Amazingly, the deals services of today are basically glorified email marketing. They are still ads, but somewhat unique from those non-targeted, obtrusive, and rather lame display ads, the new deal ads will be more relevant and interesting to users. Or at least that seems to be the logic fueling a new strategy by Microsoft.
Below are images of an actual display unit in Hotmail (left) vs. a screen capture of the new deals unit (right):
The company is reportedly doing this beginning with a limited pilot program before all users see the changes. However, Sterling mentions that Dharmesh Mehta, Director for the Windows and Windows Live Business Group, believes users will like the new ads, as they will be “less distracting” and less “creepy” for users. The post offers a glimpse of the difference between the current display ads and “Deals”.
Deals are big business, with the likes of Groupon and LivingSocial sending out mass emails every day promoting businesses by offering one-time-only deals for consumers. Groupon gets credit for turning the concept in to a huge mainstream trend, and as these deals are coming in via email, it makes sense for Microsoft to make them part of the email service itself.
Even though Mehta said that Microsoft will probably see a decline in the revenue generated from the ads (he estimates that combined, Microsoft, Yahoo, and Google make something like $1 Billion annually on ads in email), Hotmail is concentrating on improving the user experience, and that Microsoft can afford not to maximize ad revenue in email (of course, they could probably afford to eliminate ads altogether, if they wanted to, but that is another thing entirely).
Hotmail was once the darling of Web mail services, but it’s faced tough competition from Google’s Gmail and currently sits in a lowly third place behind it and market leader Yahoo, which remains in first place, inconceivably. At least in the U.S. I’m not sure whether this initiative will be enough to persuade people to shift their allegiances Microsoft’s way, but I very much doubt it. Still, it certainly won’t hurt.
Earlier this week, comScore put out new statistics on display ad providers. Facebook is dominating (again), and Microsoft holds third place. But it is estimated that between them Yahoo, Google, and Microsoft make around $1 billion each year from the ads clogging up your online email services.