May 27, 2008
Microsoft Offers Shopper Rebates
By Tom Ryan
In an attempt to undercut Google’s dominance of the search engine world, Microsoft last week announced it was offering cash incentives for people who shop through the company’s search engines, Live.com and MSN.com. If elements of the cash-back plan are adopted more widely, search engine followers predicted the internet’s cost-per-click advertising model could change in fundamental ways.
Live Search cash-back allows searchers to sift through 10 million product offers from 700-plus partner merchants, comparing prices and also weighing how much cash credit they are eligible to receive on purchases. By typing “camcorders” into Live Search and then selecting a model, for instance, a user can see merchants offering discounts from 2.5 to 7 percent.
Among the initial cashback partners are Overstock.com, Zappos.com, Barnes & Noble, eBay, 1-800-Flowers, PetSmart, Sears, Canon and Adidas. Customers are driven to Live Search cashback by Microsoft search engines through a paid ad, or can get there directly at search.live.com.
For advertisers, the big benefit is that they know exactly what their cost per acquisition will be as opposed to a pay per click model where they don’t know who’s going to be buying.
“You might get 1,000 clicks at $1 per click and not get a single sale,” Sean Belnick, CEO of BizChair.com, an office chair retailer told DMnews.com. BizChair.com has been participating in a similar program for the past year through Jellyfish, which Microsoft acquired in October 2007.
Mr. Belnick said, “Essentially, what we’ve been able to do is figure out what our cost per customer acquisition is and we’re able to offer an amount near or equal to that as a cash-back to our customer.”
Participating merchants pay Microsoft a fee only when a customer completes a sale through Live Search Cashback. Said Microsoft chairman Bill Gates, chairman, at the launch, “Our goal is to make Live Search the most rewarding commercial search destination on the Web.”
Many observers questioned whether the rebate plan would revive dismal traffic rates to Microsoft’s search engines. According a Nielsen Online report for April, MSN/Windows Live Search had a 9.7 percent share versus 62 percent for Google and 17.5 percent for Yahoo.
But other analysts said the incentive could lead scores of consumers to Live Search for bargains, and could lead to an overall reduction in margins for search advertising, according to The Washington Times.
“Retail history has shown that consumers react favorably to coupons, rebates and sales,” according to a report from IDC analysts Rachel Happe and Susan Feldman. “Our bet is that the next time you look for a product online, you’ll check out Live.com to see if you can get it for less on Live.”
Discussion Questions: What do you think of Microsoft’s Live Search cash-back program? Do you think cash rebate programs around search engines have the potential to replace the internet’s pay-per-click advertising model?
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If a company starts paying me for something that everyone else offers for free, I become suspicious. Why do they need to pay me? What is the hidden catch? What’s wrong with the search product? Somebody must be getting a kickback.
Consumers, especially the millenials, tend to be a suspicious lot. Are these prices really a lot lower than what can be obtained through Amazon or somewhere else?
Biggest problem with Microsoft’s search engine rebate plan: it’s so easy for Google and other search engines to copy. Microsoft’s core product, operating system software, is a shambles.
Vista is the best salesman Apple ever hired. General Motors dominated the car business in the 1950s and couldn’t handle the competition when it arrived in the 1960s. GM sold low quality, defective products, famous for planned obsolescence. They assumed their majority market share was invulnerable. How’s that different from Microsoft? If Bill Gates had to pay minimum wage to everyone who used his software, for the time wasted in recovering from defects, loading “updates,” booting new versions and new drivers, and cleaning up viruses allowed to thrive because of poor software design, would Bill be a poor man?
Bill, invest the company’s money on reliable software engineering and careful testing for your core product: operating systems. Forget spending on video game technology, search engine enterprises, and all other non-core activities. Get back to basics and rescue the #1 business you’ve got.
The key here is that shoppers want to get good value, but they don’t want to work too hard for it. They also already love Google and for good reason! They listen to what people want and give it to them proactively (MS could take some hints from this approach). If this play offered simple, streamlined and quick turnaround benefits that truly motivate a change in consumer behavior, I’d be more in support of it. As it stands, it smells a bit desperate–and a day late and a dollar short.
Yes, consumers love a good deal and will frequently go out of their way to get one, but will they flock to Microsoft Live Search? Initially, the curious will be drawn to Live Search. If they find discounts from merchants where they usually shop, they may stay. But if they find that even with the discounts the prices are lower at other retailers, they will not return. The key to Microsoft making Live Search a success will be the breadth of retailers it is able to bring into the program and the ability to quickly and accurately serve them to consumers.
It’s something different in the online retail world. I think this new system will help bring more traffic to MSN but I really have to see the customer experience to make a complete call on it. MSN’s usability now is why traffic is so low. A recent study I was involved with found that the biggest complaint from online shoppers was the site’s ease of use factor. That input also would decide whether or not a customer would complete the sale and ever come back. For MSN, they need some good chains to get on board with this program. It is the only way it will be successful for them and generate the ad revenue they hope to achieve.
We need to take this discussion up a notch. To answer whether this program will work for Microsoft or advertisers, we first need to address whether it will work for consumers. If consumers (who have never been too thrilled with Microsoft’s search engines thus far) don’t gravitate to this model, I think we can quickly agree that it will fail.
The concept of offering cash back is compelling and a good idea. But today’s consumer needs immediacy and substantial ROI. This program, as it’s been rolled out, offers neither.
The fine print of the program has an 11-week delay from sale to rebate, which is enough to cool any decent momentum. Secondly, look more closely at those discounts being offered and see who is offering what. Yes, they offer some substantial discounts (some as much as 20 percent) and yes, they have some very major retailers, but those do not intersect much.
The big discounts are coming (generally) from the smaller retailers with no name recognition and the larger players offer such small rebates that it’s hardly worth it. Sears, for example, is offering 2 percent while Home Depot dug deep and is offering 3 percent. (We tried comparing the key discounts and looking at the fine print delays: http://storefrontbacktalk.com/story/052208cashback)
In short, I think Microsoft needs to look at a much faster rebate model. If it could be instant cash-back, this could be a runaway success. Maybe. But that approach shakes up their business model, with Microsoft having to lay out more cash. Arguably, it could be done (and Microsoft has the clout to make this happen) with advertisers paying money in case anyone buys. If no one does, it’s returned. That way, it could fund instant rebates.
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If a company starts paying me for something that everyone else offers for free, I become suspicious. Why do they need to pay me? What is the hidden catch? What’s wrong with the search product? Somebody must be getting a kickback.
Consumers, especially the millenials, tend to be a suspicious lot. Are these prices really a lot lower than what can be obtained through Amazon or somewhere else?
Biggest problem with Microsoft’s search engine rebate plan: it’s so easy for Google and other search engines to copy. Microsoft’s core product, operating system software, is a shambles.
Vista is the best salesman Apple ever hired. General Motors dominated the car business in the 1950s and couldn’t handle the competition when it arrived in the 1960s. GM sold low quality, defective products, famous for planned obsolescence. They assumed their majority market share was invulnerable. How’s that different from Microsoft? If Bill Gates had to pay minimum wage to everyone who used his software, for the time wasted in recovering from defects, loading “updates,” booting new versions and new drivers, and cleaning up viruses allowed to thrive because of poor software design, would Bill be a poor man?
Bill, invest the company’s money on reliable software engineering and careful testing for your core product: operating systems. Forget spending on video game technology, search engine enterprises, and all other non-core activities. Get back to basics and rescue the #1 business you’ve got.
The key here is that shoppers want to get good value, but they don’t want to work too hard for it. They also already love Google and for good reason! They listen to what people want and give it to them proactively (MS could take some hints from this approach). If this play offered simple, streamlined and quick turnaround benefits that truly motivate a change in consumer behavior, I’d be more in support of it. As it stands, it smells a bit desperate–and a day late and a dollar short.
Yes, consumers love a good deal and will frequently go out of their way to get one, but will they flock to Microsoft Live Search? Initially, the curious will be drawn to Live Search. If they find discounts from merchants where they usually shop, they may stay. But if they find that even with the discounts the prices are lower at other retailers, they will not return. The key to Microsoft making Live Search a success will be the breadth of retailers it is able to bring into the program and the ability to quickly and accurately serve them to consumers.
It’s something different in the online retail world. I think this new system will help bring more traffic to MSN but I really have to see the customer experience to make a complete call on it. MSN’s usability now is why traffic is so low. A recent study I was involved with found that the biggest complaint from online shoppers was the site’s ease of use factor. That input also would decide whether or not a customer would complete the sale and ever come back. For MSN, they need some good chains to get on board with this program. It is the only way it will be successful for them and generate the ad revenue they hope to achieve.
We need to take this discussion up a notch. To answer whether this program will work for Microsoft or advertisers, we first need to address whether it will work for consumers. If consumers (who have never been too thrilled with Microsoft’s search engines thus far) don’t gravitate to this model, I think we can quickly agree that it will fail.
The concept of offering cash back is compelling and a good idea. But today’s consumer needs immediacy and substantial ROI. This program, as it’s been rolled out, offers neither.
The fine print of the program has an 11-week delay from sale to rebate, which is enough to cool any decent momentum. Secondly, look more closely at those discounts being offered and see who is offering what. Yes, they offer some substantial discounts (some as much as 20 percent) and yes, they have some very major retailers, but those do not intersect much.
The big discounts are coming (generally) from the smaller retailers with no name recognition and the larger players offer such small rebates that it’s hardly worth it. Sears, for example, is offering 2 percent while Home Depot dug deep and is offering 3 percent. (We tried comparing the key discounts and looking at the fine print delays: http://storefrontbacktalk.com/story/052208cashback)
In short, I think Microsoft needs to look at a much faster rebate model. If it could be instant cash-back, this could be a runaway success. Maybe. But that approach shakes up their business model, with Microsoft having to lay out more cash. Arguably, it could be done (and Microsoft has the clout to make this happen) with advertisers paying money in case anyone buys. If no one does, it’s returned. That way, it could fund instant rebates.