Lu Hire Shows Ballmer Is Switching Tacks to Help Microsoft Battle Google in Search

By Clint Boulton  |  Posted 2008-12-05

Lu Hire Shows Ballmer Is Switching Tacks to Help Microsoft Battle Google in Search

Industry experts treated Microsoft's Dec. 4 hiring of Qi Lu as president of the company's cursed Online Service Group, one of the company's few glaring red zones, with cautious optimism.

After all, Microsoft CEO Steve Ballmer has run plenty of business and advertising guys, such as Kevin Johnson, through the Microsoft Online Service gauntlet with no success.

As Om Malik noted, Microsoft's online revenues were $770 million, up 15 percent from Q3 2007 in the last quarter. But the losses jumped 80 percent from the previous year to $480 million. That's staggering for a company of Microsoft's historic economic efficiency.

Lu will attempt to boost Microsoft's struggling search and online ad efforts, as well all the company's online information and communications services, reporting to Ballmer.

By hiring Lu, analysts see Ballmer as taking a page out of Google's playbook: Hiring an engineering heavyweight to do the heavy search ad algorithm lifting. This could be Microsoft's chance to combat Google on a more level playing field.

Some analysts, such as  Forrester Research's David Card, aren't sure what to make of Ballmer's move. Card told eWEEK:

They could have gone for a media guy or a product guy and they went for an engineering manager. Does that mean that it is a more engineering focused, or is he just really a good manager and they don't think that they need an operations guy in charge because two or three of his lieutenants are going to be doing the product development, the marketing and the advertising sales? It's tough to get a read.

Enderle Group analyst Rob Enderle told eWEEK in the wake of Microsoft's announcement the move represents a change in tactics for Ballmer, who in Lu is getting someone that is less likely to get involved with the meeting-room politics of everyone "sitting around, telling each other how brilliant they are" and proceeding to do something stupid.

"They made an attempt to buy the company and then they decided, 'What the hell, we'll cherry pick it'," Enderle said, alluding also to Microsoft's previous coup of hiring Sean Suchter, Yahoo's vice president of search technology at Yahoo, Nov. 20.

Analysts Offer Mixed View of Lu Move

Adding Lu only adds to the luster, and underscores Ballmer's sentiment: If you can't buy them, poach them. Enderle added:

Now they've got somebody on board who at least knows the landscape and was able to compete at least to a certain degree with Google. More important, he understands the portal side of it, which is probably where both Yahoo and Microsoft should have focused instead of trying to make a head-on run against Google on search given that Google's now entrenched in search and is going to be really hard to displace.

Indeed, The New York Times' Saul Hansell echoed Enderle's sentiments, noting that Microsoft is combating Google at its own game:

Mr. Ballmer sees Microsoft's No. 1 enemy as Google. Google's No. 1 product is a search engine. So to beat Google at its own game, he may figure he needs the person who can make the best search engine possible. By that standard, Mr. Lu would be on anyone's short list.

With Lu running Microsoft's Online Services along with Suchter, Microsoft may poach more engineers from Yahoo, which has opened up its search platform. It could also give Microsoft the credibility to lure programmers from Google, Facebook or other Silicon Valley darlings.

Yet these potential advantages don't equate to a recipe for success, Enderle noted:

Is it going to be a silver bullet to the group? Boy, MSN has struggled ever since it launched. The only thing that may work this time is the combination of some experience, coupled with the fact that the position reports to Steve Ballmer, who is [insert a more vulgar word for annoyed here]. The only thing you can say for sure is if they don't start doing something quick, that is going to be a short-lived job.

IDC analyst Karsten Weide added that if you have a 65 percent market share, or Google's approximate share in search traffic, you're likely to keep that position.

"I have no reason to believe [Lu's] a bad choice, but we'll have to wait and see what happens," Weide noted. "There are only so many experienced online managers to go around. It's certainly not the worst choice that they could have made.  

Kara Swisher at AllThingsDigital has trenchant fun with Ballmer's letter to Microsoft employees about Lu's hire here.


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