By Daisuke Wakabayashi

SEATTLE (Reuters) - Seeking to narrow the gap with Google, Microsoft Corp unveiled a retooled Web search service that aims to deliver more relevant results and combines text, video and other information onto a single page.

Microsoft, the world's largest software maker, said Windows Live search is now on an even technology footing with offerings from rival search engines after years of playing catch-up since it started developing its own Web search in 2003.

Its new presentation is in line with an industry trend to step beyond traditional text links, with unified search results that offer Web sites, news, pictures and video on one page.

Rivals Google Inc and Ask.com made similar changes this year, and Yahoo Inc is moving in that direction.

"Microsoft is realistic. It doesn't think it's going to wake up tomorrow and overtake Google," said Allen Weiner, an analyst at research firm Gartner. "Right now, Microsoft wants to establish itself more firmly with its existing users."

Microsoft ceded a head start to Google in Web search and then watched it create a multibillion-dollar business on the back of selling advertisements tied to search results.

Google is now one of its main rivals, using its Web ad money to invest in threats to Microsoft's core desktop software business by offering Web-delivered software as a "service."

Last quarter, Google earned net income of $925 million, almost entirely from ads. That lagged Microsoft's $3 billion overall profit, but Microsoft online services business posted a loss and the unit's revenue grew at a third of Google's pace.

Microsoft ranks a distant third in Web search, with just 11.3 percent of the U.S. search market in August versus 56.5 percent for Google and 23.3 percent for Yahoo, according to research firm ComScore. Yet analysts note Microsoft is one of the few companies with the wherewithal to close that gap.

"It's very, very challenging but Microsoft is one of the few companies that is in a position to take a really long-term view of this whole game," said Greg Sterling, founding principal of research firm Sterling Market Intelligence.

FIRST STEP: CREDIBILITY

Satya Nadella, Microsoft's corporate vice president in the search and advertising platform group, said its first challenge was to get current users to do more searches on Windows Live.

"The first step was to have a credible product," said Nadella, who joined the search team six months ago. "Google has been ahead of us and we believe with this release we've caught up and we can compete effectively in terms of search quality."

Microsoft said it broadened the coverage, quadrupling the size of its searchable index over the last year. It has also worked to improve the core algorithm behind its search engine and better decipher the intent of a query.

The Redmond, Washington-based company also focused on improving four specific areas of search: entertainment, health, shopping and local. Those four segments account for about 40 percent of all searches, according to Microsoft.

For example, a search for "Justin Timberlake" yields news, videos, images and even the "buzz" ranking of the singer versus other celebrities. For shoppers, Windows Live will aggregate reviews, prices and other information about a product.

Microsoft is just the latest company to expand search from a series of text links to a more multimedia offering.

Ask.com, the search arm of IAC/InterActiveCorp, started a search service this year, Ask3D, that divides results into panels for links, images, video and other information.

Google released "Universal Search" to draw results from separate properties covering local information, images, news, video and books.

(Additional reporting by Eric Auchard in San Francisco)
© Copyright 2007 Reuters.

Photo:
Microsoft Chairman Bill Gates in Bucharest February 1, 2007. Microsoft Corp unveiled a retooled Web search service that aims to deliver more relevant results and combines text, video and other information onto a single page. REUTERS/Bogdan Cristel