs means that mobile also represents a crucial new frontier for the major search engines. Google, Yahoo! and MSN are all racing to stake their claim to the nascent sector, with a clear winner yet to emerge. "Mobile is still virgin territory for search engines," explains Guy Phillipson, chief executive of the IAB. "It is the next frontier on which the battle for dominance will be fought."

With Forrester Research predicting European spend on search to exceed £5.5bn by 2012; the big hitters will have to fight harder for their share of the spoils. Google will always be a force to be reckoned with, but the rapid expansion of UK search marketing sector looks set to provide Yahoo! and MSN with new opportunities to challenge its dominance.