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May 1, 2006

Microsoft: Marching toward Moogle?

Posted by David Hunter at 4:24 PM ET.

The Wall Street angst over Microsoft’s big bet on Internet search and advertising has given rise to a good deal of examination of how well Microsoft is doing in that regard. Are they building a powerhouse competitor or a Moogle (Microsoft’s inferior copy of Google)?

Microsoft, of course, would have us believe it is the former as they roll out adCenter which spices up Internet ad sales with viewer demographic information:

Microsoft’s adCenter, for instance, will incorporate a wealth of user demographic data into its ad-matching equations. Unlike Google, Microsoft knows a great deal about its customers. More than 250 million users have provided Microsoft some level of personal info, such as gender, age, and Zip Code, when signing up for various MSN services, such as a Hotmail account. Microsoft will lay this demographic data on top of contextual ad matches with the hope of providing a radically improved result. Microsoft insists that no personally identifiable info will be disclosed.

Instead of simply bidding on words and phrases, MSN is betting that some advertisers will offer a larger payment if the Web surfer falls inside its target audience. For instance, Kentucky Fried Chicken (YUM ) could target women between 35 and 45 at dinnertime with hopes they’ll opt to buy a bucket of thighs and breasts instead of cooking. Or Neutrogena Corp. (JNJ ) could target one set of ads for its facial cleansers for men and another for women. “Search is a very, very blunt instrument,” says Joanne Bradford, vice-president and chief media revenue officer at Microsoft. “AdCenter is a tool that you have much more control over.”

Frankly, if that’s it, adCenter is hardly razor sharp. Google, of course, is relying on IP address location and search history to refine its results.

Henry Blodget is clearly in the Moogle camp in his blistering attack, MSN: Another Quarter Closer To Irrelevant:

Microsoft has been at the web business for 11 years now–and it is still running a distant third. How long Microsoft will continue to believe that gaining real traction online is just a matter of hiring the right people, developing the right algorithms, or spending the right amount of money remains a mystery. Unless the MSN division soon shows signs of first stabilizing and then regaining share, however, even the Microsoft faithful may eventually have to throw in the towel.

He recommends a spinoff as was the ultimate fate of other Microsoft Web properties such as Slate and Expedia, although it’s not clear how that would boost MSN in the search business as opposed to ensuring its doom.

However, on the flip side, Microsoft may have some advantage in just not being Google. The rumor from a week ago that eBay was soliciting help from Microsoft and Yahoo in fighting Google was subsequently denied by Steve Ballmer, but choosing an ad vendor for a content site seems like an ordinary business decision that could expect to be examined regularly. The conjecture that eBay management was incensed by Google’s recent forays into shopping might play a part in any decision, but neglects the fact that Microsoft and Yahoo have notable shopping sites of their own.

More concretely, Microsoft did manage to snag a search client away from Google over the weekend. Amazon’s A9 and Alexa searches are now “powered by Windows Live” :

Jeff Bezos hasn’t had much luck finding a winning recipe for entering the Web-search market. His previous formula — pluck an algorithms guru from Yahoo, add search results from Google, and stir up the Web world — didn’t attract many users. Meanwhile, Udi Manber, CEO of Amazon’s search subsidiary, has decamped for Google. Now Bezos is giving it another go by partnering with Microsoft. While Amazon’s move doesn’t do much for Microsoft’s paltry share of the search market, it’s a symbolic victory for Microsoft, which failed in a bid late last year to power AOL’s search results.

Amazon’s search properties are small potatoes (and ad-free), but something is better than nothing. As Nicholas Carr observes:

As Google has moved deeper into shopping services and book sales, it’s been on a collision course with Amazon. But my guess is that money was probably more important than strategy in this decision. The big question: What did Microsoft pay, and is this part of a larger deal? No word yet from the principals.

Once again this seems like an ordinary business decision where Microsoft can provide an alternative to the ubiquitous Google, although the current lack of ads makes it a special case.

Filed under Amazon, Coopetition, Executives, Google, Live Search, MSN, Microsoft, Steve Ballmer, Windows Live, Yahoo, adCenter, eBay

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4 Responses to “Microsoft: Marching toward Moogle?”

  1. Yahoo one-ups Microsoft (and Google) with eBay deal -- Microsoft News Tracker Says:

    [...] Yet Bruce Richardson, an analyst at AMR Research, said it would be difficult for Google and particularly Microsoft to win such large partnership deals because their competitors have no desire to make either company stronger. Possibly, but as I have suggested previously, there’s no need to invoke Machiavelli, when ordinary business judgement will do. An Internet content site that wants to make money from ads and search will likely end up dealing with one of the big three, and would be foolish not to get the best deal possible given the current cut throat competition. The decision could have been as simple as who was willing to ante up the most. Filed under Coopetition, MSN, Google, MSN Search, adCenter, Yahoo, Windows Live, Windows Live Search Listen to this article   [Permalink] [...]

  2. Google Checkout checks in -- Microsoft News Tracker Says:

    [...] Mr. Schmidt said the company was willing to lose money on transaction fees because it felt the package would increase advertising spending. … Advertisements on from companies that accept Google Checkout will display a small image of a shopping cart. Clicking on the ad will take customers to the advertiser’s Web site, as it does now. When customers decide to buy something, they will be offered the option to sign into Google Checkout and use the credit card and address information on file there. Customers that do not have accounts with Google will be encouraged to set them up. There’s more in the article including the expected benefit to Google of obtaining more demographic information about Web shoppers in order to better serve ads to them, much like one of the promised benefits of Microsoft’s adCenter. Forrester Research’s Charlotte Li has more on the benefits and summarizes it this way: So hopefully you’re beginning to see the virtuous circle that Google is building with Checkout and how it supports the core search business. It’s brilliant – by tying the wallet service to search, Google creates a huge incentive for its retail advertisers to participate. This is what differentiates Google Checkout from other wallet services … Offhand, it looks like Google has pulled an interesting looking rabbit out of the hat. Also notice that Google Checkout is not a beta, but has been fully launched and is ready to rock and roll although admittedly it’s version 1.0 with all that implies. In any case, the bar just got higher for the other big search and commerce players like Microsoft. Filed under Coopetition, Google, General Business, Yahoo, AOL, Online Services, Ad-supported software, eBay, Microsoft, PayPal   [Permalink] [...]

  3. Oops, there goes another Microsoft Web customer -- Microsoft News Tracker Says:

    [...] One of Microsoft’s few victories in the eyeball auctions was signing up Amazon’s A9 search service to use Windows Live Search.  A9 is hardly one of the Web search biggies, but it was a victory. Now that victory is being called into question as Amazon Nearly Exits Search Business: After failing to generate much interest in its search engine, Amazon confirmed Tuesday that it was removing search history and mapping features that differentiated it from competitors. In its place, a simplified front page that links to other search engines has appeared. [...]

  4. FTC investigates Google acquisition of DoubleClick -- Microsoft News Tracker Says:

    [...] Also, the investigation may open a real can of worms for all Internet advertising sellers, including Microsoft, since the FTC apparently plans to investigate the privacy aspects of the deal, not just its effects on competition. You may recall that Microsoft touts its adCenter advertising platform as offering better demographic targeting than competitors, which is the polite way of saying they think they know a lot about their search and MSN/Windows Live users.   Filed under Acquisitions, Coopetition, Legal, MSN, Google, Governmental Relations, General Business, adCenter, Ad-supported software, Privacy, Microsoft, DoubleClick, aQuantive   [Permalink] [TrackBack] [...]

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