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May 25, 2008

Microsoft Thinks Short Term

I was a little surprised to see that Microsoft decided to end the book scanning initiative and close its book search engine. But I was even more surprised to read the motivation:

"Given the evolution of the Web and our strategy, we believe the next generation of search is about the development of an underlying, sustainable business model for the search engine, consumer, and content partner. For example, this past Wednesday we announced our strategy to focus on verticals with high commercial intent, such as travel, and offer users cash back on their purchases from our advertisers."

In other words, the book search engine didn't make enough money and Microsoft decided it's better to focus on areas that are more profitable. Instead of improving their search engine with valuable content from books and offering better search results, Microsoft chose to make decisions based on the short-term profits.

This is also visible in the Cashback offering: "Microsoft Live Search cashback is The Search That Pays You Back. Find great deals on millions of products from hundreds of brand name stores that you know and trust. You will be able to earn cashback savings based on a percentage of the product price. Your savings will be paid to you via your choice of a deposit to your PayPal account, direct deposit to your bank account, or a check in the mail."

Microsoft hopes to attract more search users, but this will probably work in the short term. People will only go to Live Search for the rebates and they'll return to Google to find information on the web. If you pay your users and define your service as "The Search That Pays You Back", your brand's value diminishes because the search should pay off through its own merits.

Google has a long-term strategy for its search engine and for the other services. "Our goal is to develop services that significantly improve the lives of as many people as possible. In pursuing this goal, we may do things that we believe have a positive impact on the world, even if the near term financial returns are not obvious. For example, we make our services as widely available as we can by supporting over 90 languages and by providing most services for free," wrote Google's founders in the IPO letter.

To offer a compelling alternative to Google, you need to offer services that are more valuable to the user, even if there's no profit involved. Google thinks you first need to create a great service and then start to find the business model. Microsoft still has to work on building a great search engine, so discontinuing the book search engine is not a step in the right direction.


  1. I'm totally agree of you. Only one wat that can keep customer, is -- good services!

  2. It all depends on audience profile. If we assume that more people are interested in information then yes, Google is doing right thing.

    However, if most people do not need any books and just need those fancy free stuff...

  3. Who is behind the idea of the Search That Pays You Back (cashback)? I don't know. I just know the one who approved it was the CEO, who had lost basic vision of running a giant company. Cashback scheme is generally used by some small company to improve traffic in short term, and such scheme is not so good for company's public profile, as the company will be looking cheap for this, and mature customers won't be coming for such cheap things.

  4. I think MSs step is absolutely correct. Every serious business man would do the same.

    No money flow - no product. Always been that way and will always remain that way.

    Sure, Google is scanning (legal?) book contents... but serious, how many people are using Google Book Search? 0,1% of the Google Image users maybe? Or less?

    90% of Googles products are nonsense and are just there to make people think.. Whoo.. Google is THE company... expensive marketing in other words.

    But we all see that Google has done too much too fast.. Jotspot integrated after YEARS, Google Docs looks like MS Word in 1998, etc. Too many projects at the same time... and then this privacy issues... people are more and more moving away from Google because Google offers anonymous product registration...

    some years.. google will require anyone to identify themselves...
    and then people finally understand that this anonymous stuff was just wheat for the pigs...

    maybe then people will realize how important non-contextual data really is

  5. The idea behind creating live search cashback is to hit at google's core revenue center.

  6. I forgot to mention that the whole Cash back thing is deceiving and misleading. Here's a quote from a Microsoft press release:

    "Microsoft Corp. today announced it will offer ad-funded cash rebates to customers who find and purchase their favorite products through a new program called Microsoft Live Search cashback. (...) With Live Search cashback, Microsoft helps merchants maximize their advertising investments and drive more sales by providing consumers with an added incentive to buy — a cash rebate. Participating merchants choose to pay Microsoft a CPA fee each time a customer completes a sale through Live Search cashback. The fee is a percentage of the retail price, and when that transaction is complete, Microsoft returns that fee to the consumer in the form of a cash rebate."

    But when you go to the Cashback site, Microsoft "forgets" to mention that what you'll find are actually paid listings (also known as ads), not organic results. That means you won't get the best deals: you'll only get the best deals for the small number of companies that advertise with Microsoft's program (I found better prices using Froogle).

  7. Microsoft thinking short term is nothing new, they have done it since the inception of their company.

    The difference is that they are "persistent", which may sound contradictory but it isn't.

    They tend to try things out using short term vision, and then if it shows some potential they through a bunch more resources at it until it sticks. They tend to do things in threes:

    1 - Buy a company or copy a technology with an innovative idea.
    2- Market one or two versions to see if it has potential
    3 - If it has potential, flog it to death using FUD (fear, uncertainty and doubt) tactics to make it mainstream,
    discontinue it.

    This has been shown to be a pattern many times over for them.

    The cashback idea is merely a way for them to make commission sales from people using the search engine... trying to get it from the vendors in another direction...

    If it reduces costs of advertising, and therefore the costs of the products, it might be a good thing... if all it does is to raise prices, then it won't last very long at all.

  8. I genuinely doubt that many people will be attracted to use the lousy MS search engine day in and day out just to save a few bucks on airfare. If anything, people will only use Live when they want to buy something and then switch right back to Google.

  9. I believe that offering money for people to use a low quality search engine, smile at you, or be your friend, seems low class and needy and will ultimately backfire.

  10. I agree that they should focus in making good service.

  11. I think Microsoft is just so business-minded that they forgot that what the costumers are looking for are quality services. They should at least knew that the costumers will always be looking for you(Microsoft) if you have given them what they really want.

    They have lots of competitors. They should think that if they move to short term profits, they won't be leading to any successful goals they've been hoped for.


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