BuzzMachine

Microsoft’s effort to bribe/reward/cajole ecommerce search business away from Google with customer rebates is the product of dubious business economics. It’s a trap: a customer acquisition cost that becomes a habit hard to break. It’s just like premiums given by magazines to get you to subscribe. When I was at Time Inc. in the ’80s, Sports Illustrated had a big hit on its hands — or so they thought — with the Sneakerphone, free with your subscription. Time and other of the company’s magazines followed with clocks and other geegaws. In the end, though, they found that people weren’t subscribing to the magazines; they wanted the Sneakerphone and when it came time to renew, because they already had what they wanted, they canceled — and renewals are where magazines begin to see a return from their marketing to acquire subscribers. Advertisers eventually realized that they weren’t talking to readers; the magazines were the premium. The Sneakerphone turned out to be a very expensive problem. It took painful effort for Time Inc. to ween itself and its subscribers from the expectation of freebies with subscriptions.

Microsoft’s fees are a marketing cost, pure and simple. The company could pay to advertise it search or it can pay consumers to search. I’m glad to see money going into the pockets of consumers — the internet dividend strikes again. But I doubt that these economics are sustainable; this is just an effort to poke Google in the kidneys and I doubt that the giant will even notice. This is akin to Mark Cuban’s sillyass idea to pay/bribe/reward/cajole advertisers into leaving Google.

Michael Arrington has a well-done analysis of the Microsoft gambit. He concludes that it could increase Microsoft’s share of valuable commerce search:

A year ago Microsoft basically did a trial run of Live Search CashBack with Live Search Club, which lured searchers to Microsoft with offered of prizes to users for using Live Search. Microsoft went from 10.3% to 13.2% market share in a month, a nearly 30% rise. Live Search CashBack, which gives a much more straightforward payout to users, should see significantly better results.

But earlier in his post, I think he defeated that argument when he said, quite rightly:

This is a winner-take-most market: Having 9% of search doesn’t mean Microsoft has 9% of search marketing dollars. Far from it - publishers go to Google to partner on ads, which means advertisers must go there to get inventory, and a very healthy auction system pushes up prices. So not only does Microsoft (and Yahoo, and everyone else) have much fewer queries than Google, they are also generating much less revenue per query as well.

Right. So Microsoft pays heavily to raise it share but still doesn’t get critical mass. Then let’s say that Cuban gets on the board of Yahoo and convinces them to follow his plan and they lower their profit margin by paying advertisers, forcing Microsoft to do likewise. And what will they be left with? A warehouse filled with sneakerphones.

Is there a way to defeat the Google beast at search? Not this way. How about the Mahalo or Wikio method? I’m not sure about them either. They all have to try to change what is already a well-ingrained consumer habit and a critical mass of advertiser participation. Does this mean that search is Google’s forever? Well, I still don’t see anything to topple them — certainly not Microsoft’s plan. It has been tried before. Remember IWon.com? I barely did.

I’m not sure what I think about the Barry Diller/IAC announcement of a black-oriented search engine and content site, Rushmore Drive. I get the content part, of course. I also understand specialized search engines based on need or interest — jobs v. homes v. medicine, and so on. But isn’t there a danger in creating a search engine segregated along racial lines? Does it create more separation? Does it create a new sort of echo chamber? Does it limit the world reached by the search? I would never want to use a search engine aimed at middle-aged, suburban white guys like me; I want the world. And how do they know what is black-oriented content? It almost smacks of reverse red-lining, possibly pandering: How can you tell that a given article would be of more interest to an African-American than others and who’s to say that all African-Americans would look at it the same way? Perhaps I need to hear the problem stated clearly before I can judge this as a solution.

It has been said that tools like blogging and Facebook are disproportionately white; is that the problem? Is the solution, then, a search engine that gives them more traffic? Well, perhaps. But it’s a rather indirect one; there are other ways to encourage more creation and send them more audience.

Or is the problem search itself and an inability to find some content? I did a search on teen pregnancy because I recalled a recent survey saying that the incidence is much higher in the African-American community, and on Rushmore Drive, the fourth and fifth results are about just that. Not so on Google, though adding “African-American” to the search query comes up with very good results.

I would regret seeing the open prairie of the web marred with fences. On the internet, nobody knows you’re a dog or a cat, black or white, man or woman, young or old, unless you chose to say so and unless it’s relevant. I would have hoped that we could use this vast openness to break down some of these separations, not build them back up.

Jason Calacanis makes the case for human v. algorithmic (SEOed or spammed) search and then shows off his apple pie and his new social network. Jimmy Wales says what we need is more transparency and openness in search. “This is something that has benefited us across the internet,” he says. David Kirkpatrick, the moderator, says that given Google’s incredible growth, people are satisfied with search. Calacanis mentions a study that says 60 percent are dissatisfied (anybody have that citation?). Jimmy says that the leading search engines — Google, Yahoo, Ask — return essentially equivalent-quality results. So he argues that they compete on brand.

Marissa Meyer of Google is sitting in the front row right in front of them. I’m betting she’s not scared. She’s the fourth member of the panel just by her presence.

Jimmy says that Wikia will have not only the functions Jason’s Mahalo has but also user-submitted algorithms. This goes to yesterday’s theme of software being content — and open software requires open algorithms. Jason says he doesn’t think Jimmy will be unsuccessful trying to “jump in front of the Google train” in algorithms.

Jason says that he has a “pretty good suspicion” that Google is using people to clean up results. Marissa shakes her head no.

Jason says he has 60 fullitme people and 400 freelancers. “I believe in paying people for work,” he says; his zing on Jimmy. “I’m a writer by trade and I take offense when people try to devalue writing.” Do you think this way about Wikipedia, Kirkpatrick asks.

“There’s a very strange element to it, cult-like some people would say, that they want content to be free.” Jimmy responds: “Nobody works for free… What people do for free is have fun…. We don’t look at basketball games and people playing on the weekends and say these people are really suckers doing this for free.”

Jason has his teeth in the leg. He says it’s hypocritical that “everybody in the Web 2.0 industry should become millionaires and billionaires except for the writers.”

Jimmy: “To me this like the debate we got over a long time ago because it was so stupid that open-source software is communism.”

Yes. It’s about aligned interests.

Kirkpatrick pushes Jimmy and says he has a chicken-egg problem: Wikia is getting “terrible reviews” and he needs people to build the product but he needs the product to attract the people. Jimmy agrees about the chickena and the egg and says the bad reviews also hatched ore audience.

“If you’re going to come in the search space you need to invest at least $50 million to do this… This is not for the faint of heart. A major of search companies fail.”

Jimmy says it will take at least two years to get to industry-standard results.

Marissa from the front row says that it’s a mistake to return to the human-created directory. she agrees with them that there’s a false-dichotomy to look at this as all algorithmic or all human and, as Jimmy pointed, out, Pagerank is edited by humans — engineers, he says, but humans. She pushes back on Jason’s model of trust and says that may not be the right model; expertise matters.

“I agree with everything you said,” Jason says. “Can I go work for you?”

Esther Dyson says the problem with their model is the long tail. If she were starting a company she’d do somethign else. “Ok, I’m going to kill myself now,” Jason said. Punch line. He says that the fat tail will be human, the medium tale social, the long tail algorithmic. And he says that the advertising interest is in the fat tail.

Michael Arrington says he was very tough on Wikia when it started but has “promising aspects.” He returns to the playing basketball for fun question and says “that there are very few examples of for-profit companies getting people to do their work.” Not sure I buy that as a rule. He acknowledges Digg. I’m seeing networked journalism. I do believe in sharing revenue (a better model than staff work given the business realities today). Jimmy responds that “if we ask people to do work we will fail” but if he provides tools they want to use for their purposes they will succeed.

At the end, I ask about advertising and whether they will concentrate on the fat-tail brand, display ads and Google will have the scale to do automated advertising. Turns out that Jason will likely turn over all his inventory to Google to start and then, as with similar companies, will grow sold advertising. As the last word, Jimmy says, amazingly, that he hasn’t thought about advertising.

Mary Hodder, one of the most respected thinkers of the blog world, has launched her new company, Dabble. It’s a video search across many sites and a place where you can find the good stuff. In that sense, it is just what I was saying the world needs this morning: network 2.0.

My latest Media Guardian column — this one about the foolish publishers trying to shut themselves off from Google … and thus the public — is up here (and here). A snippet:

The World Association of Newspapers is portraying Google as an enemy of news. I wouldn’t say that. I’d call Google something between a necessary evil and a friend - and if news organisations are smart, they will learn how to befriend the beast. …

At this month’s Online Publishers Association conference in London, WAN managing director Ali Rahnema asked: “Could this content exist if someone else wasn’t paying to create it?” Well, in the quaint Americanism of my hillbilly roots, I’d say Rahnema got this bassackwards. Instead, we soon will be asking, “Could this content exist if someone else wasn’t linking to it?”

I’ve been arguing for sometime that the real competitor to Google will not be the next big thing but lots of little things, like Oodle, for job search and now see more specialized searches at Kosmix for health (it’s prett good), travel, and politics. [via TechCrunch]

Susan Crawford, bearer of one of the most dazzling brains online, has perfect advice for the old-media people who think search is an enemy. European publishers complained about Google making money off “their content” when the truth is that Google is sending prospective members to “their” communities if only they were ready to welcome them. Susan says:

What Google does is respond to search queries by providing snippets — thumbnail pictures and a line of text here, a line from a page there, a headline — and helping people get to where those things were posted. That’s pointing, not copying, and it’s a key element of Web 2.0.

The publishers, and the news agencies, are having trouble with this evolution — heck, they had enough trouble with Web 1.0, much less the groupness we’re seeing now– and are relying on incumbent laws (like copyright law) to protect their ability to charge for content.

But there’s a great opportunity here that shouldn’t be missed: news companies can become not only providers of great stories (well-researched, well-written, unlike blog posts) but also sources of order. There is so much information now — we need help! We need priority, and sense of impact, and sense of global connections. We need visualizations, and links, and commentary. All of these things are valuable. We’ll pay — with our attention, our loyalty to the brand, and maybe even with money if the reporters’ own personalities are allowed out to play.

A search engine, alone, can’t provide this kind of judgment. Not even Google can say which story is likely to have an important impact on our collective future. There is a Web 2.0 model for publishers, and they can only get there by letting go.

I think it’s about order and also about relationships, about connecting people to information and each other.