Advertisers prefer the affiliate approach since it makes it possible for them to work on a ‘cost per action’ (CPA) basis. They do not need to pay for millions of page views (with a possibility that a user might not even notice their advert) or for thousands of clicks that seldom lead to a sale). They need to pay only on getting a result.

Microsoft Live Search Cashback is, in a way, an affiliate scheme. The concept is that if someone purchases a product via your web site, you would get a percentage of that deal. This enables a vendor to reach out to customers on millions of sites, not just the ones who come to their home site. Microsoft is, in actuality, passing on the affiliate fee (or any other promotional discount) instead of choosing to pocket it, with the Cashback service.

Of course, the deal does not make much money for the firm. The best Microsoft can hope for in the beginning is to build healthy relationships with suppliers, which will result in more traditional advertising. But since the firm basically does not make much, if any, money on the web, it does not have much to lose, in that sense.