Microsoft's Web Search kickback program has a Windows precedent

Over on his SearchBlog site, John Battelle shares the details of a Microsoft incentive program known as "Microsoft Service Credits for Web Search."

The program provides kickbacks to businesses who agree to use Microsoft's Live Search services. The more users a company agrees to "influence," the bigger the payout from Microsoft. The Microsoft credit program comes in three flavors, according to Battelle: Low, medium and high involvement.

Battlle blogged:

"Moderate and high promotions include 'In-house training session on ‘how to get the most from web search’ using Windows Live Search,' 'Remove all existing toolbars,' 'Set Homepage to Live Search,' and 'Email message of encouragement from CEO.' IE 7 is mandatory for the program, as one might expect."

(I've asked Microsoft for comment on particulars about the Web Search program. No word back yet. Here are more details on the Web-search incentive program, provided by Microsoft on March 16.)

The Web Search credit program isn't without precedent at Microsoft. Anyone else remember the Market Development Agreement (MDA) stipulations that Microsoft was pushing during the 1990s? Here's how that program worked (from an article I wrote on it a few years ago):

"Microsoft launched the Market Development Agreement (MDA) licensing concept in 1994. The drill for hardware makers went something like this: If OEMs wanted to license Windows 95 but didn’t promote or sell it, they would pay a fairly hefty price per copy. If they agreed to co-promote the operating system in ads or issue a Microsoft-endorsed press release noting they had decided to offer their customers Windows 95 preloaded on new systems, they got a better price.

"The Windows 95 MDAs listed a dozen or so criteria through which OEMs could lower their per-machine fees. Those agreeing to preload the operating system on at least half of their PCs each month got a knock-off. Those agreeing to display the Windows 95 logo prominently on their advertisements got another benefit.

"Hardware vendors who okayed the whole list of Microsoft Windows 95 marketing criteria got a 'bargain' rate of, on average, $60 to $70 per Windows 95 copy. That’s for those who were considered tier-one hardware makers, committing to move a lot of Windows 95 copies. But there were then-and are still now-only a handful of tier-one vendors, including Compaq Computer Corp. and Gateway 2000 Inc. The next 12 to 15 vendors, constituting tier two, receive a slightly less favorable per-copy rate, even if they agree to the bulk of the MDA criteria. Tier-three players-the rest of the OEMs with whom Microsoft does business-get an even less attractive rate because they sell fewer boxes."

As Microsoft historians may recall, Microsoft was forced by the U.S. Department of Justice to end its preferrential pricing scheme for Windows. Microsoft now charges its top 20 OEMs the same price per copy for Windows. At least as of 2004, the MDA incentive program still existed in some form, however.

The Web Search program is more of an opt-in program than was the MDA program. With more than 95 percent share of the desktop operating system market in its control, Microsoft used the MDA program to tighten already tight screws on its OEM "partners."

The case is quite different in the Web search arena, where Microsoft is No. 3, trailing behind Google and Yahoo. One could argue -- and I'm sure some already have -- that Microsoft will use illegally its OS monopoly to try to better its search position. Others will point to the Microsoft Web search kickback program as evidence of the desperation among Microsoft execs to improve its search share.

In either case, if Microsoft were to offer your company thousands of dollars for agreeing to mandate IE 7 and Live Search as defaults across your users' desktops, would you take the money and run? Do you expect this Microsoft program to have much of an impact on Microsoft's overall search share?