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| Microsoft Live Search Shares the Wealth by Rachel Happe, IDC (co-authored by Caroline Dangson and Susan Feldman, IDC) On May 21, 2008, Microsoft announced two innovative search products for consumers – Live Search Cashback and Live Search Farecast – that will give something back to the end user when they find and purchase products through Live Search. Designed as a rewards account, these new products may give Microsoft an edge in eCommerce search. The first product, Live Search Cashback lets Microsoft's eCommerce advertising partners give rebates to customers for making a purchase that starts at www.live.com. Cashback rebates will be credited to the customer's Cashback account and paid out to consumers 60 days after a purchase. The Cashback account will allow users to track purchases and rewards over time, view pending and earned rebates, and cash out via PayPal, check, or direct deposit. The second product, Live Search Farecast, addresses one of the biggest segments of eCommerce, the travel segment. In 2007, 41% of Internet users purchased travel products online representing over $68 billion. Farecast, which Microsoft acquired earlier this year, uses predictive technology to recommend the best prices and schedules across multiple travel sites. Strategically, this announcement represents a move by Microsoft to compete in search by differentiating betweens the various types of searches. eCommerce search is one of the largest and most lucrative segments of the consumer search market and one of the most uncomplicated value chains; if a search delivers a purchase, then the value of a search advertisement is quite clear. Plenty of sites have sprung up over the years to crawl and compare products – everything from MySimon to c|net to ePinions to Froogle (now Google Product Search) but all have operated on the premise that they aggregate traffic and they get paid for advertising, placements, and referrals. These sites attract consumers by features such as breadth of index, enrichment with reviews, or improved presentation of content, or they aggregate by topic or industry, focusing their information and their audience for potential advertisers. However, to compete in a market where social ratings are becoming pervasive and the top consumer search engines will always have the biggest indices, the existing tactics to attract customers are no longer sufficient. By giving money directly back to the consumer, Microsoft hopes to change the balance of power by disrupting the existing value chain. This disruption portends a reduction in margins for search advertising and could trigger a significant increase in downward margin pressure on existing direct response advertising. By attaching advertising to rebates, advertisers will want to apportion the lion's share of their ad spend to customer rebates in order to ensure conversion. In the long term, Microsoft gains a notable advantage by giving consumers an account to receive and cash out rewards: They will be able to track and collect information on consumer preferences, price sensitivities, and behavior. The stored value account could also be used for further purchasing (although that is not part of the current productat www.live.com. Cashback rebates will be credited to the customer's Cashback account and paid out to consumers 60 days after a purchase. The Cashback account will allow users to track purchases and rewards over time, view pending and earned rebates, and cash out via PayPal, check, or direct deposit. The second product, Live Search Farecast, addresses one of the biggest segments of eCommerce, the travel segment. In 2007, 41% of Internet users purchased travel products online representing over $68 billion. Farecast, which Microsoft acquired earlier this year, uses predictive technology to recommend the best prices and schedules across multiple travel sites. Strategically, this announcement represents a move by Microsoft to compete in search by differentiating betweens the various types of searches. eCommerce search is one of the largest and most lucrative segments of the consumer search market and one of the most uncomplicated value chains; if a search delivers a purchase, then the value of a search advertisement is quite clear. Plenty of sites have sprung up over the years to crawl and compare products – everything from MySimon to c|net to ePinions to Froogle (now Google Product Search) but all have operated on the premise that they aggregate traffic and they get paid for advertising, placements, and referrals. These sites attract consumers by features such as breadth of index, enrichment with reviews, or improved presentation of content, or they aggregate by topic or industry, focusing their information and their audience for potential advertisers. However, to compete in a market where social ratings are becoming pervasive and the top consumer search engines will always have the biggest indices, the existing tactics to attract customers are no longer sufficient. By giving money directly back to the consumer, Microsoft hopes to change the balance of power by disrupting the existing value chain. This disruption portends a reduction in margins for search advertising and could trigger a significant increase in downward margin pressure on existing direct response advertising. By attaching advertising to rebates, advertisers will want to apportion the lion's share of their ad spend to customer rebates in order to ensure conversion. In the long term, Microsoft gains a notable advantage by giving consumers an account to receive and cash out rewards: They will be able to track and collect information on consumer preferences, price sensitivities, and behavior. The stored value account could also be used for further purchasing (although that is not part of the current product). Microsoft has been testing points, rewards, and stored value systems for years and have found it to be effective in attracting end users. Given current economic sensitivities, this program is likely to appeal to a broad cross-section of the market. Retail history has shown that consumers react favorably to coupons, rebates, and sales. While this is certainly a ploy to attract users, so is any marketing effort, and this puts real money back into customers' hands. Live Search Cashback may not immediately change behavior, but it gives Microsoft a large stable of eCommerce partners that will be watching results very closely. If it is successful, it will help push consumers to Live Search. Among Microsoft's partners are Overstock.com, Barnes & Noble, Zappos.com, Sears, OfficeMax, Buy.com, The Home Depot, and Circuit City. Our bet is that the next time you look for a product online you'll check out Live.com to see if you can get it for less on Live. write your comments about the article :: © 2008 Computing News :: home page |