Microsoft Dangles Rebates for Web Shoppers

But other analysts said the incentive could lead flocks of consumers to Live Search for the bargains.

"Retail history has shown that consumers react favorably to coupons, rebates and sales," according to a report from IDC analysts Rachel Happe and Susan Feldman. "Our bet is that the next time you look for a product online you'll check out Live.com to see if you can get it for less on Live."

The IDC analysts also said that Microsoft's move portended "a reduction in margins for search advertising."

The program is part of Microsoft's plan to "innovate and disrupt" in the search industry, according to a memo Sunday from Microsoft executive Kevin Johnson, and, indeed, if elements of the cash-back plan are adopted more widely in the industry, it would change the Internet advertising business in fundamental ways.

The company's cash-back program includes more than 10 million products from more than 700 merchants, Microsoft said. Microsoft also announced a service to make it easier for searchers to find the best travel deals on the Web.

While most search advertisers pay each time a user clicks on their ad, participating merchants will pay Microsoft a fee each time a customer completes a sale through Live Search Cashback. The fee will be a percentage of the retail price, and when the purchase is complete, Microsoft will return the fee to the consumer in the form of a cash rebate, the company said. The rebates to the customer, in effect, come from the advertisers.

"Our goal is to make Live Search the most rewarding commercial search destination on the Web," Gates said.