Cashback scheme to make Microsoft ‘king of search’?

26 May 2008

While Microsoft’s nemesis Google dominates in the online search and advertising market with a combination of ‘cost per click’ AdWords and targeted ads on AdSense, it is hoped that the ‘cost per acquisition’ model of the new Windows Live Search cashback programme will give it an edge with merchants.

Cost per acquisition means that unlike the traditional model where an advertiser pays when an ad is merely clicked upon, in Microsoft’s scheme the cold hard cash is only coughed up if the click results in a purchase.

This may sound like a tough delivery but the expectation of a cash rebate may drive online shoppers to the Live Search portal and get them out of their habit of googling.

This seems like an attractive proposition for online advertisers given the current economic downturn, said Mike Davis, senior analyst at UK analyst firm Ovum: “Given that advertising expenditure is one of the first things to be cut back during a recession this offers advertisers potentially more bang (and return) for their advertising bucks.

“Interestingly as well, this cashback proposition doesn’t just put Live Search up against Google; it also allows it to have a go at the likes of Amazon and eBay.”

But if advertisers are getting bang for buck, shoppers are getting cash back and Microsoft is getting more site traffic surely, the yin and yang of economics dictate that there must be a catch somewhere?

There are indeed a few catches, said Davis: “A US$5 minimum balance in the online account to which the cashback is credited before transfer to a bank or even PayPal account, and a 60-day waiting period.

“This is presumably to account for the potential of the purchased goods being returned to the vendor. Microsoft has also not said how much it is committing to the initiative or how long it will last.”

This new programme must not be seen as a move in isolation, urged Davis. It is actually happening in the context of the ongoing Yahoo! acquisition or at the very least coupled with the purchase of its advertising business, which Microsoft hinted was a possibility going forward.

With the new ‘Find My Location’ service for mobile phones without GPS functionality on the UK version of Live Search which resembles Google maps functionality on the iPhone, Live Search cashback can be seen as part of a series of strategic moves aimed at toppling Google.

“Add to this the completion of the FAST acquisition giving Microsoft enterprise search products for all sizes of organisations, and it can be seen that the underlying, and continuing, message here is that Microsoft is very determined that it will be ‘king of search’ whether that is in the enterprise or the consumer markets,” said Davis.

By Marie Boran