Microsoft Tries to Get Search Traffic by Paying Users

Posted by: Rob Hof on May 21, 2008

Microsoft on Wednesday is launching its latest attempt to make a dent in Google’s dominant market share in search and raise its currently single-digit percentage of search queries: Live Search cashback—a service that pays people cash back on purchases made from certain advertisers when they use Live Search to find the products. Here’s how it works, from the cashback site:

Live Search cashback - Live Search_1211380230633.png

Microsoft had tried paying users before, such as with prizes on its Live Search Club site. This program is much more extensive, and I suspect advertisers who are worried about Google’s dominance will give it a try if only to keep Google honest. Some merchants also will like paying only for sales made, not per click, which can be open to fraud. And kudos to Microsoft for trying something different.

But it all feels a bit gimmicky. Paying users to come to a site never seems to have been a great strategy, especially compared to simply providing a service that works better.

Also, there seems to be a lot of friction built into the process. First, you have to sign up for an account, always an obstacle; on Google, you just type in words. Then, you have to go out of your way to search on the cashback site. Not least, you have to wait to get paid to account for returns. It seems like all this is going to turn off a lot of people who aren’t natural-born coupon clippers. Danny Sullivan at Search Engine Land gave it a real workout and came away unimpressed, though Mike Arrington at TechCrunch thinks it has a chance to disrupt Google if it catches on.

UPDATE: Steve Baldwin from search marketing firm Didit, in the comments below, makes a good point: I don’t necessarily agree with him that cost-per-acquisition is the perfect model—Web publishers justifiably don’t want to get paid only when a sale is made, because a click is logically worth something. But if Microsoft can compile a sizable list of prime lead prospects, that may well be worth a lot. The question is whether this will in fact attract a lot of people.

And if it does end up working, Google could do something similar, and it has the search economics to make it work even more profitably. I guess this program is a lot cheaper than spending up to $21 billion to buy Yahoo’s search ad business, though.

Reader Comments

Steve Baldwin

May 21, 2008 11:27 AM

This is a brilliant, truly disruptive move. Microsoft is putting itself where the transactions are. Vendors have been clamoring for the CPA model for years, instead of paying for non-converting clicks and dealing with significant fraud.

Google cannot match the CPA model because it would destroy its cash-cow click-based business. Microsoft, on the other hand, has nothing to lose (it doesn't make much from selling clicks).

One more point: if you've been through the reggie process, you can see that Microsoft will soon be able to amass the most valuable possible DR list possible: a list of buyers, with real names/addys. This may wind up being more valuable than all of Yahoo!

Nodir Ruzmatov

May 21, 2008 11:44 AM

it's gonna be the same thing what google did with Google Checkout! They offered 10$ off & what happened!? They could do nothing, PayPal is still leader in online payment systems!
I think the same thing will happen to Microsoft! Just waste of money...
But you never know...

Sandeep Sinha

May 21, 2008 11:56 AM

Companies like fatwallet.com provide this (deals with online stores) functionality. MSFT will have the capability and reach to take it to mass market. Challenge will be managing relevance and cannibalization (explain to other stores that do not show up in top 5 or are paying PPC $$$s).

Shane

May 21, 2008 12:06 PM

How are they going to distribute the money? Is it going to be through checks in the mail or are they planning on setting up a site similar to paypal that you can just have it transferred into an account and then you can do with it as you please to save on the cost of shipping out a check? I think this is definitely a good alternative because with the price of gas and growing inflation problems people can sit at home and shop without having to waste gas and comparison shop for the best prices online and have it delivered to their doorstep. Other companies have tried this and failed because they were just too small to get it off the ground. Now that someone is big enough and is willing to take the risk, we will finally see if this system can pay off. In all honesty a click isn't worth anything if the customer ultimately doesn't buy the product. How do you measure clicks? By the sales produced through the clicks. If it's a hassle to take 5 minutes and sign up for something then you have way too busy of a schedule to bother with shopping online anyhow.

noname

May 21, 2008 12:28 PM

This is definitely better than buying Yahooooo...it is all about the users.
Microsoft should try to improve its technology on search rather than buying yahoooo which is really not worth that much....

Some Guy

May 21, 2008 12:59 PM

I think it will work. There is no question for advisers. For consumers, there is nothing to lose. I tell you the reason:

1. I want to buy something at the first place, then why not buying it through Live Search?

2. If I use Live.com, I can find bargans on the right side bar. Why not?

3. The notion of Google search is better is not true now. I don't see any difference between them at least the first 50 results. Who cares if you return 5 million results or 6 million results.

Sri

May 21, 2008 1:06 PM

Let me predict what will happen to this initiative - it will fail. MS has a problem understanding how the web operates. Several failed attempts attest to it. I see this as just another flailing attempt by MS to be relevant in the web world today. Personally, I wouldn't even bother checking this out. In this age of information overload, I can check out only top products which are going to survive. MS with its history of failures doesn't deserve attention.

random

May 21, 2008 1:25 PM

So the brilliant disruptive move by Microsoft is to do exactly what Google failed to do and what eBay and comparison sites do much better because they already offer the lowest prices for review?

And I'm puzzled by Mr. Baldwin's idea that Microsoft if going to have "the most valuable possible DR list possible" because it will contain named and e-mails of "real addys." Ok, so they'll have a distribution list. Now what? Monetize it by paying these users? Sell it to spammers? Send them ads for new software? What are they going to do with a distribution list of people who search the web and buy some stuff from their advertisers other than demographic research?

Let's be honest and call MSN Live Search Cash Back what it is. Microsoft is paying people to use their search engines because they can't get users any other way.

the_sphinx

May 21, 2008 1:55 PM

It doesn't work as a list because everyone buying something already has an amazon account, or will make one as the result of the purchase.

It doesn't work for Amazon because people will just shop on Amazon, then enter the product name in live.com to get paid. So they're paying MS for their own customers. And then it will come down to price - is amazon through live.com actually cheaper than amazon?

Ryan

May 21, 2008 2:08 PM

'Microsoft is paying people to use their search engines because they can't get users any other way'

I agree 100%. However, users/consumers are fickle these days and swing like the wind during autumn. Some will take advantage of this, then switch back once the offer is over.

Come to think of it. Why don't we all take up the offer, suck Microsoft's marketing budget dry then switch back to Google.

All Together

May 21, 2008 2:15 PM

This is a massive world wide retail Rewards Program. Much like grocery stores or a credit card. The problem is this... How many searches are about seeking information as apposed to looking for something to purchase? Mine or mostly to educate myself on an issue or subject. Come on Microsoft, it isn't that hard. Just create a better search engine, allow me to customize my home page and you're Golden. You've done it before... Think, think... Yeah, you got it! Xbox VS. Playstation and Nintendo. Categorize your search into local community business, and national businesses. Home, Apparel, Electronics et cetera. Keep the local search amount cheap for local businesses, don't price your bread and butter out of the market. Let the national companies battle it out using the auction model, but instead of getting bumped by price, bump ads only by last in first out. (Think Airlines) On national search clients, limit the inventory to create demand, hard to do, but too much info is not good. Start a paid classified to weed out crap, if you're willing to pay to advertise it, it's probably not junk. Not much, just a buck or two, plus a refund if your items doesn't sale in two months.(Think old school Newspaper) I rarely use Craigslist, too much junk, plus I don't do much business in India, I'm in the Pacific NW.

Ash

May 21, 2008 3:53 PM

Search comparisons -

Tried to search for "CASIO EX-S880RD Red 8.1 MP Digital Camera" on both Google and MS Live.

NewEgg.com (reached through google) lists the final price as $218.29. Live takes you to NewEgg too and suggests that you would get 2.8% discount on the final price, which makes it $212.52.

HOWEVER, when you click on the "Go To Store" button on live.com, it takes you to NewEgg's shopping site, without providing any clue how it is connected to live.com's cashback. After checkout, the final price continues to show up as $218.29.

If a sign-in to live.com is a prerequisite, you need to have MSN email account, which I don't prefer. Not because I have anything against MS, but simply because it is not as good as gmail.

CONCLUSION: I would conclude that this new strategy, if at all successful, may just prove to be a trickle to MS's revenue stream because it lacks the juice. MS's market share in search would increase only through an acquisition, possibly of Yahoo. The saga continues.

DCD

May 21, 2008 4:47 PM

You don't need a msn email account to sign into live.com. Stop spreading FUD.

pat

May 21, 2008 5:04 PM

what percentage of users who use search are doing it specifically to buy something? then after you have that %, take a minute portion of those people, and perhaps a few will do this.

this reeks of desperation and an overall corporate policy of "throw money at this and it will work!". i'm sure the ROI equations in the model of this project are looking really attractive - look we can acquire new search customers for less!

when has this worked exactly? in any internet business?

Ash

May 21, 2008 5:36 PM

Yes you are right, DCD. You can use other email accounts as well. I was misled by the message: "Have an MSN Hotmail, MSN Messenger, or Passport account? It's your Windows Live ID." during the sign-up process.

Having said that, it doesn't change things much. Rest of the stuff that I wrote still holds good. The saga continues.

Sean

May 21, 2008 6:33 PM

Be more creative please. Mr. Microsoft

First, these CPA reward programs have been there for more than 10 years. Many established sites (such as ebates.com, fatwallet.com), well not as gigantic as M$, have already built an active and solid consumer-community. One may argue they might not be competitive and survive in the storm that MS brings.
So here is the second point.

2. How big is the pie anyway?
It is true that online purchase has gained it popularity as the gas prices are skyrocketing.
Say 2 millions people each makes $500 purchase annually through the MS cashback program. Given a net average 5% commission fee, the annual revenue is 50 millions. This might be a lot for a mid-size company, but only a small piece in MS’s pocket.

Third, low technology barrier brings intensive competition and squeezes the profit margin.
The key is: to identify loyal and active customers and build an interactive merchandise platform? The question is does MS has it in the plan?

Fourth, you know I will bring this up. As a rational customer, whenever I will buy or try a new product. I will search internet for product reviews, feedback and price factor. The tool I used is a 6-letter word, GOOGLE.

TJGodel

May 21, 2008 7:43 PM

Nothing innovative here! If you think it is then you don't use the web to purchase anything. The campaign will amount to nothing. It will not fix Microsoft Internet search problem. Me too solution such as this stunt can not create a "network effect" which is what Google has and what Microsoft doesn't understand. You have to fundamentally change to "rules of the game" in order to really compete with Google.

Let's put an end to this whole drama of Microsoft catching Google by:

A) Purchasing Yahoo or Yahoo's search business.

B) Gains massive search using "Live Search Cashback".

C) Buys Yahoo, AOL, Facebook or any other combination of online property.


No technology company has dominated more than a Single-Era. No matter how that my try to dominate the next era. NONE!!! List do the list

IBM (Mainframe computing)
Microsoft (Client-Server computing)
Google (Search Computing)

Google probably will not dominate what comes next. Now go and read.

"The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail" (1997) by Clayton M. Christensen, the Harvard Business School professor

Shawn Truesdell

May 22, 2008 3:23 AM

I would never use such a scheme. Microsoft have sucked since day 1 with all things web related: Internet Explorer, Messenger, Hotmail, Search, Active X web scripting, VB Script and the list goes on.

I would rather support someeone who offers a better, faster and more stable service and right now that is Google.

Daniel Will-Harris

May 22, 2008 6:39 AM

Here's my take on how Microsoft could spend their $44 billion buying CUSTOMERS instead of Yahoo.

http://frickingenius.blogspot.com/2008/02/how-microsoft-should-spend-their-44.html

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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