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Summary:

Microsoft launched Live Search Cashback, a new service that allows the company to attract customers who want to get paid for their search-commerce efforts. It is a nice gimmick and no slam dunk. My breakdown of the news announcement. Continue Reading.

Yesterday, I read a post on Google’s blog about their focus on improving search quality. Today, I read a press release from Microsoft in which it said its Live Search product will be used to give “cash back” to those who use it to find and buy things. Innovation vs. buying your way into the market…in my book, that kinda speaks for itself.

Microsoft’s “Live Search cashback” site…promises to pay back a portion of the purchase price — ranging from about 2 percent to more than 30 percent — to people who use it to find designated products and buy them online from participating retailers…including the online sites of large retailers such as Barnes & Noble, Sears, Home Depot, J&R Electronics, Office Depot and others. [via]

Instead of jumping to conclusions, I decided to make a list of my thoughts on this, many of which the folks at Microsoft are not going to like.

  • We shouldn’t be surprised that Microsoft is using the lure of the cash. When it comes to beating Google in the search game, cash is the one asset it already has.
  • Microsoft Chairman Bill Gates is still running the company, despite not being the CEO. He talked about paying people to search almost three years ago.
  • eBay is using Microsoft to generate traffic. That leaves lead-generation players on a slippery slope.
  • TechCrunch notes that this program is based somewhat on Jellyfish, a company that Microsoft bought back in 2007. In other words, this isn’t a new idea, just new spin.
  • Will this work? That remains to be seen. Remember a company called iWON? Well, despite all the cash and prizes it handed out, it failed miserably. Will Microsoft’s size and online presence give it a leg up? Maybe.
  • It really doesn’t address the issue of Microsoft continuous loss of market share in search.
  • Microsoft will need to find a way to overcome resistance to register for the service.
  • Microsoft Live Search Cashback has 200 merchants, compared with the average comparison shopping engines, which each have about 10,000 merchants.
  • Microsoft is pretty serious about what amounts to little more than a gimmick. They recently bought Cashback.com, showing how committed Microsoft is to this effort.
  • What Microsoft is indicating: It will shift to a cost-per-acquisition model, instead of the more generic cost-per-click model, which I think is actually a good thing.
  • What they really need to do is to upsell merchants to other types of online advertising they offer — search, contextual, content and display. Now that could prove to be a very big opportunity

Final thought: Microsoft’s traditional strategy of “We will charge less and crush the competition” really doesn’t cut it anymore. How long do you think merchant partners are going to stick around and waste their resources if they can’t make money? This is not some PC-maker-schmuck they have in a headlock. Take a look at all the other new technologies where Microsoft hasn’t been able to dominate — this is a sad reflection on that trend.

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  1. Well, don´t know about you, but personally I surf with treehoo.com the web that plants trees for most of its profit. What a simple and genious way to help our planet. Can any other webportal beat that?

  2. Just a side note A9 – the amazon search engine also had the same or similar strategy. They gave a Pi/2 = 1.5 % disoucnt on Amazon.com for “regular” users of the website. A9 eventually stopped this As the advertising revenues did not match up. Then they gave up on the search itself.

  3. okay.. next time when I ve decided to buy something.. i ll use live to get there.. simple.. but for regular use i ll stick with Google.. howz that?

  4. The “search game” is about cash. So what if MS uses the lure of cash to attempt to win at this game. Business is business.

  5. Don Jones – VentureDeal Wednesday, May 21, 2008

    MSFT is now competing on business model, not on technology. They’ve given up on the tech side.

  6. They might have been talking about this for a while but it is such a different business model for Microsoft, just tracking all of these computer purchases, checking to make sure the merchandise hasn’t been returned, sending out rebate checks, etc. I hope they have a good ecommerce infostructure in place because they are entering quite a different world that just selling their own software.

  7. I think this is a terrible idea for all the reasons above and some I think you’ve missed.

  8. Actually I don’t think this is a bad idea at all. Lets assume that MS is really serious about this and that the cash rebates are real. Given this assumption, lets take the worst case situation (from MS’s point of view) – I will search on Google most of the time, but when I am ready to buy, I will do a final search on MS to get the rebate.

    What does this mean? MS will get searchers who are more valuable to advertisers. So the quality of the traffic (from the point of view of the merchants) will increase.

    It is better for MS to give away all the money they make from search back to the searchers than to allow their marketshare to go to zero. In other words, this can change the game from “may the best engine win” to “an engine has to be good enough, the rest depends on the rebates and marketing”. MS obviously excels at the second kind of game.

  9. Antoinette hits on a great point that has been missed by every outlet covering this. They have to absolutely nail the back-end portion of this promotion. If users have problems getting the rebate it could cause huge customer relations/PR problems for MSFT, not too mentioned ensuring those with a bad experience will never use Live Search again.

    This reeks of desperation.

  10. But exactly which model will work best is anyone’s guess. Blingo.com seems to be doing OK : http://siteanalytics.compete.com/blingo.com/?metric=uv but I don’t know if they make money. It is certainly simpler than what MS is proposing.

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