Bill Gates seeks patent for ad-rebate program

Microsoft Chairman Bill Gates and a Microsoft researcher applied for a patent in March 2006 for a advertising system that would use customer points to confirm transactions. Think of it as a frequent-flyer-reward style system involving advertisers and consumers.
Written by Mary Jo Foley, Senior Contributing Editor on

I don't write a lot about Microsoft patent applications, as they're often so vague that guessing their true intent is an effort in futility. But when it's Microsoft Chairman Bill Gates' name on the application, things get a little more interesting.

Gates and a Microsoft researcher applied for a patent in March 2006 for a advertising system that would use customer points to confirm transactions. (Thanks to Todd Bishop with the Seattle Post-Intelligencer for the patent link.)

The patent abstract:

"The claimed subject matter can provide a mechanism that facilitates a new advertising and/or referral architecture in the Internet advertising space, e.g., for advertising on search engine web pages and/or on content web pages. A mechanism is provided to confirm transactions even without monitoring them e.g., by issuing perishable, non-redeemable points to a merchant based upon an advertising budget. The points can then be issued as redeemable points to a customer, e.g., based upon the customer makes a purchase from the merchant. Points transferred to the customer can verify that a transaction occurred, and can be redeemed for products/services, including a convenient 'micro-payment' mechanism."

This patent application is interesting for several reasons. First, it shows just how much time and energy Gates is putting into understanding the dynamics of the online advertising market. (And you thought all Gates cared about were perpetually up-and-coming technologies like Tablet PCs, voice-recognition software and IPTV....)

Gates has been mulling the role of points and micropayments in the e-commerce space for years. Anyone else remember Microsoft Wallet? As of late, like a number of other Microsoft brass, Gates also has been looking for ways to target advertising at specific consumers by using methods and technologies other than search engines and click-through rates (CTRs).

Could a point system, similar to a frequent-flyer rewards program, be a better and potentially more secure way to match advertisers and consumers? Playing the "anti-competitive" and "information monopoly" trump cards, the patent applicants argue:

"Conventional search engines providers usually sell the ad space to the highest bidder based upon a pay-per-click (PPC) scheme and/or set the fee for the ad space according to a click-through-rate (CTR). However, these schemes have proven to be counterproductive for both consumers and advertisers, and ultimately inefficient to the search engine industry as well. These schemes or business models are anti-competitive as evidenced by the extremely high profit margins of the top two search engine providers. However, the market share for these search engine providers continues to increase, establishing an 'information monopoly.' Moreover, these models do not account for the true value of the ad to consumers or compensate for click fraud, wherein a user clicks on an ad, perhaps numerous times, for the incentives provided rather than due to an interest in the advertiser."

Another reason I found this patent application interesting was Gates' co-applicant, Kamal Jain. Jain is a seven-year Microsoft Research (MSR) veteran. His current title is "Principal Researcher, Theory Group." According to Jain's bio, he started out as a member of MSR's cryptography group. Now he's part of MSR's ACE (algorithms, computation and e-commerce) group.

Jain is listed as a co-inventor on a number of patents, "including some on contemporary areas related to ad display and ranking, dynamic ads in live games, ecommerce, wi-fi music sharing, peer-to-peer networking, water-marking, global and universal Turing tape, and ink-signature etc." Besides Gates, Jain's other co-inventors include Chief Software Architect Ray Ozzie and Distinguished Engineer Gary Flake.

According to the "SEO by the Sea" blog (a link also provided by the Seattle PI's Bishop), Jain's been a busy patent applicant and seems to be submitting patents on a variety of ad-referral- and ad-targeting-related inventions.

Any other observations about this patent application by Gates and Jain?

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