Thursday, May 22, 2008

Microsoft Should Know Money Can’t Buy Love

The rap on Microsoft is that it copies everyone else’s good ideas. That may be too kind. I think it also copies a lot of proven bad ideas. To wit, Microsoft’s latest move to offer shopping rebates to people who use its Internet search service.

You can see why Microsoft would want to do this: It has too much money and not enough customers, so why not pay people to use its services? Sometimes putting money into creating value for your customers is a great strategy. For an example, see Amazon’s decision to subsidize free shipping rather than buy television ads.

But Microsoft’s approach is wrongheaded. First, it’s not really about the main market for search. Price comparison shopping is a good service, but a relatively modest market, with none of the independent sites — like eBay’s — or the services of search engines — like Google’s Product Search — really taking off.

More importantly, history has proven that you can’t build a mass Internet business by buying customers with cash or rewards. I’ve seen hundreds of companies that have tried versions of this. There was AllAdvantage, a company that wanted to pay people to surf the Web and see ads. There are all kinds of bonus and reward programs, like the now defunct Netcentives, which offered airline miles for online shopping, and Upromise, which takes a cut of purchases and kicks it into a college savings account.More>>