Saul Hansell, in the NYT Bits blog says Microsoft still has its search problem since it lost out on its bid for Yahoo. (The problem is that it hasn’t got any.)

According to Steve Ballmer, one asset Google has is that some searchers actually like the ads—and since Microsoft’s lagging search engine doesn’t have any advertisers, that’s yet another turn-off for potential converts.

Microsoft’s last gambit for perking up its search business is paying people to use it, through a program called Live Search Cashback. (How the process works is delineated here, somewhat confusingly.)

Here’s the company’s next line of attack:

Mr. Ballmer described Microsoft as facing a Catch-22 in this area. Advertisers are not interested in Microsoft search if it does not have users. But what can it do, if it believes that users won’t search if it doesn’t have enough ads?
[…]
Mr. Ballmer said that the company was working diligently on narrowing the advertising gap.

We may have to get kind of way out of the box in order to get back in the box. The most important thing right now is to make sure we work on the relevance of those ads, and the team is exploring two or three, actually, different concepts to get there. But, I don’t choose to chat about it today.

I wouldn’t be surprised if Microsoft wants to subsidize advertisers or even pay them to place ads on its site (just as it is paying people to search).

I’ve emphasized Hansell’s last words on the subject. Does this seem right? Can the company pay advertisers to advertise, and at the same time pay customers to patronize? I understand that it’s all designed as a way to try to create a critical mass for the search product, and further that this was just the writer’s speculation. But wouldn’t it be better if the company just bought the advertisers’ products and handed them over to consumers gratis? That way the companies wouldn’t have to spend money advertising, and the customers wouldn’t have to waste time searching, and Microsoft could spend its time making its operating systems less susceptible to viruses.