Beyond Binary

Microsoft on Monday apologized for glitches on its Live Search Cashback site, which frustrated online shoppers looking to scoop up Black Friday deals.

Amid heavy volume on Friday, consumers encountered a range of problems from site sluggishness to seeing the wrong amount of cash back show up in their accounts.

The problem was particularly acute with shoppers who were looking to take advantage of a promotion with Hewlett-Packard that offered buyers a 40 percent discount when visiting HP.com through Microsoft's Live Search Cashback. Some shoppers, however, reported seeing only a 3 percent cash back amount posted to their account.

"We deeply regret customer inconvenience with respect to the outage," Microsoft said in a statement provided to CNET News. "The spike in traffic in combination with a technical glitch led to the outage. The promotion will restart in the next day or so. Again, we apologize for our customers' inconvenience."

A Microsoft representative said the company is in the process of going back to make sure the proper cash back amount is credited.

Live Search Cashback was launched in May as a way for Microsoft to try to boost its share of commerce-related search queries. Instead of taking in revenue on a pay-per-click model, Microsoft gets advertisers to agree to pay in the form of a certain percentage of any resulting sale. For now, anyway, Microsoft is giving that entire amount back to consumers as "cash back."

Separately, Microsoft said on Monday that some users will be able to get cash back instantly on eBay purchases, as opposed to having to wait the 60 days that is standard on Live Cashback.

Blockbuster and Microsoft are working together on an effort to use Live Mesh as a means to give consumers a way to reach their video content from a variety of devices.

A Microsoft representative said on Monday that Microsoft's Live Services team is working with Blockbuster on "building some demo Mesh apps."

It's the latest tie-up between the companies. Blockbuster is already one of the early customers for Microsoft's Exchange Online hosted e-mail service.

Live Mesh debuted in April, but at the time was largely limited to PC and Web file synchronization. However, Microsoft said at the time it launched Live Mesh that it would be opened to third parties to write their own Web-based and PC-based applications. Microsoft did just that at its Professional Developers Conference.

The Dallas Morning News has more details on the effort, including a line on just how far the company hopes to take things.

"Eventually, we'll give customers instant access to any movie on any device with an Internet connection and a screen," Blockbuster Chief Information Officer Keith Morrow told the paper. "More immediately, we could use this technology to reach into airports. Travelers could quickly download movies from Blockbuster kiosks to their portable media players."

Updated 6:15 AM PST November 30

According to one report, Yahoo and Microsoft may once again be working on a search deal.

The Times of London reported this weekend that Microsoft is in talks to acquire Yahoo's search business for $20 billion. According to the paper, former AOL CEO Jonathan Miller and fomer Fox Interactive President Ross Levinsohn are set to head the effort.

"Senior directors at Microsoft and Yahoo are understood to have agreed the broad terms of a deal, but there is no guarantee that it will succeed," The Times said in its report.

Microsoft declined to comment on the report. It is worth noting that as of Friday, the market capitalization of Yahoo in its entirety was just shy of $16 billion. Microsoft was once willing to pay far more to get Yahoo, but a lot has changed since the early part of the year.

Since Microsoft made its last offer for Yahoo, Yahoo and Google have announced and abandoned a search deal, Yahoo's shares have plummeted to single digits, and the company has said it would replace Jerry Yang as CEO.

In the days following the Yang announcement, Microsoft CEO Steve Ballmer indicated that the company was decidedly not interested in a full acquisition of Yahoo but said that some sort of search partnership remained "an interesting possibility." CNET had earlier reported Microsoft's continuing interest in such a deal.

Update:Kara Swisher of D: All Things Digital talked to Ross Levinsohn, who the Times of London said would be involved in the $20 billion deal. He told her the report was "total fiction," and sources from Yahoo and Microsoft denied such a deal was in the works. Of course, this series of denials doesn't mean that a search deal between Yahoo and Microsoft isn't a real possibility in the near future.

With so many people pointing out the external challenges and internal missteps from Microsoft, it is easy to pile on criticism.

One longtime watcher of the company, Directions on Microsoft, has a new report out looking at five big things the software maker has done right.

The analysis is on the Internet and worth a read.

Directions on Microsoft points to the company's appeal to developers, its focus on software, its reliance on others to sell its products, along with the fact it targets technology for the masses and takes the long view.

For sure, these are the things that have helped the company survive past missteps and address other competitive threats as well. But, through most of the past challenges, Microsoft has been able to largely keep the same business model, something it probably won't be able to do in this next wave of difficulties.

I have no doubt Microsoft will be able to deliver its software as a service and find ways to make money. But whether it will be able to make the same kinds of money in terms of both revenue and profits is a key question.

For more on the man leading the current wave of change, Steven Levy's Wired piece on Ray Ozzie is also definitely worth checking out, as is CNET News' Dan Farber's take on the piece.

In case you have not noticed by the less frequent posts, I'm off this week (well, sort of off anyway). Happy Thanksgiving to all.

SAN FRANCISCO--One might think that as a CIO, it would be tough to have someone else running all of your desktops and many of your servers.

Not so, says Randy Benz, CIO of Energizer. For more than three years, Energizer has handed off much of those duties to Microsoft. And he'd be fine with Microsoft running just about everything, save perhaps for the company's iconic battery-powered bunny.

"If I never run another server in there for the rest of my life, I'm as happy as can be," Benz said over lunch last week following the launch of Microsoft Online, essentially the company's effort to turn the Energizer experiment into a business.

Energizer CIO Randy Benz said he's happy to have Microsoft running his servers. That gives his workers time to do other things, like offer specialized computer training for workers.

(Credit: Energizer)

Initially, Microsoft is offering to host only a few of its server products--Exchange and SharePoint, although over time businesses will gain the option to run most of Microsoft server products as a service running from inside the software maker's data centers.

So, one might reasonably ask what Benz and his team are doing if they aren't running all the servers and managing desktops?

For one thing, his group now offers a much broader range of computer training for Energizer workers. Beyond just teaching how to use specific products, Benz said Energizer now has classes for different types of workers focused on their particular role. One recent creation is a specific program just for road warriors.

"It cuts across products," Benz said.

Of course, businesses that don't want to handle the more mundane IT tasks have had other options for a while, such as more conventional outsourcing in which a third-party company comes in and handles things like help desk and server management.

The problem, Benz said, is it typically doesn't save much money. Any efficiencies the outsourcer gets because of its expertise are offset by its profit margins.

By having Microsoft run its software from its own data centers, though, Benz figures that it will have enough scale to actually be more cost effective.

Not everything that Microsoft has been doing with Energizer is going to be offered broadly. But, Benz said, that has more to do with the fact that some of the things aren't good businesses for Microsoft, as opposed to the fact they didn't work out for Energizer.

"There's nothing we've done that I'm disappointed in," he said. Rather, he is looking to what he can hand over next. The two companies recently added a hosted business intelligence offering, something that isn't yet part of the services Microsoft is offering broadly.

Benz also knows the managed service route isn't for all customers. Even though it resembles outsourcing, he said it is actually more suited to customers that want to be on the cutting edge. Having Microsoft manage their software means that Energizer is always running the latest versions, for better or worse.

One of the areas the company is looking at keenly, Benz said, is Microsoft's plan to offer Web-based versions of Office applications, the company licenses the full version of Office for every PC, but limits the number of PCs it gives out accordingly. Having a lower cost Web-only option for workers that only need light editing abilities might mean more workers get access to technology

"It may be a breakeven for us but we are reaching more of our people more appropriately," he said. "We'll revisit it when the products are out."

Microsoft has said it will have technology preview versions of the Office apps will be available later this year, but hasn't said when the product will be formally released or when the business version might be available. For consumers, the Office Web apps will be part of Office Live, while businesses will be able to provide access as part of Microsoft's SharePoint server software.

A judge on Friday ruled that Microsoft CEO Steve Ballmer will have to testify in a class action suit over the "Vista Capable" logo program that Microsoft ran ahead of the launch of Windows Vista.

Microsoft had sought to limit depositions in the case to former Windows executives Jim Allchin and Will Poole, both of whom have since left the company. However, the judge ruled against the software maker.

"The court appreciates that there are severe demands on Mr. Ballmer's time; however, a busy schedule cannot 'shield' an executive from discovery," Judge Marsha J. Pechman said in her ruling, which was posted on the Seattle Post-Intelligencer Web site.

The plaintiffs in the case have argued that Microsoft was misleading in labeling certain machines as Vista Capable even though they lacked the graphics power to run the operating system's more advanced features.

Ballmer will have to be deposed for no more than three hours some time within the next 30 days, Pechman ruled.

Already, the suit has proven to be a treasure trove of internal documents.

A top Microsoft lawyer made the case on Thursday that sites like Google News are making money while the folks creating that digital content aren't able to make a living.

Google News, said Thomas C. Rubin, makes $100 million a year, while the newspapers that power its content are having to cut staff in record numbers.

"Clearly this can't be the future for publishing," Rubin said, according to his prepared remarks delivered to the UK Association of Online Publishers. Rubin is Microsoft's chief counsel for intellectual property strategy.

It's somewhat curious though, since Microsoft essentially uses the same model with its MSNBC Newsbot. It just wasn't anywhere near as successful.

I'm all for a model that better compensates journalists and their employers for their work. I actually thought Microsoft was working on just such a model some time ago. But the longer I wait, the more journalism jobs get lost (not to mention the pain for other content creators, including musicians).

If Microsoft plans to save the publishing industry with a better business model online, it had better hurry.

Microsoft confirmed Thursday that it has indeed hired Yahoo search executive Sean Suchter, following speculation this week that he would be joining the software maker after his departure from Yahoo was announced.

"We are very pleased to confirm that Sean Suchter will be joining Microsoft as the GM of our Silicon Valley Search Technology Center, working on Live Search," Microsoft search head Satya Nadella said in a statement. Suchter, who starts work December 22, will report to Harry Shum, corporate vice president of Search Product Development.

The poaching comes as CEO Steve Ballmer reiterated at Microsoft's shareholder meeting Wednesday that it has no interest in buying all of Yahoo, though it remains open to a search partnership.

Microsoft would not comment on a report that another former Yahoo search executive, Qi Lu, is under consideration to head Microsoft's online efforts.

Microsoft plans to offer one more public test version of Internet Explorer 8 before releasing the final version of the updated browser, the company said late Wednesday.

The next test, essentially a "release candidate" version will come in the first quarter of 2009. That means the final release won't hit Microsoft's initial goal of finishing the browser this year.

"Our next public release of IE (typically called a "release candidate") indicates the end of the beta period," general manager Dean Hachamovitch said in a blog posting. "We want the technical community of people and organizations interested in Web browsers to take this update as a strong signal that IE8 is effectively complete and done."

Microsoft first demonstrated the browser at the Mix conference in March. Among its improvements are malware protection, better standards support, and the ability to carve off a piece of a Web page, known as a Web slice. It also supports having private sessions that don't get logged in a browser's history.

The first beta version was released in March, with a second beta arriving over the summer.

Hachamovitch said that Web site developers should test their sites and report "any critical issues" to Microsoft.

"We will be very selective about what changes we make between the next update and final release," he wrote. "We will act on the most critical issues. We will be super clear about product changes we make between the update and the final release."

Hachamovitch also called on technical users to download the current beta 2 version and let Microsoft know how that goes.

With fewer consumers than hoped for signing up for all-you-can-eat music subscriptions, Microsoft and the record industry are trying to make the option more appealing.

As of Wednesday, those who pay for the $14.95 a month Zune Pass subscription will start being able to permanently keep 10 tracks a month. The subscription already allows unlimited music downloads, but users have the ability to listen to the music only so long as they are subscribers.

Under the new plan, Zune Pass members will essentially get $10 worth of music to own each month, along with whatever subscription content they download. The move comes as much of the consumer enthusiasm in the digital music industry has been for music that is sold free of DRM (digital rights management) protections.

Both Microsoft and music industry executives acknowledge that the uptake for subscriptions has not been what they'd hoped.

"I think everybody in the industry would say they would have hoped that by this time there would be more (subscribers)," Rio Caraeff, Universal Music Group eLabs executive vice president, said in an interview.

"It's hit a plateau," Caraeff said. "It's just not as big as anybody would have hoped...We have to retool the model."

Microsoft marketing director Adam Sohn said that Microsoft saw some boost when it targeted its advertising specifically around subscriptions but said that the total number of subscribers is less than the company would like.

"It's not grown as fast as we'd like it so we think this will give it a shot in the arm," Sohn said, declining to say how many Zune Pass subscribers Microsoft currently has.

For the record industry, subscription music represents an important potential revenue stream at a time where traditional music sales have continued to decline far faster than digital downloads have grown.

Meanwhile, for Microsoft, subscription music is one of its key differentiators over the iPod/iTunes combination, as well as the key to the value of many of the music discovery options built into the latest release of the Zune software. On Tuesday, Microsoft said it was cutting the prices for its flash-based line of Zune devices, a lineup that is only a couple of months old.

Caraeff said that Microsoft won't necessarily be paying the labels more for the tracks subscribers get to keep.

"We're making some concessions," he said. "Microsoft's making some concessions. We're both working and investing."

Subscription music is also a key for some of the eventual entertainment scenarios Microsoft and the industry would like to see, where consumers don't have to manage their music on individual devices, but can instead play any song they want, wherever they are over a network.

Caraeff said he still believes there will be a point in time when the "vast majority" of people have a subscription music service, whether that comes with their device, their monthly Internet bill, or through some other means.

"As you know, we are going through a transition and we are not quite there," Caraeff said.