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Microsoft challenges Google through an alternative advertising model

May 26, 2008

Microsoft’s new Live Search Cashback program is expected to shake up the search space. By offering ”cashback” incentives to the consumers and a shift in the advertising model the tech giant is hoping to become the major search engine at least among the online shoppers. With this move, it is questionable whether Microsoft aims to get larger search engine marketing share (now it is third in U.S with fewer than 9.1% of the total pie) or it strives to increase its search revenue. The new program mainly applies to e-commerce related searches, which represent one of the most lucrative parts of the advertising market and generate 80% of the overall search revenue.

Basically, CashBack program gives "cash-back" to the consumers who buy products through Microsoft Live Search engine. After making a purchase from participating retailers/advertisers, Microsoft pays back to the consumer from 2 to 30 percent of the purchase price, depending on the product.

More than 700 merchants are participating in the program. Key partners are some of the top Internet retailers as eBay, Barnes & Noble.com, Overstock.com, Sears, Zappos.com, and J&R Electronics.

Cost Per Acquisition – an alternative payment model

Live Search cashback service is based on an alternative payment model - Cost Per Acquisition, in which the advertisers pay only when the ad results in a consumer purchase. This model gives advertisers a more secure return on their advertising investment; in contrast to the traditional search engine Cost-Per-Click model (currently applied by Google) that carries more risk because the searcher may not complete a transaction and buy a product.

Microsoft’s Cashback service combines the CPA model for advertisers with a clear payback mechanism to users.

“Our goal is to make Live Search the most rewarding commercial search destination on the Web. Live Search cashback will help advertisers drive more online sales while giving consumers a new way to stretch their dollars.”, Microsoft Chairman Bill Gates commented.

Previous experience

Actually, this isn't the first trial of Microsoft in the world of search engine incentives. Microsoft Live Club is an ongoing experiment but with significantly smaller scale. After the launch of the Live club in 2007, Microsoft temporarily increased its search market share. The tech giant believes that the new service will even better work for it.

Gates added that in a few years time people will look back and say, 'Wow, search started to get a fair bit more competitive around that time.'

What the consumers have to do?

Users will need to sign up for Live Search cashback accounts in order to use the service. The query for eligible products can be typed directly on the Live Search Cashback site. If not, the consumers need to look for special icons next to search results in the standard Microsoft Live Search site.

After consumers make the purchase through the retailer's site, the designated discount will be paid into an online account. The refunds will be available via direct deposit to a bank, PayPal account, or by check.

In conclusion

It is not clear yet whether Microsoft Live Search cashback service is enough to really change the game and to what extent this move will influence the search engine market.

Anyway, it is a great move for Microsoft and we will see soon how hard Microsoft will hit Google and what portion from the advertising market the tech giant will cut out of Google’s pie.



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