It's been about a month now since Microsoft launched its Cash Back promotion around its new search engine, Live Search. When I first saw the promotion, I found it to be an interesting concept. Setup a standard affiliate program (although MS probably gets better rates than others) and pass back the affiliate commissions back to the consumer. However, in looking at the rates on the Cash Back offers vs. the affiliate rates posted on their retailers sites, clearly Microsoft was giving more than standard affiliate rates.
In actuality they're giving consumers a portion of their ad revenue. They are applying a new model to search by collecting payment from advertisers after SALES instead of CLICKS. This is clearly a strategy to differentiate from Google and lure advertisers to the Microsoft engine. But my question is, what is the sustainable advantage for this model? If this turned out to have traction in the market, Google could simply create a similar program to eliminate any incentives advertisers have in going to Microsoft. And all this would lead to eroding profits in the online ad world as all the search engines one up each other with cash incentives.
So how has the promotion affected market share in the search industry? As you can see from the comScore May 2008 numbers below, Microsoft's share actually went down. Granted, the Cash Back promo started on May 21st, but that is still 1/3 of the month and should have at least helped to slow the declining share of Microsoft. It will be interesting to see how things are going when the June numbers come out.
comScore Core Search Report* | |||
Core Search Entity |
Share of Searches (%) | ||
Apr-08 |
May-08 |
Point Change May-08 vs. Apr-08 | |
Total Core Search |
100.0% |
100.0% |
N/A |
Google Sites |
61.6% |
61.8% |
0.2 |
Yahoo! Sites |
20.4% |
20.6% |
0.2 |
Microsoft Sites |
9.1% |
8.5% |
-0.6 |
AOL LLC |
4.6% |
4.5% |
-0.1 |
Ask Network |
4.3% |
4.5% |
0.2 |
When it comes down to search engines, its a matter of search engine quality and brand that is going to lure consumers to the portal and Google has both. Heck, they have created the very verb to search for things, Googling stuff! Consumers will still be driven to Google and the ads go where the consumers go.
We've seen these cash incentive programs before and know they have a short term impact on consumers. Can you remember iWon.com from back during the tech bubble? They used to give away $10,000 every weekday to a lucky searcher with a $1,000,000 grand prize given out once a year. Obviously, they aren't around as a search engine anymore which shows you need more than a short-term cash promo to build a long-term customer base.
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