Explaining the workings of Live Search Cashback

REDMOND, Wash.--I'm not sure how much Microsoft's Live Search Cashback program will help Microsoft take share from Google, but I do find my brain grinding over the business model implications.

As I noted earlier, the economics are based on the same broad model as affiliate programs that pay referrers a cut on sales that they directly feed to the site. In this case the referrer (Microsoft) is shuttling all that money to the consumer. It's the same model bargain-hunting sites like Fatwallet.com use, although those sites typically keep some of the money to pay the bills.

But, where Microsoft is changing things a bit, is by moving this approach to search advertising. Essentially, advertisers can get placement by offering to pay Microsoft a cut of the sale as opposed to paying per click.

Here's where it gets interesting. In order to place a value on that ad, Microsoft has a team inside the company that figures out how much the new ads are worth to Microsoft and bids a cost-per-click amount against traditional buyers that use Microsoft's AdCenter.

But how does Microsoft do that? If it were keeping a percentage of the cut, I could understand it. It would assess a conversion rate for each advertiser and estimate what that translates to on a per-click basis. In this case, though, Microsoft is returning 100 percent of its cut to consumers. So the value to Microsoft is essentially the goodwill and loyalty that its offer generates--something that seems to me hard to put a value on vis a vis a pay-per-click ad.

It's also worth noting that although Microsoft is giving all of its revenue per search for the Cashback results to its users, it is not having to put money upfront or lose money on each sale, either.

Those retailers who are taking part in the program spoke fondly of it on Wednesday, saying it was a no-brainer that let them pay a percentage of the sale--something they basically try to do all along but using other, less precise methods.

They just pick a percentage they are willing to pay and offer that amount up to Microsoft's search users. The only tricky one is eBay, which sells much of its stuff through an auction--so it doesn't normally know the final price, unlike traditional retailers.

To deal with that, eBay plans for now to limit its participation to a subset of its Buy It Now fixed-price items.

"With auctions, it does get a little tricky," said Matt Ackley, eBay's vice president of Internet marketing and advertising. The company also has to figure out how to adjust the model to work for a site that sells items for less than $1 as well as cars and houses for thousands.

The question I have, though, is how those advertisers that are NOT part of Cashback will feel, essentially having to bid not only against other pay-per-click ads, but also against the somewhat intangible value that Microsoft itself places on the Cashback ads.

Any pay-per-click advertisers care to drop me a note? (I'm at INA dot FRIED at CNET dot COM).

[theantibush]

what an innovative and brill idea ballmie, u litl rascal u

http://news.cnet.com/5208-13860_3-0.html?forumID=1&threadID=37344&messageID=405030&start=0

[aafter]

MSFT is approaching it as a new cashback advertiser at their search engine. They can advertise the same at Google or Yahoo.
AAfter Web Search has been giving cashback for a year. It has a much focused search approach. We invite you and your reader to check us out, and give us some feedback.

Regards,

Subhankar Ray


Subhankar Ray

[colamix]

The only way I'd see this brining in search engine loyalty is if it truly was innovative and the rebate was immediately deducted at the retailer when referred to by Microsoft. This isn't the case, it's another one of those cashback offers only 10% of consumers bother to go through the red tape to take advantage of.

[powderbunny]

Hum...up one day...down th next?
Been trying to check out the buzz all day today, but can't connect.
Anybody know why the live cashback site cannot be reached.

[sumthin]

"This isn't the case, it's another one of those cashback offers only 10% of consumers bother to go through the red tape to take advantage of. "

You said this as a negative, but in reality 10% would be HUGE for Microsoft. That would be billion$ per year.

[ram108]

Attimes live and yahoo didnt work for me very well. MS can pay percentage of .
Microsoft ad center can give some more better deal than this.

[ram108]

Attimes live and yahoo didnt work for me very well. .
Microsoft ad center can give some more better deal than this.

[cashbackshopping]

The is a really good offering from livesearch but i found another site which i have been using quiet often called rewardlover.com. I compared the cashback rates and on some offers they pay more than live so its always worth checking around before you buy for example rewardlover pays out 50% cashback for eBay. And cashout level is only $10 which they pay you by Paypal or Amazon e-vouchers. Plus they give you $1 for joining.