REDMOND, Wash.--I'm not sure how much Microsoft's Live Search Cashback program will help Microsoft take share from Google, but I do find my brain grinding over the business model implications.
As I noted earlier, the economics are based on the same broad model as affiliate programs that pay referrers a cut on sales that they directly feed to the site. In this case the referrer (Microsoft) is shuttling all that money to the consumer. It's the same model bargain-hunting sites like Fatwallet.com use, although those sites typically keep some of the money to pay the bills.
But, where Microsoft is changing things a bit, is by moving this approach to search advertising. Essentially, advertisers can get placement by offering to pay Microsoft a cut of the sale as opposed to paying per click.
Here's where it gets interesting. In order to place a value on that ad, Microsoft has a team inside the company that figures out how much the new ads are worth to Microsoft and bids a cost-per-click amount against traditional buyers that use Microsoft's AdCenter.
But how does Microsoft do that? If it were keeping a percentage of the cut, I could understand it. It would assess a conversion rate for each advertiser and estimate what that translates to on a per-click basis. In this case, though, Microsoft is returning 100 percent of its cut to consumers. So the value to Microsoft is essentially the goodwill and loyalty that its offer generates--something that seems to me hard to put a value on vis a vis a pay-per-click ad.
It's also worth noting that although Microsoft is giving all of its revenue per search for the Cashback results to its users, it is not having to put money upfront or lose money on each sale, either.
Those retailers who are taking part in the program spoke fondly of it on Wednesday, saying it was a no-brainer that let them pay a percentage of the sale--something they basically try to do all along but using other, less precise methods.
They just pick a percentage they are willing to pay and offer that amount up to Microsoft's search users. The only tricky one is eBay, which sells much of its stuff through an auction--so it doesn't normally know the final price, unlike traditional retailers.
To deal with that, eBay plans for now to limit its participation to a subset of its Buy It Now fixed-price items.
"With auctions, it does get a little tricky," said Matt Ackley, eBay's vice president of Internet marketing and advertising. The company also has to figure out how to adjust the model to work for a site that sells items for less than $1 as well as cars and houses for thousands.
The question I have, though, is how those advertisers that are NOT part of Cashback will feel, essentially having to bid not only against other pay-per-click ads, but also against the somewhat intangible value that Microsoft itself places on the Cashback ads.
Any pay-per-click advertisers care to drop me a note? (I'm at INA dot FRIED at CNET dot COM).
Bill Gates makes lemonade at Advance 08 conference, saying, "It's kind of fun to be the underdog."
(Credit: Ina Fried/CNET News.com)Update 11:30 a.m. PDT: Added more details about the cash back program and comments from Overstock.com CEO.
REDMOND, Wash.--Microsoft still wants to be all things to more people in search, but, in the short term the company would settle for just getting people when they want to buy stuff.
The company's big search news, as previously noted, is a program that gives customers cash back when they use Microsoft's Live Search as the starting point when making a purchase.
"The one you'll see us particularly invest in in a major way is a deep focus on commerce," Chairman Bill Gates said on Wednesday at the company's Advance 08 advertising conference. "Commerce represents about a third of all searches, but a dominant share of the revenue."
Gates said that, although the program is just beginning, the company has signed up more than 700 merchants representing about 10 million products.
"The overwhelmingly positive feedback from all the partners confirms there is this opportunity for change," Gates said.
The cash back Live Search program is based on the Jellyfish.com acquisition from last year. Although other sites have offered cash back to shoppers, Microsoft is building it into the search process itself, a process it is counting on to boost the popularity of such efforts beyond hard-core bargain hunters.
In video messages, the chief executives of Zappos.com and Overstock.com praised the move.
"It takes so much of the risk off the plate of the advertisers," Overstock CEO Patrick Byrne said in a video message, before appearing onstage with Gates. Byrne and a handful of partners were trotted out briefly, but did not speak before walking off again. "I hope they got the picture. If not, we will stage it again later," Gates said.
The move comes as Microsoft continues to badly trail Google and Yahoo in overall search. The company has used financial rewards in the past to gain users, although such efforts have also been short-lived gains that largely disappeared once the incentives went away.
Gates reiterated that Microsoft is a long-term player in the search market and tried to put the best face he could on being a distant third in the business.
"It's kind of fun to be an underdog," he said. "It's neat."
REDMOND, Wash.--Microsoft's Live Search cash back program may be a new business model for Microsoft, but the underlying economics have actually been used outside the company for some time.
Bargain hunter sites, such as FatWallet, also offer cash back programs using much the same model that Microsoft is employing with its program.
In both cases, the referring sites get a certain percentage of the sale and give part or all of that money back to consumers.
Sites like FatWallet tend to appeal toward hard-core bargain hunters. One of the questions that looms over Live Search cash back is whether such programs have broader appeal.
Microsoft is playing up the change in economics for advertisers, who are able to pay just based on the actual sales that their advertising yields, as opposed to paying for everyone that comes to their site or views an ad.
As expected, the software maker announced more details of the program on Wednesday, ahead of a speech by Chairman Bill Gates. Initial partners for the program include eBay, Barnes & Noble, Circuit City, and Zappos.com, among others.
Microsoft said it will give its entire cut back to consumers, benefiting from the added search traffic as well as the user data customers are required to give in order to take part in the program.
The company also announced a Live Search-branded version of Farecast, the travel cost prediction service that it acquired last month.
REDMOND, Wash.--Republican strategist Cyrus Krohn wasn't the only elephant in the room at Microsoft's ad conference on Tuesday.
Indeed it was the other one--Yahoo--that loomed largest inside the walls of the Microsoft Conference Center. At least three Microsoft executives spoke about the company's online business but none addressed discussions with the Internet pioneer.
But with CEO Steve Ballmer dodging eggs in Europe and the heads of Microsoft's online business all gathered here, I wonder who it is that's doing the talking with Yahoo?
Well, I guess that's what having thousands of employees is good for--multitasking. I'm sure there are enough Microsoft online folks to simultaneously tell advertisers how strong its organic growth is while also talking to Yahoo to try to fix its obvious shortcomings.
James Cameron speaking at Advance 08 advertising conference
(Credit: Microsoft)REDMOND, Wash.--Filmmaker James Cameron sees the world in stereo. So does everyone else, though, and that's exactly his point.
"When you are viewing in stereo, which is what we do," Cameron said, "more neurons are firing. More blood is pumping through the brain."
Cameron has been a big proponent of making movies in 3D, but he said that the digital projectors going into movie theaters are capable of showing more than just movies. Cameron's talk came as part of Microsoft's Advance 08 advertising conference, which runs through Wednesday.
"That digital image can be live," Cameron said. "That digital image can be 3D."
He suggested such locations can show live sports and events, alongside impressive travelogues and other content.
"We're not quite there but we are on the cusp of that and people need to have a strategy for it," he said.
More than 1,000 theaters in the U.S. already have stereoscopic (3D-capable) projectors, while Cameron hopes that there will be 5,000 such facilities by the time his 3D movie Avatar debuts next year.
3D movies have often generated much more revenue than 2D versions of the same film, a potential boon to the entertainment industry. Retrofitting theaters with 3D technology is expensive and difficult, though, and some 3D advocates are unhappy with the pace of adoption.
"I feel as though things have dragged along, and it's been pretty disappointing," DreamWorks Animation SKG Chief Executive Jeffrey Katzenberg said in April, according to Reuters.
3D isn't just for theaters. The real revolution, Cameron said, comes as games and television also start appearing in three dimensions.
"Stereo production is the next big thing," he said. "We are born seeing in three dimensions. Most animals have two eyes and not one. There is a reason I think."
He noted that games, in particular, stand to benefit. First-person shooters become true first-person experiences, he said.
"You are in the game," he said. "This is the ultimate immersive media."
He noted that Ubisoft, which is making the game version of Avatar, already has a stereoscopic game up and running using a standard Xbox 360 and 3D glasses.
Cameron said that displays for laptops, phones, and Zunes can be made stereoscopic even without needing special glasses.
The Windows operating system, Cameron said, should be viewable in 3D.
"They should be talking to their various partners," Cameron said.
Earlier in the day at the conference, Microsoft announced a new "Microsoft Advertising" brand to try to unify its disparate tools for advertisers and publishers as well as an effort to start selling display advertising on mobile phones.
News.com staff writer Stephen Shankland contributed to this report.
REDMOND, Wash.--On the eve of Microsoft's Advance 08 advertising conference, I thought I would offer up my take on three catch phrases that I expect will come up during the two-day affair.
1. "Search should be more than 10 blue links"
This is Microsoft's typical answer to why it thinks it can still catch Google in search. The truth of the matter is that search is already more than that. There's already product search, image search, blog search, news search, academic search, medical search, and a whole assortment of specialized search types. That said, there are still plenty of times that finding what you want online is still hard.
2. "Engagement mapping"
This is a notion Microsoft has been pitching hard of late. The idea is to get advertisers to think more broadly about where their sales are coming from. The basic idea is that buyers may use search advertising to make that final click, but it is display, TV, newspaper, and other types of advertising that all contribute to that purchase. Microsoft is most interested in trying to get advertisers to spend more on display and less on search. Good luck with that one.
3. One-stop shopping
Here, Microsoft will argue it has the most to offer advertisers because it serves up the broadest range of advertising, including search, display, video, mobile and in-game advertising. That may be true, but again most of the checks are written for that first type and Microsoft is still trailing badly there.
And, then there's the word that we're all actually hoping to hear discussed--Yahoo. I, for one, am prepared to be disappointed.
Although talks have heated up again--and there is plenty of reason to think Yahoo and Microsoft will end up in each other's arms--it's likely to take beyond the close of the conference midday Wednesday for an accord to be struck.
Even if we don't get a breakthrough in Microhoo, I'm sure we'll hear lots of other phrases I haven't thought of, as well as see some new demos of where Microsoft is headed in search. I'll have on-the-spot coverage Tuesday and Wednesday, so check back here frequently.
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