Can Money Buy Microsoft Love?
Like many in this industry, I’ve been giving a lot of thought to the different ways MSN can pose a legitimate threat to the dominance of Google and Yahoo in the years ahead.
While there are undoubtedly numerous others, here are four different approaches they could take (or have already taken).
Evolve the Marketplace
There’s no disputing that paid search has been on a tear for the past few years. The few lines of text that have been served across billions of search results pages are largely responsible for the resurgence we’ve seen in interactive advertising. But while those ads are now being served across content pages and in RSS feeds, there’s been relatively little evolution in the way search marketing is bought and sold - we’ve been talking about clicks, CPCs, match types, etc. for years. This has stood in stark contrast to the many developments we’ve seen on the consumer end of the search process. That experience now includes desktop search, mobile search, book search, blog search, just to name a few.
While MSN should have had the foresight to enter this market years ago, they have undoubtedly benefited from observing the mistakes that Yahoo and Google have made in the past. Beyond that, the fact that MSN doesn’t have to rush into the market at this stage has allowed them to think about improvements that can be made to the search marketing process as it exists today. As a result, in addition to the standard features we’ve seen from existing paid search providers, MSN’s adCenter includes both behavioral (day-parting) and demographic targeting - something no other engine currently offers.
Because the system is still in beta, the jury is still out on its overall effectiveness. But there’s no doubt that if the targeting is accurate enough to justify the incremental bids it requires, advertisers will begin to shift some percentage of their search budgets to MSN. If nothing else, MSN’s entry into the market is going to drive innovation. Google and Yahoo! can no longer afford to be complacent.
Cut Into Competitor Distribution
We’ve all heard the rumors about MSN’s attempts to replace Google as AOL’s paid/algorithmic search partner and that would certainly be a step in the right direction. Distribution across AOL represented 10% of Google’s third quarter revenues, so this could represent a significant hit to Google’s financials.
What’s been largely overlooked (and what our Product Director, Prashant Desai, likes to point out), however, is that a possible AOL shift to MSN search could release the latent value of the AOL user base through the integration of MSN demographic targeting capabilities mentioned above. The partners would reap incremental revenue from AOL’s existing user base of 112MM unique visitors to its web properties. As a result, the pairing could ultimately create some of the most valuable traffic in the market - traffic that is free from the equivalent of spam sites.
It’s also worth noting that Microsoft has somewhere in the neighborhood of $37.5B in cash on hand and they continue to generate something like $13.5B in free cash flow each year. If they want to increase their distribution with quality traffic that is currently owned by either Google or Yahoo, they can simply guarantee revenue to some of those potential partners. Google has used generous revenue shares to accomplish a similar goal in the past, but MSN is in a position to guarantee those syndication partners more money than they’re currently making from either of the “Big Two.”
Share the Wealth - With Users?
While scanning yesterday’s news, I came across the following excerpt:
