Monday, December 12, 2005

“Only the Leftovers…”

Microsoft May Give Consumers a Share in Advertising Revenue

Thus reads the headline in today’s Wall Street Journal above an article describing the Evil Empire’s plans for beefing up its not-even-close search business, with the following detail:

"We'll actually go to users and say instead of us keeping all that ad revenue, we'll actually share some of it back with the user," said Mr. Gates, according to a transcript supplied by Microsoft.

"The user essentially will get paid, either money or free content or software things that they wouldn't get if they didn't use that search engine."

Not that Microsoft’s plans don’t matter, but with just 12% of searches (compared to Google’s 45% share), and a deteriorating base of unhappy Microsoft Hotmail users (including yours truly) migrating daily to other email platforms—Google’s own Gmail among them, Microsoft has to do something to become relevant.

But paying customers to use the service is not likely to be that something.

Search users want speed and accuracy—and they don’t want to feel like chum for the shark that is Microsoft’s efforts to expand its tenuous grip on internet users.

The most interesting thing about today’s Wall Street Journal story, in my opinion, is that according to Google’s own spokesperson, Google itself has considered sharing revenue with consumers, but, at the moment concluded that this is not the way to go.

That flexibility, and willingness to consider all approaches to its business model, is one of the things that to date has made Google so successful. Microsoft, on the other hand, is famously inflexible, because it has a desktop operating software monopoly to protect.

Lest you think I am being too harsh on Gates and Company, a New York Times article related to the ongoing AOL negotiations with Microsoft and Google quotes an advertising executive, who sums up the need for Microsoft and AOL to get together with perhaps the harshest judgment of all:

"Today, you can't do search without buying Google. If you want to do a large brand communication, you need Yahoo. Only the leftovers go to AOL and Microsoft. If they combine, they can become a viable competitor to Yahoo for the branded stuff and could become second to Google for search."

Jeff Matthews
I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.


Its_strange said...

Years ago Jim Cramer would write a weekend piece " Web in review" . I loved it , it caused many people to think about how to make life better using the internet. Many , many times people would say " MSFT should do this"....."MSFT should team up with ....."...Now Cramer hung around with MSFT's CEO in collage so i figure he read Cramer's thoughts....I don't know of one thing MSFT did , even in part, cause of the many ideas offered in that column ...But they did get the Rolling Stones to sing a song

M said...

Amazon does "pay" you for using their search engine On each order you get a percentage off equal to 1/2 of "pi" provided you use enough.

muckdog said...

People have been trash-talking MSFT for years now. They say it's too big, too slow, too this or that. But while folks were complaining, MSFT just got Palm to put Windows on the next Treo. Farewell Palm OS. MSFT beat Sony to market with the next gen gaming system. And a new OS is coming out in 2006. MSFT still dominates office software products, and security concerns will probably keep it that way. (Who wants to expose secure documents to some other software running on a server in India or China?)

It's true that Google runs a nice search engine, but I don't know many who look at or click on the ads.

And Yahoo makes a nice home page and does good email. Heck, doesn't most everybody use Yahoo for news these days? I don't know who clicks at or reads the ads there, either.

I think the folks at Yahoo and Google have done a good sales job selling advertisers on the idea, though.

Serenity said...

muckdog, a lot of people click on those Google ads. Google's main revenue source is when surfers CLICK on the ad not read the ad. So most of the 100% revenue growth is a direct result of pure clicks.

Your friends aren't a representative sample of what millions of people do today, which is click on Google ads.

adam lake said...

i think there is a HUGE number of bots that click on these ads and create false numbers...having used it as an advertiser myself it churns through the amount of money set aside far too quickly....not that many people want new batteries for their ipods yet and was thrashed with hits when the ad posted.

Chris said...

Google is experimenting with paying people to search via their relationship with Blingo:

I agree, though, that this isn't a good idea. Incentives are a dangerous tool, and rarely deliver the results you expect.