Will any company ever be able to compete effectively against Google in the search market? Microsoft is trying, and spending a lot of money in doing so.

But Steve Ballmer might want to have a chat with IAC’s Barry Diller. That’s because Diller, who spent close to $2bn buying Ask.com in the belief that it might one day compete with Google, has come to the conclusion that Google just can’t be beat in search.

Yesterday, he effectively pulled the plug on Ask.com as a traditional ‘search engine‘. According to Diller, “We’ve realized in the last few years you can’t compete head on with Google.

Doug Leeds, Ask.com’s president, elaborated in his comments on the announcement:

[Google has] become this huge juggernaut of a company that we really thought we could
compete against by innovating. We did a great job of holding our market share but it wasn’t enough to grow the way IAC had hoped we would grow when it bought us.

Going forward, IAC will outsource a greater portion of search to a partner whose identity is confidential and refocus its own efforts on Q&A. It may have a decent niche opportunity there, as Search Engine Land’s Danny Sullivan notes.

But the implications of Ask.com’s departure from the ‘search engine‘ market are significant, even if its market share wasn’t. Those implications are particularly important to Microsoft, which has focused much of its Google strategy on finding a way to compete with Google in the search market. That’s because Microsoft’s strategy in search is essentially the same as IAC’s was: innovate, and if you innovate well enough, they will come. Sure, Microsoft is much bigger than IAC, and has arguably done a lot of things right with Bing, but will that really matter?

Microsoft’s Ballmer should be concerned about the likely answer to that. More than a few of IAC’s post-acquisition Ask.com upgrades bear some similarity to some of the upgrades Microsoft has been rolling out on Bing. Even when those upgrades (or ‘innovations‘) are well-received, it’s relatively easy for Google to copy what it likes. Case in point: Google’s new Instant Preview is little more than Google’s version of something Ask.com has been offering for a while now. Pragmatically, Google is so dominant that it has the luxury of piggybacking on the R&D investments other search engines make.

Which highlights an inconvenient truth for Microsoft and other would-be search competitors: innovation and product are only two parts of the equation in competing effectively in this market. And they’re not the largest. Google’s brand, scale and market share give it advantages that will make the Mountain View behemoth tough to dethrone, let alone compete with in any meaningful way. That doesn’t mean companies shouldn’t try, but as Diller finally recognized, as lucrative as search is on paper, there are far better digital investments out there to be made.