Microsoft Gets Stung by MSN Butterfly

Microsoft's MSN site had a 13% share of the search market in March, lagging behind Yahoo!'s 28% and Google's 43%, according to comScore Networks. The market researcher shows that MSN and Yahoo! both lost market share during that time while Google expanded its lead. Yahoo! has the most unique users, 123.8 million unique visitors in March compared with 116.1 million for MSN and 103.5 million for Google, according to comScore.

Neither Google nor Yahoo! will be willing to concede ground to Microsoft because there is too much money at stake. Demand for search, though slowing, remains strong as more local businesses shift advertising dollars online. Forrester Research estimates that U.S. search-engine marketing spending will hit $11.7 billion by 2010, a gain of 170% from 2004. During that same period, spending in Europe will jump 250%, to about $3.6 billion.

"The advertising and search market combined is growing at around 40% a year and it appears that MSN is significantly lagging behind the market," writes Piper Jaffray analysts Safa Rashtchy and Aaron Kessler in a note. "Yahoo! has been gaining share in advertising in the past year while Google has gained share in search." Piper Jaffray has an outperform rating on Microsoft.

Shares of Google rose 35 cents to $420.38 while Yahoo! fell 4 cents to $33.16.