Gates Announces Rebates for Web Searches

Microsoft Gives Away Click Revenue, but Gains a Chance to Undermine Google

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REDMOND, Wash. (AdAge.com) -- Microsoft Chairman Bill Gates today said the future of search will not only include simple, intuitive user interfaces and results based on rich semantic data but it will also reward consumers for their engagement.
Bill Gates speaking at the Microsoft Advance '08 confab.
Bill Gates speaking at the Microsoft Advance '08 confab. Credit: AP

Microsoft's first iteration of that reward? Underwriting rebates for consumers searching for e-commerce deals on Live Search. While the company surrounded the announcement with lots of talk about it being a future economic model for search, it is also clearly a ploy to lure people away from Microsoft's biggest competitor, Google.

Simple ... but is it brilliant?
Under the model, coined Live Search CashBack, an advertiser determines the cost it is willing to pay to sell a particular product via Live Search, a typical cost-per-acquisition pricing model. But instead of Microsoft getting the money when a consumer clicks on the search ad and fulfills the purchase, it offers that fee back to the customer in the form of a rebate. Microsoft doesn't make money on the ads: a classic example of economic disruption. Ad Age digital editor Abbey Klaassen reports from Microsoft headquarters.

In a few years, Bill Gates said at the Microsoft Advance '08 confab, "we can look back and say search started to get a fair bit more competitive and we can look back to this announcement."

Mr. Gates spent much of his last presentation to advertisers as Microsoft's chairman talking about the future of search -- a clear indication of how importantly Microsoft views this channel. He criticized pure keyword search as "just syntax and not semantics and has limits no matter how much you build those things up."

At Microsoft, he refers to it by the phrase "information at your fingertips."

"Web search is an element, a piece of information at your fingertips," he said. "But you shouldn't think of it over time as being isolated. If you're in a document and you want to do a search, everything in that document should be helpful in terms of guiding what I want to look up."

Instant details
New innovations and business models will be key to the future of search, he said. In addition to CashBack, Microsoft is also launching what it calls "intelligence tools," in which Microsoft mines content in the commercial search task. Someone searching for a flight, for example, can get additional information that predicts the flight's price volatility. Searching for a hotel might offer up a rate key that gives users a sense of whether they're getting a good deal, based on a hotel's historic prices.

From a user standpoint, CashBack sounds simple: When a user searches for a product -- say, a digital camera -- on Live Search, he or she sees a green button that says "compare prices." Clicking that button takes the user to a page that compares prices and shows cash-back offers from a number of retailers. When users click to buy that product from the retailer, they are entitled to the rebate.

The rebate isn't instant, however, and the consumer will have to sign up for an account to get the cash back via either PayPal or a check in the mail. Microsoft said it has 700 merchants signed up for the program, including eBay, Barnesandnoble.com, Sears.com and Zappos.com.

Commerce represents a third of all searches but is the dominant share of revenue, Mr. Gates said. However, satisfaction with commerce searches is much lower than other kinds of searches, such as when users look up entertainment information. The CashBack launch, he said, is a way of "simplifying the tasks and rewarding the consumers and advertisers for their engagement in a major way."

Time will tell
Microsoft said it would measure progress based on how many cash-back offers there will be on Live Search; whether advertisers were reporting good return on investment; and whether Microsoft was growing its commerce-based query volume, meaning is it shifting share?
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