Want CNET to notify you of price drops and the latest stories?

Microsoft cuts checks for e-wallet users

The company says it will hand up to $100 to people who use its e-wallet and identity software, just as an effort led by some of Microsoft's bitterest rivals gains momentum.

Jim Hu Staff Writer, CNET News.com
Jim Hu
covers home broadband services and the Net's portal giants.
Jim Hu
3 min read
Microsoft has begun offering cash to people who use its online wallet and identity software, a little-noticed promotion that comes as a rival effort led by some of its bitterest enemies gains momentum.

The software giant, which recently said it had $36 billion in cash, will write checks to people who buy $100 or more in goods using Passport Express Purchase. The program will dole out $20 rebates for each $100 spent using the online service, with total rebates capped at $100.

"All your purchases at participating merchants count, and the more you spend, the more you get," read a notice on Microsoft's MSN.com portal. "MSN will send you a check for up to $100 after the holidays."

A Microsoft representative confirmed the details of the promotion, which was first announced in November. The promotion ends just before midnight Dec. 20, 2001, though the notice's terms and conditions said that date is subject to change by MSN.

The decision to offer incentives for Passport Express Purchase reprises a strategy that has allowed Microsoft to gain traction in numerous unrelated markets, from Web browsers to multimedia to Internet access.

Although online wallet and authentication software has seen low consumer adoption, it is widely perceived as a competitive choke point of the future, essentially giving the winner a hand in every transaction conducted online.

Microsoft has been staking out this territory for at least two years, but recent efforts have spurred a major response from rivals, who have formed a consortium aimed at developing authentication technology standards.

Known as the Liberty Alliance Project, the competing group scored two major coups in the past week, adding American Express and AOL Time Warner to its list of partners. Other industry giants such as General Motors, American Airlines, Bank of America, Cisco Systems, Intuit and eBay are also charter members.

Sun Microsystems, one of the Liberty Alliance's founders and a critic of Microsoft, was quick to raise flags about the Passport promotion.

"We're not the competitor; the competitor is every credit card company and every major retailer whose customer loyalty Microsoft is purchasing," said Sun spokesman Jonathan Schwartz. "They're under siege now from the same monopoly dominating the desktop."

The stakes in the burgeoning battle over online authentication standards are especially high for Microsoft, which is slowly moving toward selling software through online subscriptions instead of one-time purchases. The embodiment of this initiative is Microsoft's .Net, a vague strategy to connect all of its software and services using the Internet.

One key to this effort is Passport, which will act as the primary sign-in point and transaction manager for the services.

The Liberty Alliance has yet to describe publicly how its technology will work, putting it far behind Microsoft's up-and-running Passport service, which ships with Windows XP and has 200 million subscribers. The majority of those subscribers do not actively use the service, however; they signed up for Passport by default when they became members of Microsoft's Hotmail, a free, Web-based e-mail service.

As a result, the door is still wide open for competing authentication formats, according to analysts.

"No one wallet product has been accepted by more than 100 merchants...and consumers don't want them because they don't deliver convenience," said James Van Dyke, an analyst at Jupiter Media Metrix. "It's a chicken-or-the-egg syndrome."

Microsoft has long used its deep pockets, built on its PC operating system monopoly, to help its products win acceptance in the marketplace. The strategy goes back to the days of the browser wars, when the company gave away Internet Explorer for free. Microsoft also has offered substantial incentives to customers of its Windows Media multimedia software in an attempt to win market share from RealNetworks.

Two years ago, Microsoft began issuing $400 rebates in RadioShack and Best Buy stores to people who agreed to a three-year membership to MSN Internet Access--a giveaway that helped the Internet access provider, with about 7 million subscribers, become the No. 2 service in the United States behind America Online.

Microsoft discontinued the subsidies after they became a drain on its earnings. The rebates helped major retailers such as Best Buy, which sold 200,000 MSN subscriptions worth $80 million in rebates, drive sales during the holiday season.