Microsoft Squeezed by Search Market Struggles

Microsoft's(MSFT) relatively tiny footprint in the Internet search market doesn't necessarily jeopardize its plans to be relevant in the online advertising business.

But it does narrow the realm of possibilities that one could normally expect from buying a digital advertising company that makes a lot of purchases in search.

Microsoft's MSN division has lost search share to Google(GOOG) since March, when Microsoft had 10.1%, to 8.4% in May, a drop of 111.6 million search requests, according to figures announced by Nielsen/NetRatings Wednesday.

Over the same period, Google's share rose to 56.3%, from 53.7%. For the first time, Google turned out over 4 billion searches in a single month.

"I'd attribute most of that [loss] to the work and announcements around Google's improvements to its own search product," says Gartner analyst Andrew Frank.

Reasons for rating shifts aren't easy to nail down, he said. But in this case, Google is benefiting from a number of upgrades to its universal search. "They gained on everyone."

While Microsoft treads water in search, its plan to buy digital marketing firm aQuantive (AQNT) "shows how serious they are" about the online advertising market, Frank says.

"Whether they can make good on a promise to be a single stop for advertisers remains to be seen," according to Frank.