We’ve all been there. We’re at the store sizing up that shiny new product, and everybody from the floor manager to the checkout person to our Significant Other is telling us how much we can save if we just went ahead and bought the darn thing. And we know that spending money isn’t actually saving it, but we do it anyway because it feels so good. Well, last May, Microsoft saw opportunity in our soft spot, and told us that they would actually pay us to buy products we found using their search engine.

And so Live Search Cashback was born. With technology derived through Microsoft’s acquisition of Jellyfish.com, the Cashback program immediately took off, driving 140 percent increase in traffic to MSN/Windows Live Shopping Search from the previous month. As many wondered if the novelty would quickly wear off, the Live Shopping Search audience grew 615 percent over the year. Even more impressive: it was one of only two Top Ten Shopping Search Providers to grow their audience from April 2008 to April 2009.

Turning Search Activity into Cash

Of course, none of this matters unless the searches are turning into referral traffic for the retailers. And since we know that people search for products outside of the shopping-specific area of the search engines, I thought I’d take a look at how effective each search engine is in referring traffic. One obvious finding is that most Internet Retailers can claim their highest percentage of traffic from Google and Yahoo! Interestingly though, MSN/Windows Live Search can claim more efficiency than any other provider on a dollar per visitor basis, driving 8 percent of visits but 12 percent of dollars to major e-commerce sites during Q1.

The Big Picture

I have to admit to being a little surprised at the findings. If Microsoft is doing so well in connecting shoppers with retailers, then why haven’t they been able to close the gap in search share? If we take a step back for some perspective, we find that searches conducted on shopping-specific engines only comprise between one and two percent of total search activity. Nextag, the leading shopping search engine, can only claim 0.3 percent share of all U.S. searches. This in mind, it’s not surprising that shopping search alone does not significantly impact the overall landscape.

For me, the interesting piece in all this is Microsoft’s approach of breaking search into chunks, and (presumably) attacking each of them one-by-one. Of course, it’s premature to declare Live Shopping Search the likely winner, given how far it trails Google and Yahoo!, and that Shopping is such a small piece of the search pie, but it’s going to be interesting seeing how its strategy of taking on Google one vertical at a time plays out. In the meantime, I’m going to try and cut down on all the saving I’ve been doing.