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Microsoft's Cashback: Search, Buy and Get Paid

It looks like Google isn't the only one to discover there's money in search; consumers will start getting some greenbacks, too. Today Microsoft launched a program called Live Search cashback that pays cash rebates to customers who find and buy products using the software giant's search service.

Microsoft said the ad-funded cashback program covers over 10 million products from over 700 merchants online. The announcement comes in the wake of Microsoft's failed effort to purchase Yahoo (NASDAQ:YHOO) and more recent negotiations to partner with Yahoo or possibly buy its search business outright. Some of the bigger name online sellers participating in the program include eBay, Barnes & Noble.com, Overstock.com, Sears and Zappos.com.

The cashback announcement was made by outgoing Microsoft chairman Bill Gates at advance08, Microsoft’s annual advertising customer event. "Our goal is to make Live Search the most rewarding commercial search destination on the Web," Gates said in a statement on the launch. "Live Search cashback will help advertisers drive more online sales while giving consumers a new way to stretch their dollars."

Just how much cash consumers get per purchase will vary though likely very small amounts. Microsoft said the program lets the retailer decide what level of rebate to offer "giving them full control over where they stand on price versus the competition."

A Microsoft spokesman said the rebate is the commission paid to Microsoft by the merchant when customers purchase an item from a merchant via Live Search cashback. Microsoft pays the customers directly via a choice of a check, bank account deposit, or Paypal and consumers can claim payment once their account has reached a balance of at least $5.

Microsoft said it aims to make Live Search the top search engine for the growing category of search queries that help consumers conduct research and purchase goods or services. A parallel goal, of course, is to help merchants drive online sales of their products.

Separately, Microsoft also announced a new site called Live Search Farecast, designed to help consumers find the best travel deals online. Microsoft acquired startup Farecast last month.

Earlier this week, Google detailed some of its plans to help consumers find products. While it doesn't involve refunds, Google said it's launched a new suite of "image-related experiments" designed to place relevant display ads next to image results. One example, a recipe search might include food-related ads in the result. "We're looking for a true user experience alignment," said R.J. Pittman, product manager for Google's search properties.

Providing the right match of consumer search service and buying opportunity represents an enormous revenue opportunity. According to eMarketer, U.S. online retail is projected to grow to $335 billion by 2012, and today 68 percent of all those retail transactions begin at a search engine. This translates to 3.7 billion commerce-related queries a month.

The most popular option for advertisers to reach these search customers is the cost-per-click (CPC) model, where merchants pay a fee each time a searcher clicks on their ad, whether or not the potential customer makes a purchase.

There's also the cost-per-action (CPA) model, where advertisers pay only when a customer makes a purchase, or completes a specific transaction. Microsoft said CPA, which is currently deployed on a relatively limited basis, gives advertisers a more precise return on their advertising investment.

Interestingly, one of the partners at Microsoft's announcement was one of the world's largest ad-agency holding companies, WPP, which earlier this week announced a partnership with Yahoo.

"Our business is to connect consumers with brands in the most effective and efficient ways. Microsoft's Live Search cashback creates a real incentive for consumers to connect with our clients," said Sir Martin Sorrell, chief executive of WPP, in a statement. "We believe this is a major development in the evolution of search marketing and look forward to participating and measuring the results."

The Live Search cashback offers will come from a variety of vendors including Barnes & Noble.com, Circuit City, Cookware.com, Crutchfield, eBay, Foot Locker and many more.