Can Microsoft's Bing Take a Bite out of Google?

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One area where Bing especially hopes to distinguish itself from Google is in travel searches. As anyone who has done a Google search for "inexpensive new york hotel" or "cheap air fare to london" knows, the results are often close to useless, a jumble of promotional sites and lists that point to other lists. Bing hopes to trump Google in travel with its Farecast technology, designed to locate the cheapest flights and hotels on the basis of recent trends. Farecast charts the peaks and valleys of airfares and room rates for a particular itinerary over the course of several months and predicts prices for the near future. Users can then decide whether to buy now or wait for prices to fall. (A study by an independent auditing company found that Farecast's predictions were 74.5% accurate and that travelers purchasing two plane tickets saved an average of $55 on airfare.)

One detail that's missing from Bing's home page is any mention of Microsoft. (There are small tabs that link to MSN and Windows Live, but they're easy to miss.) Omitting Microsoft's name is no accident — it's an effective way of positioning Bing as a cool new search engine rather than a site sponsored by a gigantic corporation that's often seen as the antithesis of cool.

Microsoft's renewed commitment to search is only the latest example of Google and Microsoft invading each other's territory. Shortly after Bing's debut, Google announced a new operating system called Chrome, meant to take a bite out of Microsoft's Windows franchise. The Chrome OS, scheduled to be rolled out in the fall, is designed to run on netbooks, the small, inexpensive laptops that have surged in popularity. By tying the Chrome OS to popular applications like Gmail, Google Chat and Picassa, Google hopes to give Microsoft a run for its money in the operating-system market, just as Microsoft hopes Bing will do in the search business.

As for Microsoft, even the world's largest and most powerful software company can't afford to cede territory. In July, Microsoft reported its worst fiscal year since the company went public in 1986, with annual revenues from the company's flagship Windows product declining for the first time ever. In the fall, Microsoft will release a new operating system, Windows 7, to rescue the tepidly received Windows Vista.

All of which makes Bing an important rearguard action for Microsoft, a way to make Google sweat about the search space while Microsoft defends its operating-system market. Microsoft plans to spend 5% to 10% of its operating income on search over the next five years, a war chest that works out to about $10 billion per year.

Taking on Google has long been a losing proposition. But Bing, combined with Microsoft's search alliance with Yahoo!, changes the contest. As Microsoft CEO Steve Ballmer put it when announcing the Yahoo! deal, his company can now "swing for the fences in search." Suddenly, search has become — bing! — a whole new ball game.

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