Last week, Microsoft added a cashback section to its Live Search web search engine. Their goal is to have more people use their search engine by offering them money back on purchases they make online throught this portal.

Two thoughts.

First, it’s interesting to learn how they incentivized retailers such as Barnes & Noble, Sears, Home Depot, J&R Electronics, and Office Depot to use their service. According to the Seattle Post-Intelligencer:

To get merchants to use the Live Search cashback service, Microsoft is using an alternative payment model called Cost Per Acquisition, in which the advertisers pay only when the ad results in a consumer purchase. Microsoft isn’t the only company to try that, but it differs from the standard model, which is based on the number of clicks on an ad.

Cost Per Acquisition (or CPA – also called Cost Per Action or Pay Per Action) has long been touted by direct response advertisers as the ultimate way to buy advertising since you don’t pay unless the visitor becomes a customer. Though CPA can be a good solution for some businesses, most advertising companies don’t have complete confidence in their client’s ability to close the sale and therefore don’t offer a CPA option.

It will be interesting to see how successful retailers find Microsoft’s CPA model and whether their success will pressure other search engines and other online purveyors of advertisements to offer similar advertising models to their clients. (Google’s Pay Per Action campaign is still in beta and is no longer taking new clients. You can read more about their Pay Per Action ad program here.)

Second, Microsoft’s new offering was touted as its latest attempt to grab market share from search engine leader Google. This is seems to be an odd way to go about it since all they are really offering is a product search engine. Live Search cashback seems to be more of rival to Google’s Product Search, not their web search engine. It may be helpful if you’re looking to buy a DVD player but not if you’re writing a report on George Washington.

For those who are old enough to remember, early search engines were somewhat of a crapshoot in terms of getting the quality search results. Google became the dominant search engine not by offering financial incentives for those who use its search engine, but by providing better search results than its competitors.

If Microsoft was really looking to cut into Google’s share of the search engine pie, a better way to do it would be to have their search engine produce better results and then convince web browsers that their search engine is better, and then enable a CPA strategy – in that order.   

When it comes to its search engine dominance, it appears Google has little to worry about from Microsoft’s latest offering.

Tags: Cost Per Acquisition, Lead Generation

This entry was posted on Wednesday, May 28th, 2008 at 11:42 am by abelk and is filed under Cost Per Acquisition, Lead Generation, Microsoft. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.