April 08, 2009

A stark sign of the challenge Yusuf Mehdi faces as a point man for Microsoft in the company’s battle with Google comes from the company’s own research into the habits of consumers online.

During regular “blind taste tests,” in which Microsoft asks randomly-selected consumers to score the quality of results from various Internet search engines, the quality of Microsoft’s search results have so improved that people can’t tell the difference between Microsoft and Google search results, says Mr. Mehdi, senior vice president of Microsoft’s online audience business group. But when Microsoft slaps the Google brand name on the results from Microsoft’s own search engine during another portion of its tests, users invariably score them highest.

Just by putting the name up, people think it’s more relevant,” he says.

Mr. Mehdi discussed the Google “brand pop” and other hurdles for Microsoft on Tuesday in an interview in his office in a verdant patch of Microsoft’s campus in the Seattle suburbs. The interview was part of a plan to begin talking more publicly about its Internet search business prior to a re-launch of its search engine in the coming months–a project that bears the code-name Kiev. People familiar with the matter say Microsoft has hired ad agency JWT, a unit of London-based WPP Plc, to develop a major advertising campaign for its new search engine, though Mr. Mehdi declined to comment on that topic.

Microsoft has been relatively quiet in recent months about its Internet search business as it regrouped following a string of setbacks. Last year, the company abandoned an effort to acquire Yahoo Inc. for nearly $50 billion and the head of its online business, Kevin Johnson, left to become CEO of Juniper Networks in July. More recently, Microsoft CEO Steve Ballmer has said he’s interested in acquiring Yahoo’s search business, a deal that could create a stronger rival to Google, though Yahoo‘s new CEO Carol Bartz has shown little interest in taking him up on the offer anytime soon.

Microsoft’s search group has stabilized since the company hired a former Yahoo search executive, Qi Lu, late last year to lead its online services business and recruited several other managers from Yahoo. Microsoft continues to invest heavily in its search business even as it makes cutbacks elsewhere in the company because of the weak economy. Even though Microsoft still finds itself in a distant third-place position in its share of the online search market behind Google and Yahoo, with just over 8% of searches by U.S. users, Mr. Mehdi says the mood in the search group is upbeat.