Days after Microsoft withdrew its $40 billion-plus bid for Yahoo, one of its top online services executives stood before financial analysts at the Merrill Lynch Technology Conference to again assert that the Yahoo ship has sailed, and that Microsoft would be pushing forward alone.
"Yahoo would have been an accelerator, but we've moved on and now we're focused on how fast we can grow organically," Brian Hall, Microsoft's Windows Live general manager, said at the conference. "They would have brought significant assets, but we've moved on. You're going to notice a trend there."
Hall said he had several goals for Microsoft's online business, including creating a killer application for Windows through Windows Live, using contextual information from Hotmail and other Microsoft Web applications as a way to drive display advertising across Microsoft's sites and third-party Web sites, pushing into contextual search that takes place outside the usual search engine home page and growing Microsoft's online partner base.
Hall said that Microsoft already had achieved a strong position on the Web, with 448 million active visitors logging into Microsoft's online services last month, and Microsoft's sites accounting for 11% of the total amount of time spent on the Web worldwide.
Still, Yahoo would have brought additional scale to compete with Google, which accounts for a much larger chunk of the online search and search advertising market. Microsoft's share has remained steady, even dipping slightly, in that market over the last few years. Asked about how Microsoft could overcome the loss of Yahoo's scale, Hall referred back to the improvements Microsoft's making and has made to its online services.
"We're bearing down in the last little while," he said. For example, he added, Microsoft has quadrupled the size of its search index in the last year, completed the aQuantive acquisition to give it a strong position in the growing display advertising market, begun pulling Windows Live into a cohesive suite of applications, and kept Live Messenger growing.
Microsoft will soon begin combining elements of its MSN Web portal and Windows Live by adding things like an e-mail notifier and presence indicator as well as other social networking features into MSN, according to Hall. A test of that integration in the United Kingdom drove higher user engagements and more site visits.
So far, Microsoft has had limited success with social networking, but Hall hopes the company can turn that around by turning social networking more into a feature than only a destination, as it largely is today with sites like Facebook and MySpace.