Microsoft turns to cash to beat back Google
By Yi-Wyn Yen
REDMOND, Wash. – Microsoft chairman Bill Gates on Wednesday unveiled a new game plan to compete with Google, a closely-watched move that comes more than two weeks after the software giant withdrew its blockbuster bid to acquire Yahoo.
Microsoft plans to pay consumers who search and buy products through Microsoft’s Live Search engine. Microsoft’s attempt to lure search users with “cold, hard cash” — in Microsoft’s own words — is the company’s attempt to convince advertisers that it has a viable strategy to combat Google’s ever-growing share of the online ad market.
“We want to deliver the best search results,” Gates told a gathering of online advertisers at the Microsoft Conference Center. “This is giving [consumers] a reason to use a particular kind of search and get value back.”
Whether Microsoft’s new “Live Search cashback” program will draw more users — and, in turn, more marketers – remains to be seen, but some advertising executives said they weren’t convinced that it will help Microsoft catch up to Google.
“This is a shopping comparison tool that’s being rebranded as search,” said Jay Jung, president of Adaptive Marketing, referring to sites like Fatwallet.com and Couponmountain.com that offer similar rebates to consumers.
Microsoft (MSFT) said it will pay a certain percentage of the cost of a product that a consumer buys using the company’s search engine. Users need to set up an online account and can receive their rebates via a check, direct deposit or PayPal, eBay Inc.’s (eBay) online payment system. Microsoft said it has signed up more than 700 merchants, including eBay, Sears, and Barnes & Noble (BKS) and offers rebates on 10 million products.
To be fair, the company has run similar cashback promotions before – with promising results. For three months in early 2006, the company offered $1 million in prizes for online users who entered keyword searches on Microsoft’s search engine and also ran a rewards program for search users last summer. Microsoft’s search market share rose both times during the promotions.
Microsoft rolled out the new cash-back strategy at its annual digital ad conference in Redmond. The two-day summit began Tuesday with Brian McAndrews, the senior vice president of Microsoft’s advertising group, focusing on the company’s organic growth strategies.
The company so far has done little to impress marketers that it has a breakthrough strategy to compete with Google (GOOG). One ad buyer attending Microsoft’s ad conference this week referred to the new plans as “same-old, same-old.”
“Yahoo’s trying to buy traffic and search share. This is one way to do it,” said Standard & Poor’s analyst Scott Kessler. “But to what extent are people going to game the system? Say someone conducts a search on Google or Yahoo for a product, and then replicates the search on MSN to get the cash benefit.”
Many Wall Street analysts predict that Microsoft will eventually buy Yahoo. The odds of that happening increased significantly last week when activist investor Carl Icahn disclosed he had acquired more than 4% of Yahoo and launched a proxy contest to oust Yahoo’s board of directors and engineer a sale to Microsoft. Microsoft’s top brass has in recent days signaled its interest in pursuing Yahoo (YHOO) again.
Bribing people to use a search engine wont last and degrades the product,
can’t believe Microsoft is lowering themselves to this level. Microsoft
only has have 700 merchants, It’s not worth the hassles for 3 or 5 dollars of
savings. I would much rather use a site that has more products, options,
features and merchants such as
http://www.sortprice.com to search for products and compare prices.
I cant see this doing much for them. I know that in theory it’s a great idea, but ultimately any dent they could put in the search market share may come from what could be a dying base of former Yahoo users. I dont think Google will see any effect at all. Interesting to watch the search market get tugged on by these powerhouses though. Hey, it gives us something to blog about. 
are you technoNOOBs really this pathetic??
IT’S ONLY A SEARCH ENGINE….
one thing that has many, many players that provide the same results.
i know most people, like you, are iTards, but why would i want to type in a url to goto a search engine just to type in my search when i can just type in my search without surfing to a site first to do it???
technoNOOBs are pathetic….keep wasting your time…i’ll take the free money for the exact same service.
only a technoNOOB would act like a simple search engine is a gift to humanity….
LMAO @ google surfing just to get to a search bar…!!!
bigger LMAOs to all you technoNOOBs that actually think you get anything more from a google search, than you do a yahoo, ask, alta-vista, MS….i can keep going and going and going….
i’ll keep my valuable time and collect for it…you noobs keep wasting your pathetic lives oooogling over google..
LMAO….hahahahahahahahahahahahahahahaha…all the way to the bank!
The social networking and distributed application has created unique destination sites for customers. So, the value of a search engine portal Yahoo is going down compare to ebay, amazon or financial site like CreditCardsCorp.com at
http://www.creditcardscorp.com/
Customers can find the best offering and product online from smaller niche portals like Zillow and others. For example, take above CreditCardsCorp.com site which I got recently a credit cards is much better to see all offers from Visa, Master Cards, Discover, And Amex and let cards companies compete online for LOW APR and BEST DEAL at http://www.creditcardscorp.com!
So, why user need to go to potral like Yahoo anymore and get credit cards offer offline from Capital One mails when you can see all in one small niche site.
I use Yahoo! Google tried to do strange things in my computer. I then contacted them.Google add would come up on my screen and I could not get them off. I did some research on Google, and found a lot of bad things that they do. I printed copies of everything.
.
as I’ve already said (from early days of the Microsoft-Yahoo bid) on many forums and blogs, this (very good) news clearly shows that Microsoft doesn’t need to BURN $45+ billion to buy Yahoo, since, witb a FRACTION of this money, they can start from ZERO the SAME (or BETTER) Yahoo services!!!
- gaetano marano – Italy
http://www.ghostNASA.com
http://www.NewSpaceAgency
There seems to be a misconception, or maybe that’s just how I feel. Microsoft isn’t actually giving away money — the retailers are. This may narrow Microsoft’s profit margins on the purchases through Live, but it’s also possible the retailers are giving the rebate away to be competitive in an unstable economy.
Perhaps I am not aware of the finer details, but I don’t see why Microsoft doesn’t leverage its enormous mobile, Xbox, operating system, and server interfaces to compete with and crush Google. Why aren’t they focusing more on a convergent internet strategy like Live Mesh (which is basically an operating system for cloud computing) than deals like this?
5% MS Cashback sux. I can find a lower price through Google, even after MS Cashback.
MS has to remember that they have cheated the average computer user through multiple OS release prices and exorbitant Office pricing. Additionally they have cheated all of us through MONOPOLISTIC practices to corner markets. Now with that reputation going for itself people truly hate MS.
I want Google to win. We need COMPETITION to allow innovation, creativity and LOWER prices. Competition is good MS MONOPOLY is bad.
As said before MS has a track record of doing things a few times before getting it right!!! Besides Google search options even Yahoo search options are the options of choice for most websites. I can’t remember a website that had a MS search engine box. Unless of course it was owned by MS.
Google has alot more to offer Google Earth ring a bell??? They are more in touch with society changing their look on a regular basis to show appreciation for holidays, Special days and even have some kids drawings to vote for to be posted on the mainpage.
If microsoft wants to be #1 they have to kick it up a notch past the computer world. Open up and make someone feel like “Home” when they get to their “homepage”. Cash back or not. I know most people Feel at “home” with google’s heartwarming welcomes
If it’s useful to the consumer, it will take off. It all depends on the rebate amount that the consumer will receive and when. Microsoft has the ad-budget to get enough online consumers to know about it. And who knows, it may actually stimulate the economy. Regardless of whether or not Microsoft wins this battle, one thing we’ll find out is if this rebate thing, that others out there are trying to do as well, actually works on a large scale.
If MS gets out of the way of the search thing Google is just going to rule the world. Google already offers office applications that rival MS packages, but they have it one step better…you can access it from any computer in the world! MS needs to evolve and get into the online market place if they are to survive, otherwise Google will win. So while Search may not be ther thing, they need to gain some market share there and branch out to offering web based applications. Also in my opinion MS really isn’t good at anything, well not on the first try anyway. It takes them a little bit of practice to get it right hence SP2!
I tried this new cash back site and I do not like it, like most of microsoft items. I did a search for computer cases and came up with this case http://search.live.com/cashback/products/offerings/4011/11915005 . I then went to the website that was offering the case in the first place and found this http://www.newegg.com/Product/Product.aspx?Item=N82E16811196025&Tpk=AeroEngine
i wonder if microsoft is really giving money away or actually making money through this venture.
the main reason live cant gain market is because it is only available on one browser I.E. Can someone tell me Safari Opera Firefox Maxthon and all of these other browser dont offer live search as a default search engine, or at least give me the option of using it. Whats worse every linux distribution I have ever used comes with firefox and google as the primary search engine(wheather I want it there or not). So linux (which is supposed to be about choice) doesnt give me an option of using live search. As a matter of fact I cant use live search from within linux at all. If windows decided to lock out any search engine in this manner the anti trust flags would be waving. 9% market share is incredible when only one browser supports your engine.
The move is not going to help them compete because the search engine reveals only a tiny portion of what is available on the web. For example, if you search for a memory stick using the cash back search engine, you will not find the web’s dominant retailer… Amazon… as a possible selection. Amazon’s price will be about 20% better than any of the search’s results… people are not stupid… they will figure this all out in short time. The people who will use this, perhaps, would be the unethical business types with expense accounts. They can afford to pay more for something and show that they went with the lowest priced item from that search… and then pocket the 1 to 10% cash back. I don’t think there are enough corrupt expense account holders in this country to support Microsoft’s lame search “with cash back” engine.
MS Say What?
@RK, may be results identical (no true, no point to argue)
But if you check your weblogs 60% of searches coming from Google. I do not even see Live user traffic and I do not care for it.
Using Google for search is habitual activity for majority of us, I doubt few bucks will change habits.
I think MS should get out of the way of this search thing…it’s not their cup of tea. Better to focus on whatever they have which are really good (OS, Office)
is this software based off of the recent aquisition of jellyfish.com?
Yes. Good observation, Jeff.
Yi-Wyn
Microsoft should buy out clickthroughme.com and run with it. Social networking meets advertising clickthroughme is an ingenious website.
- Use MSFT, give more money to gates, ballmer, & Iconn.
- Use Google, get perfection!
*LISTEN UP> Google can simply counter-parry Microsoft by offering the same cash back deal and it would affect Microsoft’s search way more harshly. Egghead Monkeyboy Ballmer didn’t think about that one did he.
It doesn’t matter as much as you think whether a user used Google first or not.
Microsoft’s algorithm will still get to improve.
Cash will definately bring more searches and more advertisers to the MSN. The results on all the sites are almost identical. Once people will get accustomed to MSN or Live, other search engines may become secondary.
Over a long period, MSFT may gain some share from the market. Biggest loser however, will be Google as they only have downhill to go. And their will be some new kids on the block with fancy names.
Anyone remember altavista, go, lycos or another dozen names that disappeared?
Yahoo and Google AD PRICE WAR ! ! !
With Yahoo offering cash back, it is like AMD and INTC battling over microprocessor world. Cash will be sucked out of both Yahoo and Google as they have a price war. Then when it is all over, and the stocks have lost 50% value, then they will come to senses. AMD and INTC did.
completely brain dead. embarrassing in fact.
users are not going to change their search habits for a couple of dollars back. even the discover credit card where all spending enjoys the cash-back did not beat visa. or mastercard. or amex. Mkt Share: Visa 44%, MC 31%, AXP 17%, Discover 7%.
throwing money at the problem makes microsoft look desperate.
theBlueTick
“Say someone conducts a search on Google or Yahoo for a product, and then replicates the search on MSN to get the cash benefit.”
That’s exactly what I’m going to do. As nk wrote, I’m thinking about my bottom line instead of cheering for any of the big companies.
Joe: you are correct in writing that MS’s cash incentive will hurt Google’s profits. However, keep in mind that MS’s primary goal here is to steal Google’s market share. If people still use Google as primary search engine and then replicate results on MS Live then MS’s market share gain is going to be only temporary. Because once MS scales back on cash incentives, and eventually it will have to, people will revert to using Google. And that would be the worst case scenario for MS: speeding lots of money and not getting much for it.
Microsoft is going to buy Yahoo and its a done deal. Carl is going to do all the proxy work. I think Microsoft is going to get into online shopping as well like buying specific niche sites such as
http://www.creditcardsmedic.com/
The comparable shopping site for financial is doing much better than generic portal. Ebay bought shopping site for $600 million. The good niche social vertical would better than generic portal.
This is not how you get customers to use your search engine. MSFT’s stock didn’t budge on this news at all in the positive sector. People do not like complicated things, and will continue using what they have always liked best and will not switch over for a limited time, we are creatures of habit. Another thing, MSFT is not known for its simplicity in applications or anything, so to actually get the Cash Back may be a pain.
This is a great strategic move by Microsoft. In the end user win. Microsoft earns money from advertising and in the end returns a percentage of it to the user. Think of it as the same scheme as used by credit card companies who return cash back to the customers.
Why is Microsoft even doing this? They mint money with their OS and Office products. Why aren’t they focusing there, given all the recent problems?
If they want to own a search company, they need to start a search company and get it out of the Microsoft culture. Completely different dynamic than building desktop OS and applications.
This reminds me the big cash-back promotions that some auto makers used. As far as I remember, they continued to lose money and market share.
Goog point Joe, but it all depends on if they clicked on Google’s ads while searching for what they wanted to buy. If so, Google will still get paid for the clicks, while MSFT gets negative-revenue customers.
I actually do think your last 3 are good reasons for buying Google. The MSFT-Yahoo deal ping pong is a massive distraction for both companies and their customers. The longer it goes back and forth, the more Google benefits. And MSFT’s attempt to buy customers is not only unsustainable, but it reeks of desperation so badly that it’s certain to damage their brand.
Watching your opponent make mistakes is always a good thing.
My websites use Yahoo and Google advertising. Some run Yahoo ads, some run Google ads. I would love to run Microsoft/MSN supplied ads, but MSN only caters to the big sites like CNN, not small sites like mine that get 100 to 500 visits a day. That’s th main reason Microsoft want’s to buy Yahoo is for the small publishers. I far that Microsoft will screw up Yahoo ads and then I will basically have only Google for ad revenue.
Yes, Cash back is a good encentive, I thought of that one last week. Was trying to contact Microsoft about my scenario, but they don’t associate so, anyway let’s see if they come close to it. Oh by the way I can make it work really well. Answer the idea submittal guys……..Spectruman
So this is the great announcement? Nothing of a technology advance but a simple subsidizing gimmick?
This proves how sad MSFT has really gotten on the engineering front, they are admitting whole-sale defeat. There isn’t even a whiff of a claim anymore that they could out-innovate/out-engineer Google.
Realize that also-rans in a category always resort to this sort of stuff to see if they can’t gain a little market share, while the category leader gets to command (semi-irrational, but a fact) premium prices.
But in this case it’s even worse because Google has out-engineered Yahoo and MSFT to the tune of a 50-90% monetization gap. So there is no parity on what a search is worth to each of them to begin with.
Notice that MSFT search (MSN/Live) just shrank to about a 9% share, while Google for the first time grew over 60%. So MSFT has about 1/6 to 1/7 of Google’s QUERIES, but on the monetization front it looks even worse.
[By the way, has anyone seen MSFT's search revenue reported as a separate number, as in a Q1 financial report? I would be very interested in that number.]
It will be interesting to see if there is any movement in search share over the next 3 months as a result of this, I would predict no.
Even if they buy Yahoo’s search to ramp up the scale, my guess is that consumers will answer with a shrug. This isn’t really news, everyone has seen coupons and rebates before. Plus at a say combined Micro-hoo 30% share, that is suddenly a lot of $ to be subsidizing.
I wonder how long Ballmer could sustain justifying that with the MSFT shareholders. If he spent say $10B to buy another subsidy business…
The funny thing is, the path to them buying innovative Web 2.0 companies with growing mindshare is completely open, they could buy Twitter and about 50 other companies tomorrow for a total of say $5B (at $100M a pop).
This only demonstrates how desperate Microsoft has become for Internet market share – if there is no real value Live over what Google has to offer then the last resort is definitely cash. But consider what this says about Microsoft before you settle for a sub-par experience on Live.
Has anyone used this before. I have – and it works like this – search using your favorite search engine, retailer, local store – for the lowerst price. Go to Live Search Cashback and you will typically find that same low price + an additional 5-15% discount. Based on what it is, most smaller merchants have free shipping. I recently purchased car seats for my kids which were $150 minimum + shipping / tax. Live Search Cashback – same price $150 but merchants were offering an additional 7-10% off, no shipping, no tax. Saved 30 bucks! Stop thinking about google, think about yourself and come out ahead!
how can it be “gaming” the system if the end result is that the customer buys it through Live? if the customer does a search on Google, then goes and buys the product through MSFT Live, then they are actually hurting Google. This sceneario implies that the customer produces a search result on Google that actually produces no revenue for anyone in Google’s ecosystem. When this happens, their revenue model breaks down and is hurt, not improved. This is a typical comment from the street who tries to find any way that something can benefit Google. MSFT buying Yahoo – hmmmm, must be a good reason to buy Google. MSFT having trouble buying Yahoo – hmmm, must be a good reason to buy Google. MSFT paying searchers cash back to search their site instead of Google – hmmmm, must be a good reason to buy Google.
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Jeff, I agree with you on the fact sortprice is a neat product search engine but your wrong about the new cashback program. Microsoft has the capital to pay users and try to take market share, isn’t that the same as advertising?