Microsoft pay scheme snags free downloads

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Microsoft Corp., the biggest advertiser in cyberspace, is asking sites to accept a pay-per-download scheme for online banner ads.

Under the plan, Microsoft, instead of using a cost-per-thousand model to pay for the online ads, or even a click-through model, will pay sites a fee only when users click on the ad for the latest version of the Internet Explorer browser and then download the browser.


The online ads to offer downloads IE 4.0 will start in the next two weeks, said an executive with knowledge of the plan. It will be a "preview" or beta version of the browser, which is set to compete with Netscape Communications Corp.'s new Communicator, a product in beta testing set for a second-quarter launch.

"This isn't Microsoft strong-arming sites to accept this new plan," said another executive familiar with the scheme. "It's been presented as an option, as a way a site can make possibly more money than by Microsoft just paying a typical CPM."


Some site managers are worried about the precedent Microsoft is trying to set. Microsoft is the largest Web advertiser, spending $10.7 million in the first 11 months of '96, according to Jupiter Communications, a research company.

Site managers that have been briefed said Microsoft plans to spend at least $2 million-to-$3 million initially in online advertising on the IE launch on about 75 sites. The strategy reflects a software industry trend to do formal marketing of products that technically are still in test. IE 4.0's official launch is set for midsummer.

Like previous versions, IE 4.0 will be free to users. One manager estimates the average price Microsoft would pay per download was about $2.50.


"Microsoft is an 800-pound gorilla, and if this gains a foothold it's a step toward killing real ad revenue on the Web," said one site executive.

The manager of one of the top 10 visited news and information sites said he is seriously considering a trial of the pay-per-download plan with banner slots that would ordinarily be sold for very little. "While we are a very popular site in total, some of our pages are not used as much. That's where I'd experiment with this."

Jay Goldstein, a Microsoft product manager for online advertising who is point person on the pay-per-download scheme, was on vacation and unavailable for comment. Microsoft's interactive agency, Anderson & Lembke, San Francisco, referred calls to Microsoft. The company declined to comment except to say it is seeking more "performance-based" approaches to Web advertising.

Copyright March 1997, Crain Communications Inc.

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