Cashback Program Grows MS Product Search From Puny to Small
By Jessica Mintz

Microsoft says ads on its Cashback search program have grown from 10 million to 13 million since the company began paying people to use the site. The software maker snagged 12.9 percent of product searches in the second quarter, while its overall share of U.S. search queries ran around 9 percent. However, both figures are still dwarfed by those of rivals Yahoo and Google.

Microsoft said Thursday that paying people to use its Internet search engine is attracting new consumers, although there is little evidence that those people are making a habit of it.  Under Microsoft's Cashback program, launched in May, the company rewards shoppers with rebates from a few cents to US$20 or more on items they find using its search engine, Live Search.

When Microsoft began Cashback, the company said it would measure its success by the number of items advertised in the system, growth in its share of searches that lead to transactions online, and how happy merchants are with returns on their investment in Cashback ads.

Product Searches vs. Overall Searches

In an interview, Frederick Savoye, a senior director of product management for Live Search, said the number of items advertised on Cashback has grown to 13 million, from 10 million at launch. Companies like eBay (Nasdaq: EBAY) Latest News about eBay and Hewlett-Packard (NYSE: HPQ) Latest News about Hewlett-Packard say the ads they place on the Cashback site perform better than other paid search advertisements online.

A study conducted at Microsoft's request by research group comScore found that the software maker snagged 12.9 percent of product searches in the second quarter of the year. That's better than Microsoft's overall share of U.S. search queries, which was around 9 percent in that quarter, according to comScore, and that could mean Microsoft has found a viable way to draw new searchers.

However, overall search leader Google (Nasdaq: GOOG) Latest News about Google and No. 2 Yahoo (Nasdaq: YHOO) Latest News about Yahoo both still outpace Microsoft in commercial queries, nabbing 58.2 percent and 24.3 percent, respectively.

How Much to Spend?

Savoye said that 4.5 million people have been using Cashback every month since it started, and that the program has been effective in boosting Microsoft's overall search share.

Data from comScore, however, show Microsoft's search share rose less than a point to 9.2 percent in June, the month after Cashback launched. In July, Live Search's share dropped to 8.9 percent.  "We still have work to do, but we're very, very focused here," Savoye said.

Microsoft declined to say how much money it plans to spend on the rebate program.