Microsoft Offers Cash Back to Searchers, But for How Long?

More details are likely forthcoming shortly, as Microsoft plans to announce a big search initiative later today. But in the meantime, restless bloggers have already stumbled upon some particulars.

Microsoft’s “Live Search cashback” will pay you back 2 percent to 30 percent of the price of products you find (via Live Search) and purchase from online participating retailers. Notable merchants already signed up include Sears, Barnes & Noble, Office Depot, Home Depot, J&R Electronics, and others.

From the advertiser’s side (rather than the consumer’s side), Microsoft has decided to use a “Cost Per Acquisition” model rather than the “Cost Per Click” model Google made famous. So advertisers (i.e., merchants) don’t have to pay every time you click on an ad. Rather, they only pay Microsoft if you make a purchase (what they hope for in the first place from all those clicks).

It’s interesting to note that in the FAQ Microsoft answers the question “Why are you paying me cashback?” with the following reply: “We want to earn your loyalty and reward it with cashback savings for your everyday online shopping. We are ‘The Search That Pays You Back’!”

We all know how much cash Microsoft has (billions), so it could definitely keep this up for a while. But I have to wonder about long term feasibility. Can Microsoft make money with this model or is just one big subsidy-based maneuver to get more searchers?

If the former, then great! If the latter, I wonder what the game plan is for keeping searchers once the plug is pulled on this promotion. After all, using a different search engine is pretty easy. But I’m guessing the idea would be for Microsoft to prove to its newfound searchers that its search is that much better than the competition, even without free cash.

Even so, think of a sandwich shop that lures you in to try its sandwiches with one of those frequent visitor cards (buy 5, get 1 free or whatever variation) in hopes to convince you that its sandwiches are superior. Even if you’re convinced that these sandwiches taste better, I’m guessing you’d still be pretty annoyed once the shop stops rewarding its frequent visitors (i.e., you).

So the question is, can a high repeat business (like search) maintain its user base once it gets rid of the feature (like cash back) that attracted those users in the first place? I guess we’ll find out.