Microsoft buys ciao.com to boost e-shopping search

By Georgina Prodhan

LONDON (Reuters) - Microsoft has agreed to buy Greenfield Online, owner of popular European price comparison website ciao.com, for about $486 million to boost its Internet search and e-commerce business in Europe.

Microsoft, whose $47.5 billion bid to buy Yahoo earlier this year failed after a long battle, said on Friday the acquisition -- the latest in a series -- should help it build a more consumer-friendly, results-oriented search engine.

"We call it 'instant answers'," said John Mangelaars, head of Microsoft's consumer and online business in Europe. "I hope it's getting very clear that we have very serious about EMEA," he added, speaking to Reuters by telephone.

Internet search is dominated by Google, which has 62 percent of the global search market and 79 percent in Europe, according to Web usage tracker ComScore.

Microsoft has a 2 percent market share in Europe and 9 percent worldwide, behind both Google and Yahoo. In Europe, Microsoft is also outranked by online auction site eBay and Russia's Yandex.

But Mangelaars said buying ciao.com was an important step in Microsoft's attempt to distinguish itself by providing search results more useful to consumers, particularly shoppers, than those thrown up by a Google search.

For example, results of a Microsoft search for a particular camera model could include which prices were available from which retailers, and maps of where those retailers were, rather than just links to the manufacturer's and retailers' websites.

The acquisition follows those of Norwegian enterprise search company Fast for about $1.2 billion early this year and shopping-and-auction site jellyfish.com for an undisclosed sum last year.

CASH BACK

Caio.com is active in seven European countries and attracts 19.6 million unique visitors per month in Europe, more than twice as many as rival kelkoo.com, according to ComScore, thanks to its large network of members who contribute product reviews.

To attract more users, Microsoft also plans to reward consumers who buy products through its shopping sites by giving them cash back, extending a trial started in the United States a few months ago.

"Google's trying to do all your search needs. What Microsoft is doing with this kind of acquisition is saying: 'We are going to be very good at the commercial side of search, the shopping'," said Forrester principal analyst Rebecca Jennings.

Herve le Jouan, ComScore's managing director, Europe, agreed. "Doing this shopping thing, I think, is a good move," he said, but cautioned that acquisitions alone would never bring Microsoft close to Google's market share in search.

"Nobody is able to compete right now with Google so there is nobody to buy to compete with Google," he said.

Microsoft's Mangelaars acknowledged the distance Microsoft had to cover, especially given the commercial edifice rapidly being built by online advertisers whose models depend on Google's particular view of the Web.

"It's a race," he said, "but we also believe it's very early days in search technology."

Microsoft's offer of $17.50 per share betters an earlier proposal by media-focused U.S. buyout firm Quadrangle Group to acquire the company for $15.50 a share, and represents a slight premium to Greenfield's closing price of $17.25 on Thursday.

On August 26, Greenfield had said it had received a $17.50 per share offer but did not reveal from whom. The latest offer represents a premium of about 10 percent over Greenfield's closing share price on August 25.

Microsoft said it had agreed to sell Greenfield's main business, which surveys consumer opinion online and sells the results to market researchers, to an unnamed financial buyer.

The companies expect both deals to close during the fourth quarter of 2008. Completion of the Greenfield sale to Microsoft does not depend on Microsoft's disposal of the online survey business, the two companies said.

(Additional reporting by Saumyadeb Chakrabarty in Bangalore; Editing by Quentin Bryar and Sue Thomas)

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