Microsoft says you search, we pay

By Stan Beer
Thursday, 22 May 2008 06:03

Opinion and Analysis

Desperate to somehow claw back some of its dwindling marketshare from search juggernaut Google, Microsoft has embarked on a bold new strategy - pay consumers to use its Live Search service. Somewhat bemused market watchers are wondering whether the cash back for search purchases is a master stroke or merely another Microsoft mis-step.

The Live Search Cashback site is essentially an online searchable discount mall which allows users to search by product or by a range of retail stores. According to Microsoft, there are around 10 million products to choose from and already hundreds of retailers have signed up for the service, including some of the biggest names in the US (yes it's only available in the US).

At first glance, the service does provide some obvious benefits for both consumers and retailers.

On the consumer side, the service does enable shoppers to search for a specific product and get a range of prices from different retailers, enabling them to buy from the lowest priced supplier (or check to see if they can get even cheaper somewhere else such as Amazon). There are plenty of products that you will not see at a reasonable price, such as the iPhone, or at all, such as a Rolex watch, but surprisingly you can get a MacBook for US$1032, which is cheaper than the online Apple store where it starts at US$1099.

For retailers, the service allows them to advertise without paying a cent unless they sell something. If they do make a sale, they pay for the ad by giving a cash back percentage of the purchase price (somewhere between 2% and 30%) to Microsoft which then passes that full amount on to the consumer through either a PayPal or bank account deposit. In effect the cashback amount means little to consumers because they are shown the bottom line cost of the product including the cashback when they make their purchase.

There is a downside for retailers, however. Being on the Microsoft Live Search Cashback site exposes your store to a direct price comparison with competitors, so unless you have the lowest priced product on the block, the chances are you won't make any sales for that product.