According to a post today from Nielsen online, Microsoft’s cashback program is working to provide a source of sustainable and growing traffic for Msft. Because Jellyfish.com created the technology and platform used by Microsoft to launch cashback, this is great to see.
Here’s my two cents on why cashback is working, and what Msft needs to do to fully capture the opportunity.
Why is it working?
The paid search system became a cash cow for Google because it allowed Google to capture and sell off the thoughts and intentions of its users on a performance basis. When I search on “Florida vacation”, for example, I’m effectively telling a bunch of advertisers what I’m interested in at that moment. Google (copying Overture’s model) created a robust market for that intent. This system creates amazing profits for Google, but there is a major limitation; the end consumer doesn’t get to participate in this giant market for her attention.
In contrast, the cashback program brings the end consumer directly into the advertising value chain for the most valuable kind of search–queries with commercial intent. Use cashback when you want to buy something and Microsoft shares advertising revenue back with you. The end result of this is that more folks use Live search for commercial queries, leaving Google with non-commercial search traffic (e.g., when I need to find the address of my local public library I go to Google, when I’ve got my credit card in hand, I search at Live cashback). The data published by Nielsen backs this up, showing that Live Search is the most efficient engine at generating sales for its advertisers. This is small now, but think about what happens if Microsoft can continue to siphon off commercial queries, and the big amount of ad dollars chasing those queries.
Aside from the obvious things (like continue to create brand awareness and better functionality for users), one element to watch is whether Microsoft can create competition and liquidity in its cashback advertising system. If advertisers begin competing for sales on Live Search by increasing their advertising spend (what they are willing to pay for a sale on a product), the end result is that consumers will get lower net prices than anywhere else on the web. This advertising competition is what made Google’s revenue ramp in the pay per click system: advertiser competition meant that many keywords on Google went from pennies per click to dollars per click over time. If this happens in the cashback system, both Microsoft and the end user benefit, creating a virtuous cycle of more users, more searches, more advertisers, lower prices, more users . . . . you get the picture.
I hope Microsoft can pull it off. The death of traditional interruptive advertising is creating amazing opportunties, and cashback is just one example of an ad system that directly benefits the end consumer.
Brian and I are working on this theme again at Alice.com, this time in the Consumer Packaged Goods space where manufacturers spend billions of dollars a year on traditional advertising. Alice is launching next month, and we’re excited to start talking about ways those CPG ad dollars can start working more directly for the consumer as well.