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Microsoft's new acquisition Ciao! combines online shopping and price comparisons with social networking. Some see the acquisition as part of an effort from Microsoft to stave off a Google search monopoly.  (Source: DailyTech)
Via its recent acquisition of Ciao and its cashback program, Microsoft is offering searchers financial rewards

It’s no secret that Microsoft is a distant third behind Google and floundering competitor Yahoo in the search engine business.  With Google constantly expanding its online offerings, Microsoft has turned to tactics that either smack of desperation or perhaps of brilliance, depending on your perspective.  Microsoft is in-effect paying users for their search engine traffic.

The tactic started with the acquisition of the unusual search/auction site Jellyfish.com last year.  Jellyfish allows users to search for products.  Each product has a commission associated with it, similar to the retail markup at stores such as Best Buy.  However, Jellyfish turns around and gives users a percentage of that commission back as savings, as a reward for searching with it.

This way Jellyfish essentially gives users money for search advertisements and traffic, deposited straight to their PayPal account.  The higher the commission percentage on similarly priced varieties of the same item, the higher the ranking in the search, as the customer will get more money back.  The approach is not wholly new for Microsoft -- it already tried to pay off businesses for search traffic.

In order to more fully promote its new Windows Live Cashback program, part of its new campaign aimed at seizing web traffic, Microsoft was offering big cashback rewards.  Users could sign up for a Live account and in a limited time partnership with online auction site eBay receive a percentage of cashback on purchases.  Customers received up to $250 on up to 6 purchases (this was recently increased from 3).  The percentages were as high as 35 percent at one point through eBay’s site. 

After launching the cashback program in May, Microsoft saw a short term jump from 8.5 percent to 9.2 percent.  However, the share slipped back to 8.9 percent in July.  Many in the tech news community have said that they took advantage of Microsoft's eBay deals and then never touched Live search again, returning to the tried and true Google search instead, a seemingly common response.

With Google sporting a Herculean 62 percent search engine share in the U.S. and higher shares abroad, such as 75 percent in the U.K., some reports indicate that Microsoft's efforts are merely defensive measures to try to stave off a Google search monopoly.  In order to further these efforts, Microsoft has now acquired shopping comparison site Ciao.

Ciao, unlike Jellyfish, derives its revenue from traditional advertisements, instead of commissions.  However, Ciao offers social networking components, which can be used to possibly interface shopping to such sites as Facebook or MySpace.  Microsoft is paying a cool $486M USD in cash to acquire Greenfield Online, owners of the site.

A Microsoft spokesperson describes, "Ciao is definitely part of the effort to extend Cashback.  It will be a market-by-market rollout. We will be working closely with Ciao to assess each market individually on the presence of local online merchants and the maturity of local e-commerce activity.  Integrating Ciao's capabilities into Live Search will provide a strong launch pad for our commercial search offer in Europe and enhance our e-commerce offering on MSN.  This makes the company a fantastic asset to the future of our search offer."

Analysts are somewhat critical of the move.  First, some criticize that Microsoft plans to sell off the market research business of Greenfield Online.  They argue that this unit is very valuable when paired with the Ciao site, and splitting up the pairing will weaken both offerings.

Secondly, many analysts are expressing opinions that the move will do little to hold off a Google search monopoly.  Writes Google Watch's Chris Boulton:

Right now, there are enough e-commerce sites to parallel the properties of the Monopoly board game a few times over. In Jellyfish, Microsoft plucked an Atlantic Avenue. With Ciao, Microsoft has acquired Marvin Gardens. 

The sad thing is, while this might seem like a clever strategy, all Microsoft's acquiring will do is keep Google from owning 75, 80 or 85 percent of the search market. Indeed, Live Search Cashback is just not getting it done for Microsoft in the early going.

Some analysts are commenting that the move may only serve to provoke Google into buying up several larger search properties, consolidating the market.  Such an outcome would represent a serious backfire of Microsoft's plans if analysts correctly identify its intentions as try to hold back market share from Google.  Says Boulton, "Indeed, Microsoft's moves may just inspire Google to buy its own Park Place or Boardwalk in the great Monopoly game of search."





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