The secret is specialization.

It turns out that while most of us only have room in our heads to remember one website per category, we a limitless appetite for new categories. In fact, we create new categories all the time.

Think about coffee. There was a time when you just had just two types of coffee: regular and decaf. Now we have premium coffee, espresso, fair trade, dark roast, light roast…the list goes on.

People who are passionate about something are always on the hunt for something better. Once they find it, they will often create a new category for it to distinguish it from something more general. Think: “Oh, Folgers if fine you just drink any old coffee, but I drink only premium coffee. That is why I go to Starbucks.”

The only problem is that the general population follows them. More and more people get into this new category, so the early adopters move onto something else. They need to distinguish themselves yet again. So, they define yet another category, this time even more narrow: “Actually, I drink only custom made, premium coffee that is why I own my own espresso machine.”

So how does this all relate to search? Simple.

People who are passionate about some subjects may like Google well enough, but they would love something more targeted for their needs. Think: “Oh, Google is fine if you want to search everything, but I am into blogs so I use Technorati.”

Build a premium search site. Focus it on delivering only search results from the most respected source or from a specific topic area. Become the destination of choice for people interested in your focused subject and soon you will own a category of your own.

“But wait!” you might say. “Google makes money because so many people search on it and advertisers are willing to pay for it. If you focus your search on only topic area, then you will have less traffic and therefore less revenue.”

You would have less traffic, that’s true. But, your traffic will be more focused. That means the advertisers interested in your type of customer will get better results and thus be willing to pay a higher price for the ad space.

So Microsoft can win a search, they just need to target smaller groups and charge higher revenue per ad. Remember, this is a “premium” search engine, not just plain old generic Google.