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Microsoft Pri0

Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times technology reporter Matt Day.

July 30, 2009 at 12:45 PM

Microsoft’s Qi Lu says Yahoo deal is priority No. 2

You read that right. The Yahoo-Microsoft partnership is priority No. 2.

The first priority is search, according to Qi Lu, president of Microsoft’s Online Services Business. No. 3 is to invest responsibly and to hit financial targets.

Lu, who was a key person in Microsoft on the partnership announced Wednesday, talked more about the deal and what it would achieve at the Financial Analysts Meeting.

Scale was the main advantage, which Microsoft CEO Steve Ballmer also discussed Wednesday.

“With larger scale there’s several important advantages,” Lu said. “The first is almost immediate lift in quality user experience.” For instance, he said, the suggestions that come up when a user types into the search box is determined by what other users typically type in. The more data Microsoft’s search engine Bing has, the more likely suggestions will match what the user wants.

Bing, Microsoft’s search engine, has attracted 8.4 percent of search traffic, compared with Google’s 65 percent. If the Yahoo-Microsoft deal is approved by regulars, Microsoft is hoping to gain the 19.6 percent share Yahoo currently has.

“Even if you only have one user, you still have to crawl the whole Web,” Lu said. “When you operate at subscale you incur a certain amount of financial losses.”

Lu also talked about benefits for advertisers.

“With more clicks, the algorithms will be able to match the ads” to the right customers, he said. “Advertisers will get better ROIs [return on investment] per click. … This partnership will enable Microsoft and Yahoo to be more competitive, to innovate better, to benefit all our customers and users.”

He was also upfront about the challenges and talked about Google’s strong market share and brand strength:

“The early feedback from market has been encouraging. But the larger perspective is this only the beginning. It’s a good step but it’s a first step in a long, long, long journey.”

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