Microsoft on Wednesday took aim at Google’s dominant share of internet search with a service that returns cash to consumers when they make online purchases of certain products through its own search engine.
The announcement marks one of the first demonstrations of a tactic the software company has long promised as a way to fight back against Google: to try out disruptive new business models as a way to regain the initiative in a market where its share continues to slip. The idea of giving cash back to consumers who make searches was first floated publicly by Bill Gates, chairman, two years ago, though at the time he did not link the idea to actual online purchases.
The Microsoft service returns cash to consumers when they buy certain products on a comparison shopping service called Live Search Cashback. Adverts from retailers who pay cash back in this way will also be displayed, alongside other sponsored links on Microsoft’s main search site, with a logo of a gold dollar coin alongside to set them apart from other ads.
It was unclear from the announcement whether Microsoft itself will shoulder some of the expense of the cashback payments, eating into profit margins, and Microsoft representatives refused to provide more details. If the idea were to catch on and other search engines were forced to match it themselves, it could reduce margins for other search companies as well.
The concept is based on a service introduced in 2006 on Jellyfish.com, which Microsoft later bought. Jellyfish took a referral fee for introducing buyers to e-commerce companies, but then paid part of that fee to consumers. It also gave greater prominence to advertisers who were willing to pay the highest refunds. Microsoft did not provide details of how it would rank cashback adverts on its search engine,
For advertisers, the service is a variation on an idea known as “cost per acquisition”, or “cost per action”. Under this arrangement, rather than paying each time an internet user clicks on their adverts, they only pay when an actual purchase is made.