Microsoft buys European comparison shopping site for US$486M

Plans to integrate the service into Live Search

Microsoft has agreed to buy comparison shopping business Ciao in a deal worth around US$486 million, and plans to integrate the service into its Live Search sites, it announced on Friday.

The deal is a sign that Microsoft's commercial search ambitions extend to Europe, where Ciao is present in seven countries. Microsoft launched a comparison shopping and search reward site, Live Search cashback, for US surfers in May this year.

The company said it expects to use Ciao to boost its MSN e-commerce services, in addition to incorporating Ciao's services into its Live Search sites to enhance the user experience, said John Mangelaars, Microsoft's vice president for consumer and online in Europe, the Middle East and Africa.

"When you type in 'Sony camera' it might be nice not just to get a description of the camera and a picture, but also to know where you can get the best prices and see them on a map," he says.

Microsoft's offer for Ciao's parent company, Greenfield Online, tops that of a consortium led by private equity fund Quadrangle Group. In June, Greenfield made a definitive agreement to be acquired by Quadrangle for US$426 million, and must now pay the consortium a US$5 million fee to terminate that agreement.

Ciao, based in Munich, Germany, operates consumer review and comparison shopping portals in France, Germany, Italy, the Netherlands, Spain, Sweden and the UK.

Its sites carry around 5 million user-generated reviews of products from about 2,200 merchants, who pay a fee to have their products listed, the company said.

In addition to the comparison shopping service, Greenfield also owns Ciao Surveys, which pays internet users for responding to consumer surveys. Microsoft will sell that business to an unnamed buyer immediately upon acquiring Greenfield, it said.

Microsoft isn't interested in the survey operations. "We're not in that business," said Mangelaars.

But analyst Anette Schaefer, director of Yankee Group's Consumer Research group, expressed surprise at that decision. "I think the survey side is an excellent tool. They could get good value from that. I would use it more as a marketing tool," said Schaefer.

Greenfield expects the transaction to close in the fourth quarter. The acquisition will still go ahead even if Microsoft is unable to find a buyer for the survey business, it said.

Microsoft plans that the Ciao business will report to Rajat Taneja, general manager for worldwide commercial search at Microsoft.

After the collapse of its attempt to buy Yahoo, Microsoft is desperate to boost use of its search services, which draws far fewer visitors than those of Google and Yahoo. Attracting surfers with the offer of rebates on their online purchases through Live Search cashback is just one of the ways it is trying to catch up. The cashback service was itself built on an acquisition, that of Jellyfish.com. Now the acquisition of Ciao and its established user base will allow Microsoft to extend that approach to Europe in a future version of its search site, Mangelaars said. It will not happen immediately though. "We ship two versions a year now, so expect it in the second or third cycle."

Yahoo has already acquired a French comparison shopping service, Kelkoo, which now operates in ten European countries, and also drives Yahoo's own-brand comparison shopping service in France, Germany, Italy, Spain, the UK and Taiwan.

One area in which Yahoo's Kelkoo has the edge over Ciao is on the mobile phone, where a special mobile-friendly version of Kelkoo's site presents just the essential information on smaller screens.

It will be a while before Ciao catches up there.

"That's one of the ideas we have for the next year, to move forward to the mobile form," said Ciao spokeswoman Alejandra Rojo. However, it's unlikely that work will begin on that before the merger is complete, she said.

France is also home to PriceMinister, an independent comparison shopping service that operates in France and Spain.

Google's own comparison shopping service, has been renamed from Froogle to Google Products, but is still in beta testing and appears to be an English-language-only service.

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