Microsoft Corp. is discussing possible Web search partnerships with No. 2 provider Yahoo Inc. But on Wednesday the frustrated software giant also unveiled a strategy to buy one searcher at a time.
The company is offering rebates on some products that shoppers find and buy through its search engine, Live Search. Participating merchants include EBay Inc., Best Buy Co. and Barnesandnoble.com.
It's doing that by charging advertisers only for those people who buy the products offered in search-engine ads, rather than charging for the number of people who see those ads or click through to an advertiser's Web page.
Merchants who participate in the Live Search "cashback" program will offer a percentage of their listed price as a rebate, which the buyer can collect after a 60-day waiting period. Microsoft won't initially take a commission.
The market for search-based ads "is a $20-billion marketplace today, and we believe that there is a great opportunity as a search provider to innovate in the economic model," said Staya Nadella, who runs Microsoft's search business.
Speaking to hundreds of ad-industry executives gathered for a conference at Redmond, Wash.-based Microsoft, Chairman Bill Gates said 700 advertisers were participating.
"The idea of simplifying the task and rewarding both the consumers and advertisers for their engagement in a deeper way . . . there's incredible possibilities here," Gates said.
The rebates are one element of Microsoft's plan to compete with Google Inc., which in April won a record 62% share of U.S. search queries, up from 58% in November. Yahoo slipped to 20% from 23%, Internet tracking firm ComScore Inc. said this week, and Microsoft had 9%, down from 10% six months ago. A change in ComScore's method makes year-over-year comparisons impossible.
Microsoft is determined to become a power in Internet advertising, but its $47.5-billion offer to buy Yahoo was rebuffed this month. Under fire from its shareholders for not closing the deal, Yahoo is now in talks with Microsoft over a smaller deal on search advertising.
Other sites have tried rebates before, including Amazon.com Inc.'s A9 search engine. Credit cards use similar reward systems to compete for consumers' business.
Microsoft is the largest search engine to try such rebates, and charging only for purchases could help attract advertisers, search-advertising consultant Ellen Siminoff said.
Perhaps more important, it will attract some people who don't use Live Search.
"They're saying: 'Our search is pretty good, but we don't have the brand, and we have to get people to try it. And in order to get them to try it we have to think a bit out of box,' " said Siminoff, chairman of Efficient Frontier Inc.
Barnesandnoble.com Chief Executive Marie Toulantis called the Microsoft program "very innovative, a very interesting development in the search world."
"However customers can get to us, we're really willing to try any of these models," Toulantis said.
Google said it welcomed "competition that stimulates innovation and provides users with more choice." Yahoo declined to comment.