Microsoft’s pitch to paid listings marketers is that they can move from a cash per click metric to a more precise conversion model. They don’t have to pay (via rebate) until after an actual sale. This is an attractive concept, for sure, although loaded with nuance, esp. in comparing ROI across engines and campaigns.
Microsoft is also offering to take a risk on behalf of participating merchants. Though it wouldn’t tell us how much it was going to “spend,” Microsoft will essentially buy CPC listings for merchants, hoping to cash in by taking a piece of actual sale. It’s not clear to me how, for instance, Best Buy might react if Microsoft is doing this for Circuit City. That will have some impact on the keyword pricing for Best Buy, though Microsoft says it won’t be aiming for top spot. And what will Best Buy think of Microsoft the engine acting so much like an affiliate or an agency?
These kinds of things will be worked out as the marketplace gains liquidity. And it’s a strong sign of innovation from Microsoft in search. (I won’t give them “disruptive” yet). As a completely unfair comparison, I had previously asked Yahoo how much it was willing to engage various kinds of arbitrage while its marketplaces build, and it seemed totally unwilling to do so.
And of course, if this actually works, Google’s already more efficient marketplace would make it that much easier for Google to offer something similar.
Inquiring Jupiter clients should set up a chat with colleague and lead search analyst Evan Andrews for his take.