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Microsoft Pri0

Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times technology reporter Matt Day.

November 13, 2008 at 12:08 PM

Microsoft doing better with commercial search than search in general

Microsoft is touting the impact of its Live Search Cashback program, launched in May, on its share of the Internet search market. But the company has seen its third-place position in the broader U.S. search market steadily erode this year.

The Cashback program, which Bill Gates announced on May 21, connects online retailers with buyers who get a discount (Microsoft actually returns to the buyer some of the advertising revenue it collects from the retailer) if they search for the item through Microsoft’s Live Search engine.

Gates said at the time the program could change the business model in search. Both he and CEO Steve Ballmer have acknowledged that Google beat Microsoft, and other search providers, to the punch with the search-advertising business model.

“I think years from now, you may look back and say, ‘Wow, search started to get a fair bit more competitive and we can look back to [this] announcement,’ ” Gates said in May.

In the second quarter, when the Cashback program launched, Microsoft referred 12 percent of online commercial transactions. It’s share of the total search market in the second quarter was 8.9 percent, according to comScore, which prepared a custom report for Microsoft, only parts of which have been made public

ComScore analyst Andrew Lipsman said that while Microsoft “overindexed” on commercial search (it had a greater share than one would expect based on its overall search share) the other major search engines’ commercial search share was roughly in line with their overall share. That would mean Google, the search leader, with around 60 percent of the market, still captured something like five times as many commercial searches as did Microsoft.

Microsoft is not providing any historical data on its share of commercial queries to evaluate the impact of the Cashback program. And, really, the second-quarter figure is not all that telling considering that when Cashback began in later May, the quarter was more than half over.

“Having only recently put a stake in the ground on making commercial search a priority, we’re really looking at this set of numbers to benchmark subsequent apples-to-apples studies,” a spokeswoman said via e-mail.

Frederick Savoye, Microsoft senior director of product management for search, said in an interview that the company is pleased with the progress it has made with the Cashback program. It has attracted more retailers and grown the catalog of items for sale through the program from 10 million to 13 million.

Advertisers are getting a 50 percent increase return on their investment in the program, he said.

In the popular commercial categories of computer hardware, movies and videos, home and garden, music, and travel, Microsoft was either the No. 1 or No. 2 search provider, he said.

Of course, Microsoft is seizing on the economic downturn that has consumers bargain-hunting to emphasize the value of the program. But Savoye also noted that people tend to spend more while using the Cashback program, which is obviously good news for retailers but maybe not for consumers who are trying to stick to tight budgets.

Since starting the program, computer maker Hewlett-Packard has seen a “38 percent improvement in average order size,” Savoye said.

“What’s interesting for our partners is not only do we convert people and bring good people, but we find that people actually tend to spend more through Cashback,” he continued. “The offers are more attractive and if you think about the economy that we’re in, it kind of makes sense for people to try to stretch their dollars as much as possible.”

For more analysis: Danny Sullivan at Search Engine Land gives Microsoft’s Cashback numbers thorough scrutiny.

Meanwhile, the Web is chattering with speculation over whether Apple may field its own search engine. But the source of the speculation — TechCrunch — also debunks it:

“But one important fact that isn’t checking out – if Apple were building a search engine, they’d be hiring search experts and engineers. We’ve talked to a ton of them at all the big companies, and while some of them heard the same rumors, none have lost search employees to Apple, or heard of any specific hirings.”

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