Beyond Binary

In what could be a blow to its image, Microsoft's main Bing search site suffered through an outage on Thursday evening.

Visitors to Bing.com were getting a browser error message rather than a search bar. Service was down for at least 45 minutes before being restored around 7:10 p.m. PST.

Microsoft acknowledged the issues on its Twitter feed and said it was looking into the matter. It later offered the following explanation, posted to a Bing blog by Satya Nadella, senior vice president of the Online Services division:

The cause of the outage was a configuration change during some internal testing that had unfortunate and unintended consequences.

As soon as the issue was detected, the change was rolled back, which caused the site to return to normal behavior. Unfortunately the detection and rollback took about half an hour, and during that time users were unable to use bing.com.

We strive to maintain a high standard of operational excellence at Bing. We are running a post mortem to find out how our software and processes need to be improved to prevent anything like this from happening again.

A Microsoft representative did not immediately return an e-mail seeking comment.

The outage comes after a big week in which Microsoft announced new search abilities for Bing as well as improved mapping.

Updated at 7:13 p.m. PST to reflect site's return. Updated at 11:13 p.m. PST with Microsoft statement.

SAN FRANCISCO--Although Microsoft would rather everyone ran out and bought a Windows Mobile phone, the software maker is aware of reality. And, since it wants people to use Bing on their phones, it knows it needs to have software that works on other devices.

"Everyone understands the popularity and the pervasiveness of the platform," said Microsoft principal group program manager David Raissipour, following a Bing event Wednesday. "We are actively working on it."

Raissipour confirmed Microsoft is working on a mobile Bing application that will combine a number of features--more than just mapping and search. However, he declined to say what all of those features are or when the software will be ready.

I probed as to whether some of the cool mapping technology Microsoft showed on Wednesday might make it onto phones. Raissipour said such mapping requires a rich platform, but could potentially be done without Silverlight, if necessary. So, what about the iPhone?

"It's certainly possible," Raissipour said. "That's a rich platform."

Microsoft already has native mobile applications for many Windows Mobile phones, BlackBerry devices, and a number of Verizon feature phones. The company is also exploring what it might be able to do on Android, particularly on non-Google branded Android devices. In the meantime, the company has its mobile m.bing.com Web site.

I also had a chance to catch up with overall search engineering chief Satya Nadella to ask some overall Bing questions.

In particular, I wanted to see just how many people are actively choosing to go to Bing.com, as opposed to just searching via MSN or a browser tool bar. With Bing's predecessor, Live Search, very few people actually went to the Live.com page.

"It's still a small percentage," Nadella said, but noted that it has succeeded in getting a fan base, which was a key early goal of the product.

When it comes to the data that Microsoft is including at the top of some search results, in general, Nadella said Microsoft is not paying for the content, nor are companies paying to get their information included.

The benefit to Microsoft is that it displays more useful results while content providers get a link high up in the results page. "It's kind of like SEO [Search Engine Optimization] for structured data," Nadella said. As for those new mapping abilities, I encourage you to check them out for yourself and read . In addition, though, here's a video I did with Microsoft's Blaise Aguera y Arcas, where he walks through the new features.

Unlike when you stand over your coworker's desk, Microsoft's Bing search engine actually works better when you hover.

One of the key features of the would-be rival to Google is that when you hover to the right of a result, you can get a preview of what to expect. As part of an update this week, Bing's hover result will now feature more information including a thumbnail preview of the site in question.

Microsoft is using Wolfram Alpha to help power certain results, such as this search for the fat content of french fries.

(Credit: CNET News)

One of the ongoing challenges for Bing, besides just getting more people to use the site, is letting them know that the hover feature is there. Microsoft's research has shown it gets high usage from those who know about it, but also finds that lots of people don't know the feature is there. Microsoft has been experimenting with some different visual cues that might make it easier to stumble upon the previews.

The hover feature was developed by the San Francisco-based team that Microsoft acquired as part of last year's acquisition of Powerset. Powerset, which developed a semantic search technology, also powers Bing's index of Wikipedia.

Bing's fall update update also includes the first fruits of a deal with Wolfram Alpha. As part of that arrangement, certain health related searches, such as "how many calories in a hamburger" will now feature information from Alpha. Bing will also rely on Alpha for some math calculations, Microsoft said in a blog posting on Wednesday. Wolfram noted that Microsoft is one of the first customers for a commercial licensing program that was formally announced several weeks ago.

Other changes to Bing include improved local results for topics such as weather and events.

It's all part of a wave of updates Microsoft is making to Bing this week. On Tuesday, Microsoft said it is moving its MSN Video site under the Bing umbrella, with a new video page that can be used to watch videos from places like Hulu and elsewhere.

The company also announced some enhancements to Bing Maps, including the ability to use the mouse to alter a suggested route and have one's directions re-calculated.

The improvements come as Microsoft is looking for ways to stand out from Google as it tries to wrest share from its much larger rival. The software maker has seen a modest uptick but faces steep hurdles in trying to make more significant gains.

Experian Hitwise said Wednesday that Bing's share reached 9.57 percent in October. That's up from 8.96 percent in September, but still well behind Google, which had more than 70 percent and Yahoo, with 16 percent of the U.S. search query market.

While adding features is clearly important, trying to stay ahead in the search game can be quite a challenge. Just hours after Microsoft announced a deal last month to index real-time tweets from Twitter, Google announced plans to do the same.

Microsoft has also gotten some unwanted attention for one of its features--the Bing Cashback program--where users can get a portion of their online transactions rebated by starting off on Bing. A blog posting outlined a flaw in the mechanism that could allow people to get cash back without ever spending money via Bing.

That posting was pulled after a demand from Microsoft's lawyers.

Microsoft said on Tuesday that it is merging its video search efforts with its MSN Video site into a new page that will bear the Bing moniker.

Bing Video, Microsoft said, will serve as a site for watching everything from viral videos to full-length TV shows and video, drawing on content deals with sites such as Hulu, CBS, MySpace, DailyMotion, and YouTube.

The new Bing Video page replaces MSN Video and includes both video search as well as content from sites such as Hulu and CBS.

(Credit: Microsoft)

Microsoft notes that video is now a mainstay of the redesigned MSN home page and says MSN will continue to create original programming, such as its "Last Night on TV" effort.

The branding remains a challenge though, as evidenced by a video from Microsoft's Rob Bennett talking about the changes. The video, embedded below, features a "view more on MSN Video" link that, when clicked on, takes a user to the new Bing Video site.

The new Bing Video page is part of a series of changes Microsoft is making as part of a fall refresh of its search site. Earlier on Tuesday, Microsoft made some enhancements to Bing Maps, including the ability to use the mouse to alter a suggested route and have one's directions re-calculated.

The company said to expect more announcements later this week.

Disclaimer: CNET News is published by CBS Interactive, a unit of CBS.

Microsoft's search deal with Yahoo is the culmination of months of well documented negotiations, but in many ways, it is just the beginning of the long road ahead.

In the coming months, Microsoft and Yahoo will not only have to win regulatory approval for the deal, but also figure out how to bring together disparate approaches to the search market.

Microsoft has spent much of its energy in the last couple years refining its core technology, improving in vertical categories, and rebranding its Web search under the Bing moniker. Yahoo, meanwhile has put a lot of energy into tools that allow others to build on its technology, including the BOSS (Build your Own Search Service) and SearchMonkey efforts.

Mehdi

As part of the deal announced on Wednesday, Microsoft will now be responsible for trying to merge those efforts. In an interview, Microsoft Senior Vice president Yusuf Mehdi said Microsoft hasn't looked at the specific lines of code in that area, but is open to trying to take Yahoo's best ideas and integrate them into Bing.

"We like the approach that Yahoo has done," he said, referring to SearchMonkey and BOSS.

Both Mehdi and Yahoo Executive VP Schneider acknowledged that there are integration challenges, but Schneider said there is a clear delineation of who is responsible for what.

"At the same time we are integrating, we are really divide-and-conquering," Schneider said in the joint interview with Mehdi. "The reality is in the way we structured (the deal), it allows each of us to innovate in the areas that will jointly bring advantage."

The fact that the companies have already spent time thinking about these issues reflects the different nature of the discussions this time around.

Whereas last year's negotiations were done with Yahoo's board and a keen eye on Wall Street, the deal announced on Wednesday is much more focused on how to build a search business for the long term.

CEO Steve Ballmer noted on the conference call earlier Wednesday that the two sides have a 100-page playbook as opposed to a two-page term sheet and also noted that the negotiations were handled by management as opposed to representatives of the company's boards.

Schneider

In addition to being run by the top management from Microsoft's online group, including Mehdi, Senior Vice President Satya Nadella, and online unit President Qi Lu (a former Yahoo executive), Mehdi and Schneider said the negotiating teams routinely called on the companies' engineering and sales ranks to make sure the deal they were structuring made operational sense.

It wasn't just the typical few business development executives in a room hashing out financial details, the pair said. "We really have got a great vibe with Yahoo's operating team," Mehdi said.

The two companies will be able to do some work on their joint plans while the deal is pending, but there are limits as to how much collaboration can take place.

"We will do all of the pre-work that we are allowed to do in terms of preparing," Mehdi said. "We feel like we can make a lot of progress."

Ultimately, though, the two companies said they expect just integrating Bing's results into Yahoo in the U.S. will take several months, while moving from Yahoo's Panama ad-serving technology to Microsoft's AdCenter could take a year. It could be two years from the deal close before the two companies can fully implement the deal across the globe.

Microsoft's Mehdi didn't close the door on an eventual expansion of the deal into some of the areas the two companies had at one point considered, such as joint work on display advertising.

"Today is a start on a fantastic partnership which we are very excited about," Mehdi said. "By starting this partnership it allows us to over time build greater and deeper relationships. Right now the focus is on getting to a credible No. 2 player in search and paid search."

One of the open questions is what will happen to each company's business and workforce during the time that the deal is pending. Schneider said the companies have a communications plan for employees as well as the sorts of retention bonuses planned to keep key employees in place.

"We believe this is a winning plan," she said. "People want to be part of a winning vision."

Ultimately, Yahoo CEO Carol Bartz said some of Yahoo search employees will move to other parts of the company, some will be offered jobs at Microsoft, while others will eventually lose their jobs.

For his part, Mehdi said the company will continue to beef up its search staff while the deal is pending. "We are continuing to hire and invest in search."

Roughly 18 months after the word Microhoo entered the technology lexicon, the two companies finally have a partnership to speak of.

As part of a 10-year pact announced early Wednesday, Microsoft's technology will power the two companies' search sites, while Yahoo will handle ad-selling duties.

Executives from both companies will discuss the deal in a conference call from Yahoo's headquarters in Sunnyvale, Calif., at 5:30 a.m. PDT. Follow the live coverage here.

5:32 a.m.: Still listening to meditative hold music. They really could use something more upbeat.
5:33 a.m.: Getting the details on how conference calls work. Apparently we'll be in some sort of "listen-only mode."
5:34 a.m.: There will be some forward-looking statements. (Stuff they predict may or may not happen.)
5:35 a.m.: Yahoo CEO Carol Bartz says deal is a game changer "and I'm glad to finally be able to talk about it." She added: "We face a formidable competitor in one area and that area is search."
5:37 a.m.: Yahoo's sales force will handle sales of both sites' search. Self-serve ads will be fulfilled via Microsoft's AdCenter.

"What this deal is really about for everyone is scale," Bartz said. By combining, they can deliver a viable alternative.

Funny how it's all about Google, but she's not naming Google.

"Everyone wants a real alternative and advertisers are no different," Bartz said.

"Powered by Bing" will appear at the bottom of the Yahoo search results.
5:40 a.m.: "This agreement has been a longtime coming," CEO Steve Ballmer said. Um, yeah.

Ballmer continues: the bottom line is the agreement will enable us to create more innovation in search, better value, and world peace. (Maybe not the latter. Remember, these are forward-looking statements.)

It's apparently a win-win.

"Both companies benefit from scale and better economics. Consumers really will get better products," Ballmer said.
5:42 a.m.: Bartz talking nitty-gritty details. Both companies will have separate display-ad sales forces. Microsoft will pay Yahoo 88 percent of revenue for search ads on Yahoo sites.

"Our revenue will come down a bit due to revenue sharing," Bartz said, but added that operating income should rise, expenses drop, etc.

"This deal won't happen overnight," Bartz said. First, the companies will have to convince regulators it's a good thing.

Assuming they get the OK, the companies will start with major markets, including the U.S., which will transition to using Bing results in 3 to 6 months. Shifting from Yahoo's Panama paid search tool to Microsoft's AdCenter will take 12 months. Full global roll-out should take 24 months.
5:46 a.m.: On to the Q&A.

So why not display advertising? "We wanted to keep this as simple and straightforward as possible," Bartz said.

"We're taking a big bite here," Ballmer said. "Search is a more well-known thing" when it comes to automating the ad-selling.

How big is the revenue-per-search gap? (Microsoft is guaranteeing a certain amount of revenue for each search query to Yahoo.

"We and Yahoo are sort of close and we both lag Google," Ballmer said. Some of that is scale, he said which will be helped by deal.
5:49 a.m.: Why no "boatloads of cash" from Microsoft. Why wasn't there an up-front payment?

"Having a big cash payment up front doesn't really help us from an operating standpoint," Bartz said. As far as we're concerned, she said, the "boatloads of cash" is preserving our revenue line.
5:51 a.m.: The two companies have talked about the financial impact to Yahoo, but what about Microsoft?

Ballmer acknowledges that most of the revenue from Yahoo's search results will go back to Yahoo. "We paid a high TAC rate," he said, referring to traffic acquisition costs and the 88 percent of revenue that Yahoo will get.

Microsoft will spend "a couple of hundreds of millions" of dollars for implementation and transition costs "We're sort of betting into the future," Ballmer said. The upside, he said, is better relevance. "Ads are part of being relevant and we have a better chance of being relevant." Ballmer said it should improve relevance on both sites. The upside comes as execution really builds.

"There's a lot of work involved in this transition to our platform," Ballmer said.
5:56 a.m.: Any opposition in Washington?

"We expect we will face some opposition from...the competitor," Ballmer said. (Assuming he is talking about Google and not Ask.com)

Ballmer said that the deal benefits advertisers, publishers, and consumers.

"Obviously, we will be called to present that case in D.C. and Brussels and other places," Ballmer said.
5:58 a.m.: What about impact on jobs?

"There are certainly many Yahoo search employees that will be asked to take jobs at Microsoft as they integrate the technology," Bartz said. "There will also be search employees that we look to help us on the display side... And then unfortunately, there will be some redundancies in Yahoo."

Nothing will change until we get regulatory approval, which we hope is in early 2010, Bartz said. "There will be redundancies, but it will be in the future." Bartz didn't give an estimate of how many jobs will be lost.
6:01 a.m.: The most complex part of the deal, Ballmer said, is around protecting privacy and allowing both companies to build their products around search.

"You really have to say what data gets shared and how does it get shared," he said.

6:03 a.m.: How can Yahoo innovate if Microsoft is in charge of the technology?

"There is a lot of innovation that happens above the search results," Bartz said.
6:04 a.m.: What does this mean in terms of mobile and platforms beyond the Web?

"We spent time talking about mobile," Bartz said. "We have the option of using the Microsoft technology for the mobile Web experience. It's not exclusive as it is on the PC. The only difference is it is not exclusive. If somewhere down the road we wanted to switch, we could."
6:06 a.m.: What is the rate when Yahoo sells on Bing.com? What is the risk and impact on Yahoo's affiliates? What about all of the 800,000 advertisers that are running their campaigns only on Google.

Yahoo actually doesn't get split of Bing revenue.

"When the Yahoo sales people sell (they) don't know whether will sell on Yahoo or Bing," Ballmer said. "You are buying the keyword in both environments."

As for Google-only advertisers, Bartz said that combining Panama and AdCenter will help. "Smaller advertisers want to make sure there's a meaningful market, and they don't want to learn three platforms."

Ballmer said that the bulk of Google-only advertisers are outside the U.S. where the companies have even less share. Google has 78 percent of the paid search market here, but in Western Europe, Ballmer said, it is more like 92 percent.
6:12 a.m.: How much code will come from Yahoo vs. Microsoft's Bing. Our engineers know Bing, Ballmer said, but he added that Microsoft will be getting access to any technology from Yahoo. "We have a license to code."

Ultimately, though, Ballmer said, Microsoft will have to make those choices and build a product that is financially more successful than its current search effort. "The burden is on us to deliver the goods."
6:17 a.m.: Why is this deal better than one on the table last year.

"I've done some exploring of that," Bartz said. "There's actually more fiction in the market than there is fact."

The search partnership discussed last year would have had a big up-front payment, but would have generated less revenue over the long term for Yahoo.

"We really are trying to run a long-term business here," Bartz said.

Ballmer noted that last year's deal was negotiated more by the boards than by the operating management.

"The deal is different...For Microsoft, this deal is not better, but this deal is different," Ballmer said.
6:21 a.m.: Who will be in charge of execution?

There will be a team from both sides, Bartz said.

"This is not a minor project," Ballmer agreed. "This is a major execution (challenge)," he said, noting that for Microsoft, the team will include the top leadership of the online business, including former Yahoo executive Qi Lu.

"It's not like we come here with a two-page term sheet," Ballmer said. "I think we have well over 100 pages written to describe what we are doing."

Bartz acknowledged that a partnership is harder in some ways than going it alone. That's why the companies wanted to make sure they were really committed to one another.

"Dating is one thing," she said. "Having a partnership is another."
6:28 a.m.: Call ends, with a pitch for the companies' joint Web site www.choicevalueinnovation.com. (I guess ButItsNotGoogle.com was taken.)

Yahoo CEO Carol Bartz and Microsoft CEO Steve Ballmer were all smiles on Wednesday morning.

(Credit: Yahoo/Microsoft )

Microsoft CEO Steve Ballmer uses a giant pen to sign the 10-year deal, alongside Yahoo CEO Carol Bartz, on Wednesday at Yahoo's headquarters in Sunnyvale, Calif.

(Credit: Yahoo/Microsoft )

After months of fits and starts, Microsoft and Yahoo on Wednesday announced a 10-year search deal that will see the two companies join forces to take on Google.

"In simple terms, Microsoft will now power Yahoo search while Yahoo will become the exclusive worldwide relationship sales force for both companies' premium search advertisers," the companies said in a joint statement. The deal is expected to go into effect in 2010 and improve Yahoo's profitability, though not its revenue, the companies said.

Less expansive than the all-out, $44 billion acquisition Microsoft proposed last year--and even than some of the search partnerships once discussed--the deal does allow the companies to share resources and combine their engineering efforts. Even together, however, the two companies have only about 30 percent of the search market compared to Google, which has more than twice that amount.

"This agreement gives us the scale and resources to create the future of search," Microsoft CEO Steve Ballmer said in a statement. "Success in search requires both innovation and scale. With our new Bing search platform, we've created breakthrough innovation and features. This agreement with Yahoo will provide the scale we need to deliver even more rapid advances in relevancy and usefulness."

Yahoo CEO Carol Bartz, meanwhile, said that the move will help Yahoo focus on other areas, also adding that the deal has the full support of the company's board (lest anyone wonder what Carl Icahn thinks about the more limited deal).

"This is a significant opportunity for us," Bartz said. "Microsoft is an industry innovator in search and it is a great opportunity for us to focus our investments in other areas critical to our future."

Editors' note: The two companies had a conference call Wednesday morning to discuss the deal. Click here for our live-blog coverage of that event.

The dollar value
As for the financial terms, there is not the large upfront payment once discussed. However, Microsoft will offer both revenue guarantees to Yahoo as well as the lion's share of the search-advertising revenue generated on Yahoo's site.

That apparently wasn't enough to satisfy investors. In trading before the market opened, Yahoo's stock dropped more than 7 percent, or $1.28, to $15.94. Microsoft rose 1 percent, or 24 cents, to $23.71.

Yahoo will get 88 percent of search revenue created by its sites during the first five years, while Microsoft will guarantee a certain level of search revenue for 18 months in each country. The companies expect it will take about two years after the deal is approved to fully get the partnership up and running.

Once fully in place, Yahoo said it expects the deal will boost its annual operating income by about $500 million, while reducing capital expenditure by $200 million and increasing operating cash flow by about $275 million per year.

Microsoft will be able to incorporate Yahoo's search technology, including its Panama ad-selling tool, but the companies will use Microsoft's AdCenter sales tool and Bing search engine to power both sites.

Aiming to head off privacy concerns, the two companies noted that "the agreement protects consumer privacy by limiting the data shared between the companies to the minimum necessary to operate and improve the combined search platform, and restricts the use of search data shared between the companies."

The deal must still pass regulatory muster and the two companies anticipate it will take several months to finalize. "Microsoft and Yahoo expect the agreement to be closely reviewed by the industry and government regulators, and welcome questions," the companies said. "The companies are hopeful that closing can occur in early 2010."

Microsoft and Yahoo are joining forces in search, but in a line clearly aimed at regulators, the companies take pains to note that their collaboration is limited to that arena.

"The agreement does not cover each company's Web properties and products, e-mail, instant messaging, display advertising, or any other aspect of the companies' businesses," they said. "In those areas, the companies will continue to compete vigorously."

There's a funny video making the rounds that mocks Microsoft's huge Bing ad campaign.

In the video, embedded below, CollegeHumor.com suggests that folks start "googling with Bing."

It's a funny parody of the Bing ads, but it also shows how big Microsoft's challenge is in search.

Bing, it says, lets you Google photos, Google maps, and more. After months of development and testing, Microsoft's revamped search engine made its public debut about one month ago.

On the one hand, typing in Bing.com is just as easy as typing in Google.com (it's actually two characters shorter). In that sense, the bar for changing search engines is low.

At the same time, Google has become synonymous with search. I have been making a concerted effort to try Bing for some of my searches and even made it the default in my search bar in Firefox. I still find myself performing more than half my searches in Google--just because I type Google.com by habit.

On the plus side, Bing has made modest gains in its first couple of weeks. But the real question is whether people will keep googling with Bing. (and of course, maybe some day just Bing with Bing.)

Microsoft has been testing different search bars to see which ones drive the most traffic to Bing. Shown here is the one that appeared on the MSN site on Friday.

(Credit: CNET)

The planned fall revamp of MSN isn't just about giving the butterfly a fresh coat of paint. Microsoft also hopes to drive more people to its search engine.

The company has been toying with different search box designs to see which ones lead to the most queries. As it stands, the MSN portal already accounts for half of Microsoft's search engine traffic. Comparatively few people typed in queries straight from Microsoft's Live.com address (now Bing.com)

"A big part of my job is figuring out how I pull the Bing experience into MSN in a way that makes sense," Microsoft vice president Erik Jorgensen said in an interview this week.

One way of banking on MSN, he said, is by posting features on the site that tie in to the company's search engine. The company has talked about ways it can write features that push folks to Microsoft's local, shopping, and travel search engines--each among the most profitable parts of the search business and the areas in which Microsoft has focused.

The software maker is also looking at ways it can tie MSN features to the strongest areas of Bing--local, shopping, and travel search.

(Credit: Microsoft)

To make that work, Microsoft needs to ensure that it is less visually jarring when one moves back and forth between MSN and Bing.

"Frankly, that's one I think we haven't done well," Jorgensen said. "I think in the fall that's something we've got to tackle."

In its first two weeks, Bing has managed to pick up some market share, but the key will be sustaining those gains in the coming weeks and months.

Beyond driving traffic from MSN, Microsoft is also counting on deals with PC makers Hewlett-Packard and Dell to get more people to give Bing a try.

The company has said it wants to pick up at least a couple points of market share in the first year, although it will need well more than that to truly compete economically with Google. Hence the company's never-ending talks with Yahoo, which is No. 2 in the search market with about 20 percent of the business.