Microsoft's LiveSearch cash payback scheme

Hey guys,

I thought this scheme was one big joke - Microsoft bribing customers to use their search. But, I believe it is the merchants that are paying the cash back.

That is a subtle but really important change in how paid search is being done. What I think MS is doing (or is about to do) is not charge on a per click basis. Instead, they are letting the providers determine how much to pay back to the consumer. I would assume that Microsoft will skim a bit of that and rank paid (or I guess potential-paid) search results based on the amount the merchant chooses to pay back.

I wonder if we are starting to see the peak of paying per click?

Anecdotal evidence obviously, but a friend of mine does carpet cleaning in Seattle. I setup his AdWords for him and I was really surprised that I had to bid somewhere around $10/click for the good keywords related to carpet cleaning. Even at that high of a bid, I was only getting onto the 2nd page of search results. $10/click is such a huge risk for just a click.

Flipping this model around really starts to add some value for the providers. It removes a lot of risk from the equation. I'm sure the affiliate marketing folks are really excited about this as well.
Lastly, this conveniently side steps the nearly impossible-to-solve problem of click fraud.

Anyways, I'm going to dig a bit deeper, I'll get back with more information as I find it.

Thanks!

Eric.