Microsoft offers cash to searchers who buy

SEATTLE -- Unable to lure away Google's goog loyal patrons, and stymied in its efforts to catch the search giant by acquiring Yahoo, Microsoft msft on Wednesday revealed a new way to skin a cat.

The software giant launched a service that pays rebates to consumers who use a special version of its Live Search site to find products for sale — and make the online purchase.

"Our goal is to make Live Search the most rewarding commercial search destination on the Web," says Microsoft Chairman Bill Gates.

Users who sign up for accounts can earn rebates by purchasing products directly from the Live Search cash-back site, or by looking for a gold coin icon accompanying search results on the main Live Search website.

By purchasing a participating merchant's products, a user can earn rebates worth 2% to 30% of the price, deposited into his or her Live Search account.

After a 60-day waiting period, refunds totaling $5 or more are accessible via deposit to an online banking or PayPal account, or delivered in a check by mail.

Microsoft will use the fees it normally earns for running online ads to pay the rebates, hopefully reaping a boost in Web traffic.

The business model is not new. Websites such as FatWallet that appeal to bargain hunters conduct similar promotions.

Microsoft's wrinkle: It will charge advertisers only for actual online sales generated, rather than based on the number of times someone views their ads.

Gates said the company's objective is to "help advertisers drive more online sales while giving consumers a new way to stretch their dollars."

Big names among the few hundred online merchants that signed up for the launch include eBay, Barnes & Noble.com, Overstock.com, Sears, Circuit City, Home Depot and Zappos.com.

However, the cash-back site is limited to providing search results only for items sold by the participating merchants.

Meanwhile, Microsoft's general-purpose MSN and Live Search websites continue to run a distant third in market share to No. 2 Yahoo and search giant Google.

Google's shares closed Wednesday at $549.99, down $28.61, while Microsoft shares slipped 51 cents to $28.25, perhaps reflecting the perception that Microsoft has stirred up some fresh competition for Google, says Sid Parakh, tech stocks analyst at McAdams Wright Ragen.

But even Microsoft can't afford to give away advertising income forever.

"Eventually they need to deliver a satisfactory consumer experience — and not just while shopping," says Parakh.

Gates, who is scheduled to retire next month to pursue philanthropy, hosted 700 Web merchants at Microsoft's campus to roll out the new service.

He said cash-back search exemplifies the company's view of how search is evolving.

"I think years from now, you may look back and say, 'Wow, search started to get a fair bit more competitive,' " Gates told the advertisers.