I think it is definitely worth taking the time to read it. It’s just literally 3 minutes, a simple VSI (very short introduction).

Click here to get there.

1- you register as an Ebay seller, or find one that has the product described below at poin 2)

2- set up a 750$ cash product (i.e. customer pays 750$ via PayPal to get 750$ cash)

3- the cashback appears to be 35%, i.e. 250$ circa

4- buy your own cash product

5- walk away with 250$ worth of free-money / say thank you

Simple isn’t it? you buy your 750$ for 750$, and Microsoft gives you 250$ for having done all the legwork. According to MSFT recent balance sheet, they can accommodate about 100,000,000 of transactions.

Apparently, it has been possible for a short while. For all the efforts and time that engineers and strategists might have put into thinking through the cashback product, there is always someone smarter out there that can game the system.

Were I in their shoes, I’d hire the guy. This is arbitrage at its best.

Recently Microsoft has announced the Live Search Cashback initiative. An interesting product that, if successful, can have far reaching consequences. And I am eager to see how it does.

Live Cashback gives you money back for shopping with selected merchants. Easy: make a search for a product (try here), select the appropriate result (or refine search by category) and you are presented with a nice page with the product description and a list of merchants with a few data about price: you’ve got the store price, the cashback you get if you purchase from that merchant, and the bottom line price (inclusive of shipping costs). If you make the purchase, the cashback is accrued in your live search account and you can claim it back as soon as it reaches 5$. You can’t really say you are paid to search, more like you are paid to buy, which is not a bad thing either. Cashbacks are interesting: from single percentage points up to 30%, apparently. I have seen a 15% myself, which, on an item of 300$, is not bad.

About the model. The advertiser decides the cashback to the customer, so it looks like it is the advertiser paying, and not Microsoft. Not really, I would say, as you expect the advertiser to manage its campaign against an ROI target, and it will adjust the CPA accordingly (downward). Yes, CPA, because cashback works on a CPA basis for the advertisers. So, at the end of the day, it is Microsoft that pays you, not the merchant. And it is paying you from its margins.

All this happens only in the cashback section of live search. Supposedly, in the “usual” live search you would see a dollar icon for every advertiser that has a cashback offer.

Even with just the few details about pricing that I have, I’d like to write down a few considerations on this model and try to take it to its extreme consequences if fully rolled out and successful:

1. right now, it is limited to a “shopping comparison” framework, so I am not sure it will have a huge impact. It is a test bed. Clearly, for the migration into the mainstream sponsored search, a few things still need to be figured out. This is how you treat things that can potentially disrupt a pretty good monetization model: you test them in a controlled environment, you learn, and you adjust
2. it’s a first step in the direction of CPA, and Microsoft will be accumulating knowledge about the ins and outs of advertiser practices in such a framework
3. it’s an interesting alternative model to shopping comparison, and shopping comparisons will have to take it in consideration if it flies, and maybe adapt
4. it might prove extremely valuable for merchants, but maybe not so much for Microsoft. Merchants might discover that the first position, with the highest discount and the lowest bottom line price, converts better than the lower position, with a lower discount. This makes sense: if you are about to buy, you go for the lowest price. The lowest price might catch most of the conversion. If this is true, advertiser will trade CPA for cashback, and users will rip the benefits. MSFT margins will be massively squeezed
5. as it is, this cannot be a distribution model. With falling margins, monetization will be hit and there won’t be much left for the publishers
6. i presume if the economics work, Microsoft might integrate it with the mainstream search and increase the number of merchants in the program. They will do this with the hope that the economic incentive drives more searches toward Microsoft
7. they don’t necessarely have to be searches, they can just be “conversions”. If the model works and Microsoft manages to capture more conversions on their properties (at detriment to Google), then Google monetization will start decreasing. It is a war on margins before it is a war on users
8. the nuclear scenario looks something like this:

• cashback spreads around and attracts users at the end of the purchase funnel
• conversions migrate from other search engines toward Live as Live offers the best prices which are not accessible elsewhere
• as conversions migrate, incentive to advertise on other search engines decreases and their CPA will go up as a consequence of falling conversions. Price will have to go down
• With PPC falling, monetization weakens and revenues at other search engines fall accordingly
• if this really happens, other search engines will have to find smarter ways to deliver the value to their advertisers, or they will be forced to enter into a similar monetization model and start a margin war
• this would squeeze the industry margins, but it is less of a concern for Microsoft (with less than 10% market share) than it is for Google and Yahoo

If this is Microsof’s “secret” plan, then it really is an attack to the core of the monetization model of its biggest competitor with the goal to disrupt it. It would be a kind of “if I cannot win, then I better make sure you can’t win too” plan. But Microsoft can afford it (with its revenues stream still solidly anchored to their application), while the others cannot. Taken to its extreme consequences, if successful this might disrupt the advertising-funded applications threat that in turn could disrupt Microsoft monetization model.

Clearly, however successful the product is going to be, Microsoft won’t be able to increase the usage of their mainstream search without a competitive product.

It is an interesting experiment, but I think it is still just an experiment till Microsoft is able to clearly figure out what beast is going to unleash. But if the economics are just barely sustainable, then possibly there isn’t much downside for Microsoft, and the end results can be:

• more users for mainstream search - if the product is competitive
• smaller margins for Google, and therefore impacting their ability to fight back - if they manage to capture a sizeable portion of available conversions

You know, there are only these many conversions in the world, and they drive a big chunk of direct marketing spend. And if Microsoft manages to capture more than its fair share, then the cake will shrink for the others. The users will rip the benefits, and the competitors will be left with the dilemma on whether to enter the margins war, or find a smarter way to regain the conversions.

It will be interesting to see what happens and how serious Microsoft is about this.

More interesting, it seems that P&G is moving dollar aggressively to the web, although an official spokesperson would not confirm.

On the other side, a recent report published by PubMatic, as US company that optimizes adnetwork placements and website inventory management, shows eCPM falling dramatically in the last couple of months, hinting at troubles in the online advertising space or, at least, in the adnetwork space.

Unfortunately there isn’t much about the methodology and panel used by PubMatic, so it is quite tricky to assess how much comprehensive their data are. Also, only adnetworks are tracked, so nothing can be said about the really big Internet properties. And many publishers put only remnant inventory (i.e. low value) on adnetworks.

Sure, there is a slow down in finance and real estate (they would be crazy to keep on spending as they were, especially considering that they are not letting money or managing any house sale!), and in the broader economy as well, but I am not sure whether it will impact the online word significantly.

When money is scarce, people look for more efficient ways to use them, and Internet appears to be one of them, so it may well benefit from a slow down. If not in absolute terms, probably in relative terms.

There was an interesting table on the FT last Saturday that reported the length and extension of house prices drop (the bear market) in 15 economies since 1970 (mainly Europe, USA + Japan, Korean, New Zealand and Canada).

On Average, the bear market has lasted 6+ years, and the prices dropped between 16% (Canada) and 50% (Netherlands). UK had 2 bear markets, lasting only 3 / 4 years each, with prices dropping 26% and 34%.

If history teaches anything, and considering the highly inflated prices of the last boom cycle, are we set for prices dropping between 30% and 40% and for the bear market lasting up to 5 years?

I advise you to read them all. They are very interesting, and cover many different aspects of mobility driven by the new wireless era.

Fairly interesting are the considerations about the “nomads oasis”, i.e. places where they can stop, recharge, get wifi connection and get stuff done in a pleasant environment. You could think to the Starbucks. These are called the “third spaces”, as in the place between your first place (home) and your second place (office). Once great places to socialize, they have recently become lonely places full of people busy with their crackberries or their laptops. Part of the revenues of these places come from wifi access, and it will be interesting to see what happens when wimax will be released, or wireless broadband becomes mainstream in any way, shape or form. I guess people sitting with a single espresso and surfing online for 2 or 3 hours won’t necessarily be welcome.

Another interesting point made by the article is that mobility is completely change traffic patterns, and the way people use the city. Architecture will have to re-think the way cities and building are built, and spaces are used. It appears that desks are going to be a thing of the past. Although I quite fancy having one, and I am not sure I would trade if for a daily search of a spare couch in a common space, for as confy as the couch can be.

Let’s go a bit further ahead. Just a few years.

Mobility is going to change the way we do many things, and I am particularly interested at how it will change the way we use the internet. And it will also reinforce the need of the “cloud”. The very simple fact that you cannot squeeze 1600×1200 pixels into a 3inches screen, and that, even if you manage to do that, you couldn’t probably make good use of it (unless you carry a microscope with you, at which point you are probably better off carrying your whole pc) will require ubiquitous access to your data, files and applications. So that you will have your 3 / 4 inches mobile for the “on the road” stuff like quickly skimming through a PowerPoint presentation, reading emails, making phone calls, reading news. And then you will use a laptop -if you carry one- or a desktop at a “third space”. Clearly, all your stuff will need to be remotely stored, to make sure you can easily access them from any device around the world. Your mobile device will also carry your music and videos, and they too will be remotely stored, or the more frequently used will be locally stored while the whole archive will be sitting in a server somewhere around the world. Clearly your mobile will be able to connect via bluetooth to your camera stereo, if the stereo is too old to access your cloud. No need to buy CDs. Your camera -if you are not happy with the 5MP in your mobile you’ll probably have a tiny 14MB handy- will take geo-referenced pictures that will be uploaded in your cloud and properly categorized and tagged by a product like flickr, for example. Of course, new pictures would update your social profile online. This is, in a nutshell, what the “cloud” means for a user, and it is being made possible by a few key things: the Internet (as an infrastructure and as a collection of services), ubiquitous wireless access (wifi, 3G, 4G, wimax when it will come) and devices. Interesting times.

Ok I admit it, I am passionate about the economy too, not only about the internet. So I cannot stop posting about it and, these days, more frequently than about the internet. There is a lot going on in the internet, especially with the recent Yahoo-Microsoft story. But I cannot and don’t want to comment about “my” company.

The problem is, there is probably much more going on in the economy nowadays, and these are probably the most interesting times of the last 20 years. I make no secret that I am bearish on the economy of the developed countries, especially US. More positive about the emerging markets. I am a believer in the decoupling, although it might not be perfectly realized, yet.

Today I wanted to just post a chart of a model that predicts US recession. I discovered it on “the big picture“, an interesting blog about economics.

Jeremy Piger is an associate professor at Oregon university, and he knows a thing or two about Macroeconomics and Econometrics. He has developed a model to forecast US recessions, and the output is presented in the picture at the top of the blog. If you cross reference it with the Wikipedia record of US recessions, it seems to match quite well (although some might question the size of the sample).

Just thought to share it.

Nestoria is a vertical search engine focused on real estate with operations in UK and Spain. Founded by a few Spaniards -amongst which friend and former top dog for Yahoo Search Europe Javier Etxebeste- it aggregates information and data from other vertical engines and estate agencies, properly and smartly aggregate and present in a pleasant way. Extremely easy and intuitive to use, not useless bell and wistles, it gets the job done, nice and quickly.

The search results page has the classical drag and drop map with icons on where relevant houses are located. A big button allows to update the search every time the focus of the map is moved. Usual filters: price and number of bedrooms, sale, rent and flat-share.

A click on any of the icons on the map shows a summary of the house details, and a click on this little window will redirect you to the real estate agent website. That is what triggers monetization (and therefore revenues for Nestoria).

A very interesting feature is the information box in the bottom-right of the site. It brings you all sort of interesting information about the area: census, political, parking lots and prices, pictures of the area and, very important considering its focus is on UK, pubs and their ratings.

But probably more interesting of them all are the historical offer prices for different type of flats/houses in the area. You can have a front seat watching house prices going down