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.

  • Honestly, I bet that retention even after the promotion ends will actually be pretty decent for the people they get to switch. It is easy to switch, but people don’t do it that much. That is their whole problem, they need to make people *want* to switch.

    I have tried to used Microsoft’s search sites over the years but always went back to Google (quite quickly might I add), but recently I changed my default search to Live Search, and am still using in a month later. While Google seems to think their search is basically perfect (i.e. they don’t see a need to innovate much anymore), Microsoft is working on actually doing something better. Trying to do a completely different type of advertising model may be something that Google ends up copying.

  • Google does this thing by just being Google were it makes you feel like you’re getting the best results possible… I mean, it’s Google, it has to be the best search option, right? Maybe, but definitely subconsciously for your average searcher.

    It’s true though, Paul, that Google hasn’t seemed to do much with search in a while… at least on the surface. I’m sure they’d argue that tons of things are constantly tweaked behind the scenes. But I wouldn’t know.

  • Yan

    It is no doubt MS will make money with this. They have simply copied the business model from Jellyfish, a startup they acquired last year. That model (profit sharing) is profitable and used by many (eBates, Fatwallet, etc)