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Microsoft scoops $60 million from search companies

Paying money for prominence in the UI? Didn't we hear this one before?

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So is it OK for Microsoft to charge companies for having buttons for their applications included in the user interface? That's exactly what Microsoft announced it was doing with four major search companies yesterday, so the question is worth considering. The four companies, Alta Vista, Lycos, Infoseek and Snap, will pay a minimum of $60 million to join Microsoft's Inktomi-designed MSN Web Search system on a pull-down on the MSN.com portal. The companies aren't specific about the actual cost, the $60 million is a guaranteed minimum, while actual payment will be based on numbers of page impressions. But Infoseek says it will take a charge of $7-8 million when the service launches. If this sort of thing happened in the OS or even in the browser, Microsoft would no doubt swiftly find itself in the regulators' cross-hairs, but of course this is a different gateway we're talking about here, and if challenged Microsoft could always point out that Netscape raked in a cool $70 million from Excite in a similar deal earlier this year. Search companies are willing to pay for prominent positioning in major portals because they'll be able to pull in more users, and therefore pull in more advertising from users' search results pages. Major portals also benefit from the arrangement because having a bunch of good search engines on their front door adds value and attracts more users. Note however that major portals can theoretically earn more money by directing users to their own search engines, because they can charge for ads directly, and because they can use them to direct users to their own sites. This is of course all OK, and not a debatable practice like bundling your own online system with your operating system, or putting together contracts with special friends to be in the channel bar of your browser. But why is it OK? Because you don't have a dominant position - you don't own the portal. Yet… ®

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