Microsoft announced yesterday that it will offer consumers cash back incentives for using their search engine, Live search. The way the program is designed, consumers will be rewarded for searching and buying products using Microsoft’s SE by receiving a percentage rebate after the transaction is completed.  That rebate equates to a cost per action fee Microsoft charges its merchants, which include online stores like eBay, Barnes & Noble and 

Why The New Program?

Microsoft is grossly behind in the search engine market.  Google owns roughly 60% of the search market; Microsoft a meager 10%.  They have failed to buy out Yahoo and though they are now trying to work a deal to buy its search business, they are trying multiple avenues to get online consumers to view them as a better retail search engine. Tying usage of their site to cost savings is sure to speak to some consumers during these troubling economic times but will it be enough to pull users away from Google?  I’m not convinced it will.

Google’s superior algorithm for finding and categorizing sites simply equates to better search results for the average user. Heavy online users will always turn to it as the innovator in this area.  Gimmicks aside, the brains behind a Google search are better than a couple of bucks back on an iPod purchase through the cashback program.  Not to mention, in our experience, organic search results tend to produce more solid customers simply because many online consumers have a negative reaction to being duped into paid advertisement.  Long term buyers tend to form the relationship through organic results rather than paid.

It will be interesting to see, how long the program’s approximately 700+ merchants will continue to participate in the program if sales are not forthcoming. If users don’t gravitate to the cash incentive and increase Live Search’s user base, top retailers are sure to spend those advertising dollars else where. 

In the end, Microsoft is hoping to change the game of online advertising by providing merchants with better ROI than pay-per-click ad programs ran through Google or Yahoo! Whether or not that happens is up to the consumer.