To summarize it all, Google grabbed more share at
Particularly bad off was MSN Search, as Danny shows in this graph of Microsoft's market share in search:
Ouchie. As Danny says, "[Not] a pretty picture for Microsoft ... They haven't held share. It's drop, drop, drop."
It really is remarkable how badly Microsoft is doing against Google. I never would have thought that, nearly four years after they started their "Underdog" project to build a Google-killer, Microsoft would not only be badly behind in search, but also actually losing market share.
See also my earlier posts, "Yahoo and MSN cannot compete?" and "Kill Google, Vol. 3".
Update: Corrected the post to say that Google's gains came at the expense of Microsoft and AOL alone. Yahoo and Ask appear to have held share.
Update: For full disclosure, I should say that Chris Payne and I talked about Underdog back in 2003 (before I started Findory). Not to worry, I had no influence to speak of -- Chris and I disagreed on what was necessary to beat Google -- but I certainly am more critical of MSN Search's missed opportunities because of that history.
Update: Erik Selberg (creator of Metacrawler, now at MSN Search) takes issue with those who would criticize Microsoft's progress, saying "Well, what did anyone really expect?" and "It's not realistic to think that it can be done quickly." He also has some thoughts on the problems at Yahoo and upcoming stagnation at Google. Definitely worth reading his point of view.
Update: Coming full circle, Danny Sullivan comments on Erik's post.
Update: And a follow up post from Erik. Erik says. "Microsoft might beat Google. And Google might beat Microsoft .... Google is pressing ahead, and they've got a big lead ... Unless they do something monumentally stupid, which I doubt, it'll be a long, tough challenge to catch and beat them." He also defends the decision to move to the Live brand. Again, worth reading.
Update: There is also some discussion with Erik and others in the comments for this post.
Update: See also my follow-up post, "MSN Search and beating Google", that includes some good thoughts from Dare Obasanjo.
Update: A couple weeks later, Saul Hansell at the NYT writes:
There is a lot about the way Microsoft has run its Internet business that Steve Berkowitz wants to change. But he is finding that redirecting such a behemoth is slow going.The article goes on to show Microsoft's steep drop in market share, talk about brand confusion between MSN and Live, and discuss how far behind MSN Search appears to be in relevance.
The pressure is on for Mr. Berkowitz to gain control of Microsoft's online unit, which by most measures has drifted dangerously off course.
Over the last year, its online properties have lost users in the United States. The billions of dollars the company has spent building its own search engine have yet to pay off. And amid a booming Internet market, Microsoft's online unit is losing money.
Google, meanwhile, is growing, prospering, and moving increasingly onto Microsoft's turf.
Microsoft lost its way, Mr. Berkowitz says.
Update: Two months later, Danny Sullivan reports that Microsoft's search market share is continuing to decline.