An interesting discussion is shaping up across a number of blogs, all relating to Danny Sullivan's Search Engine Watch posting a number of graphs showing MSN (Live) Search to be losing market share to Google.  Sullivan posts this graph showing the drop in market share over the last year:

A number of bloggers chimed in with their takes, including Greg Linden of Findory and  Nathan Weinberg of Inside Microsoft (who can't resist Office 2007izing the chart):

Weinberg goes on to offer his thoughts on why Live Search is losing share:

Theories:

• Change is bad: Users don’t like two redesigns in two years, and the unfamiliarity is sending them away.
• Windows Live Search looks cheap: The old MSN search looked cheap. It was too white, too sparse. The layout and colors didn’t have the right “feel”, seeming like a low rent search engine, rather than a serious competitor to Google. While Google shares many of the same properties, users know it is the search leader, and are willing to overlook its design. MSN doesn’t get the same pass. While the newer MSN Search and now Live.com improved the look and feel, they retain some sort of cheapness. Personally, I think its the white and blue. Something dramatic and dynamic to make the page more exciting. Ask.com has it (the red bar) Yahoo has some of it (the red Yahoo logo, plus they rip off Google well). Perhaps Widncows Live needs a new color on the page, or an animated element. Anything to break it up. A suggestion: Animate the flair on page load.
• Lack of marketing: Most people don’t know Windows Live Search exists. Microsoft is counting on (a) community evangelism (and besides myself and some other bloggers, I’m not sure there is much of that), as well as (b) MSN and Internet Explorer users discovering the search engine in random use. For god sakes, buy some good commercials, ones people can’t ignore, something undeniably cool and memorable. Also: Say Live.com in your ads, leave out Microsoft, and I guarantee they become more effective.
• Beta feel: Regardless of how popular Gmail invites used to be, the average user hates betas, and will not use products that appear under construction. Windows Live has so many products that don’t work, don’t work all the time, are behind invite-only walls, or have a beta tag, that users instinctively say “I’ll wait for when its done”. Focus on core products (Live.com, search, image search, news search, Live Mail) and demand a full release by the day Windows Vista hits retail. If you have to, stop designing new features and stabilize the damn code. I don’t care how good the product will be, because your users are leaving now.

..and goes on to say that he has a "geek crush" on Windows Live and wants them to win.

Then Eric Selberg of Microsoft and Live Search chimed in with two posts, where he comments: "Well, what did anyone really expect?" and continues on to provide a very realistic summary of what Microsoft is in for to try and compete in Search.  In a comment on Linden's post, Selberg goes into more detail about the complexity of competing in Search:

"Now... to be fair and critical... let's say Microsoft did invest a few more billion into search. It's not clear hiring could have happened much faster, nor would we have wanted it as bringing on that many new people is a recipe for disaster. But certainly, the hardware infrastructure could have been built out such that it'd be much closer now (you'll notice we've been rather quiet about the size of the index since the Google / Yahoo 20 billion index scuffle a year and a half ago). That's happening, and I suspect in a year or two the size of one's data centers won't be as big a competitive advantage as it is now. But it's a fair point.
I think the real question is whether we're talking about a matter of 1-2 years vs 4-5 years. If we're arguing about 1-2 years, well, OK, fine, you win. We could have done a bit better. But as I told Steve Hanks the other week, if I knew everything I knew at the end of my PhD as I did when I started, it would have taken me a lot less than the 6 years it did. But of course, that's the point of it all!"

Very interesting to have Selberg chime in on the discussion - this is the kind of blogging we have been missing - maybe it's not dead after all!