Xbox Kinect, Bing and Kin: Microsoft's Consumer Plays in 2010

Microsoft's 2010 saw a continued investment in Bing, its search engine, and the release of Kinect, a hands-free controller designed to increase the Xbox's viability.

Microsoft made some substantial bets in 2010. In addition to pouring millions of dollars into the development and marketing of its Windows Phone 7, the reboot of its smartphone franchise, the company invested in somewhat riskier endeavors.

One of those endeavors was Kinect, a hands-free controller for the Xbox. Intended to appeal to the same casual gamers who made the Nintendo Wii a breakout hit, Microsoft hoped that Kinect would increase the lifespan of its 5-year-old Xbox 360, whose sales success represents one of the bright spots in Microsoft's consumer product line. A hit with Kinect would help balance out some notable recent failures in that arena, including the Kin social networking phones, which utterly failed to find a substantial audience.

At the same time, Microsoft also continued to invest in Bing, its search engine, which has experienced incremental growth since its summer 2009 launch. Despite its Online Services division recording massive losses throughout 2010, the company seems determined to not only maintain Bing but also expand its capabilities.

As with its "all in" cloud strategy, Microsoft's moves with Bing and Kinect suggest a company seeking new avenues for expansion beyond its traditional product lines.

In January 2010, a snapshot of the search engine market by research company ComScore suggested that Bing, while not expected to overrun Google any time soon, was at least managing to hold its own in an aggressive marketplace: With a 10.7 percent market share, it lagged a few points behind second-place Yahoo at 17.3 percent, with Google continuing to dominate at 65.7 percent.

That note arrived Jan. 15, a few days before Microsoft ripped the "beta" tag off its Bing Maps Silverlight site, offering viewing options such as Streetside and Enhanced Bird's Eye. That upgrade arrived in the same time frame as other Bing improvements designed to boost the product's usefulness, including more information and charts in specific categories such as nutrition.

On Feb. 18, Microsoft and Yahoo received clearance from the U.S. Justice Department and European Commission to commence their 10-year search-and-advertising agreement. Under the terms of that deal, first announced in summer 2009, Bing would power Yahoo's back-end search, while Yahoo took over worldwide sales-force duties for both companies' search advertisers.

"U.S. market participants express support for the transaction and believe that combining the parties' technology would be likely to increase competition by creating a more viable competitive alternative to Google," read a statement at the time from the Justice Department. "Most customers view Google as posing the most significant competitive constraint on both Microsoft and Yahoo, and the competitive focus of both Microsoft and Yahoo is predominantly on Google and not on the other."

If Yahoo's search numbers were ported over to Bing with no attrition-so went the theory-then Microsoft would be competing against Google with roughly a quarter of the U.S. search engine market. That wouldn't necessarily threaten Google's hold on the market, but it would certainly alter the competitive dynamics of the search engine landscape in ways potentially beneficial to Microsoft. That being said, the smooth implementation of a deal that size would be necessary if Microsoft, which previously tried and failed to acquire Yahoo, wanted to squeeze all possible benefits from the deal.

Around that time, in response to growing privacy concerns among Internet users, Microsoft announced that Bing would delete stored IP addresses after six months. "The change is a result of a number of factors," Peter Cullen, Microsoft's chief privacy strategist, wrote Jan. 18 in a Microsoft On the Issues blog posting, "including a continuing evaluation of our business needs, the current competitive landscape and our ongoing dialogue with privacy advocates, consumer groups and regulators."

Between March and April, Bing's U.S. market share dipped from 9.62 to 9.43 percent, according to research company Experian Hitwise. At the same time, Google's rose incrementally, from 69.97 to 71.40 percent. Even if Bing hadn't fulfilled early pundits' predictions of a quick death, its month-to-month changes nonetheless seemed incremental. During a March talk at the Search Marketing Expo, Microsoft CEO Steve Ballmer suggested that it could take Bing years, if ever, to overcome Google: "I don't know how old I will be when that'll happen."

At least in public, Bing's executives declared they were focused less on winning the war for traditional keyword-based search and more on specific areas such as event-driven tasks and commercial queries.

"People are happy with keyword-based search," Bing Director Stefan Weitz told eWEEK in March. "People are creatures of habit, and they're fairly happy with Google's keyword search today and they think it works well and there's no reason for them to look around." User behavior, Weitz added, would be the ultimate arbiter of Bing's road map: "The more exciting place, and the place we're looking at more often, is how we expand the art of the possible in search."