REDMOND — Microsoft Corp. is offering cash rebates when people make purchases after using its search engine as the software maker begins to reveal how it plans to take on Google Inc. after the failure of its $47.5 billion bid for Yahoo.
Analysts and investors have been eagerly awaiting details about “Plan C” after Microsoft acknowledged that its Plan A of going solo was troubled but also withdrew its Plan B — acquiring Yahoo — because Yahoo executives sought more money.
Under the cash program revealed Wednesday, Web shoppers who sign up for an account and buy items found using Microsoft’s Live Search cash-back site will receive a percentage of the purchase price deposited into their account.
When the total reaches $5, the shoppers can redeem their “cold, hard cash” through eBay Inc.’s PayPal. Microsoft said the rebates are funded with a portion of the money it collects from advertisers.
So far, more than 700 merchants, including Home Depot and Zappos.com, have listed products on the site.
Microsoft Chairman Bill Gates said in a speech that he believes the cash-back program will boost the number of people using Live Search for shopping, at least. More grandly, he predicted it will change the economics of the search advertising market as advertisers shift from paying for click-on links to paying for concrete actions, such as completing a purchase.
The online advertising market overall has begun to move in that direction with advertisers under increased pressure to deliver results from their spending. Historically, search ads that have made companies such as Google successful are typically sold by the click, which itself was seen as revolutionary compared with the traditional method of paying for ads by the number of viewers.
“It’s exciting. I think years from now you may look back and say, ‘Wow, search started to get a fair bit more competitive,’ and you can look back to that announcement,” Gates said.
“By giving money directly back to the consumer, Microsoft hopes to change the balance of power,” wrote IDC research analysts Caroline Dangson and Susan Feldman. They predicted that if Microsoft’s effort is successful, advertisers will sink the bulk of their advertising into such rebate programs.
This isn’t the first time Microsoft has resorted to buying search traffic. The software maker has tried offering large companies software and services credits for every employee who used Microsoft’s search engine at work.
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