"Cashback" is Bing's product to entice users to search for their purchases through Bing, and to make Bing a more attractive engine for advertisers. By using a portion of an advertiser's ad spend to pay rebates to customers who use Bing, shoppers get a discount, advertisers get more buyers (without cutting into their bottom line), and Bing gets more users. Given the nature of the arrangement, more and more advertisers are joining Cashback, but there are some management concerns that every Cashback-enabled advertiser needs to know.
1. Deal Websites Make Up A Huge Portion of Traffic
The goal of Cashback is to get more users to make Bing as their regular shopping-related destination. But most of the increase in traffic that we've seen thus far has come from deal websites and forums, where users will post that if you search for a specific keyword, you'll get a percentage off at an advertiser. What usually follows is a deluge of traffic on a keyword or small set of keywords. This effect isn't inherently good or bad: in many cases, we've seen traffic (and costs) spike, and there is a commensurate increase in sales. In other cases, costs will rise and the keyword will become grossly inefficient. But this effect does a few things.
First, data for that keyword is now meaningless: its performance is no longer driven by the natural search behavior of users. Second, if the term suddenly has great performance, it's important to keep the keyword's bid in check when the deluge stops: a term for which you should pay $0.50 shouldn't be bid $2 in response to the influx of forum traffic, because you'll be burned when the traffic stops (and you shouldn't pay $2 even when the traffic is coming). Third, it forces more attention to be paid to MSN, the smallest engine, to make sure costs don't run away on a single term.
2. Direct Links From Forums Can Circumvent Tracking
In many cases, forums will post Cashback-related deals tied to a specific keyword that a user has discovered. In recent cases, however, users will post links that send the user directly to Cashback, bypassing the advertiser's (or agency's) tracking. The effect is twofold: first, depending on how their tracking is set up, the advertiser is likely no longer able to tell that the traffic is coming from Bing, since it skips tracking appended to URLs and tracking that is dependent on an agency's redirect server. Instead of seeing a spike in traffic and a spike in PPC sales, there's just silence.
Second, because the Cashback piggy bank is paid for by a portion of an advertisers ad spend, this direct traffic will deplete the funds in the piggy bank without contributing to it. Because of the lack of tracking information, it's important to keep an eye on sales (and the piggy bank) at all times. Without careful management, this can create a problem due to the third issue.
Bing has told us that direct links should no longer work for Cashback sometime around October 15th, and we'll provide an update once it's confirmed that the situation has changed. Until then, advertisers who are on Cashback should make it a priority to check whether or not their website is generating sales that aren't being properly tracked, and should make sure that their piggy bank is in good health.
3. Microsoft Holds Advertisers Ultimately Responsible For the Funds in the Piggy Bank
Provided that your Cashback percentage is set intelligently, the ad spend you incur should offset the sales that are generated through Cashback-enabled ads. But should an imbalance be created and go unresolved, Microsoft will invoice the advertiser in 30 days for the negative balance in the Piggy Bank.
This is understandable. Microsoft shouldn't be on the hook for huge discounts that retailers offer -- there's no reason for them to foot the bill for a company's sale. But rather than turn off an advertiser's ads when a large imbalance occurs, or even throw a number of red flags, MSN lets the ads continue to run and simply bills the advertiser later.
Coupled with the previous issue that we've noticed -- shoppers using direct links that circumvent advertiser tracking and the piggy bank -- this creates the possibility of making the advertiser responsible for huge discounts on traffic they didn't know existed. It is entirely possible that sales will spike many-fold and you're left unaware of the situation until Microsoft sends you the bill.
Update: In response to this post, Bing pointed out that they send a weekly email with the status of your piggy bank and they are happy to talk with advertisers about improving the performance of their campaigns. These reports show the number of clicks, the amount of transactions and the amount owed in rewards vs the remaining funds in the piggy bank.
We believe that it is critically important that advertisers read and understand these reports. The volume of submitted Cashback rebates can spike suddenly due to traffic from forums and deal websites. Bing will not stop your piggy bank from running into the negative; should it do so, advertisers can later be billed for the amount they owe in rewards.
We'll leave it for others to decide whether or not, carefully managed, this can be a profitable business model for them: theoretically, you could capitalize on the possibility of forum traffic by setting a high Cashback percentage, raking in the sales, and simply paying back Bing for the traffic. In this case, you would set your Cashback rebate to whatever your A/S target ought to be: if your cost-to-sales target is 20%, simply pay Bing 20% for the sales they've helped generate by setting a Cashback percentage of 20%. But we feel that this is more similar to affiliate marketing than PPC, and we'd prefer that Cashback traffic come from searchers who choose to use Bing, rather than deal-seekers who bypass Bing altogether.
4. Fraud Can Become A Problem
We've seen two main sources of user fraud when our clients have opted into Cashback.
First, users will make purchases with the intent of getting Cashback discounts, and then return the item later. The Cashback waiting period is 60 days, so advertisers who who have return policies longer than 60 days are especially at risk of having users make large purchases and then return the items later. For those who have shorter return periods, it is crucial that the retailer set up an arrangement (most likely a feed) with Bing to report to them orders that are returned so that those funds are not depleted from the piggy bank. Bing has made it clear to us that it is (understandably) the responsibility of the advertiser to deal with returns.
Second, users would use Cashback and buy gift cards in huge amounts -- greater than $1000, and sometimes as high as $5000 -- and receive Cashback on the gift card purchase. After receiving the card, the users would then return to the site and make another purchase using the card, receiving Cashback a second time. This creates an large imbalance between the funds entering and the funds leaving the piggy bank, since users are making expensive purchases (twice) without generating an appreciable amount in costs. Many retailers (smartly) exclude gift cards from Cashback eligibility.
5. Don't Run Your Brand Terms on Cashback
It's not smart to opt your Brand terms into Cashback. None of our clients have done so -- we urge them not to. The primary reason for this is due to the same piggy bank balancing that's required to properly run a Cashback campaign. Brand keywords are cheap to run. Even if your total costs on brand terms are quite high, the conversion rate on brand terms is typically much, much higher than it is for non-brand terms. By including brand keywords in Cashback, you're going to be paying high rebate amounts out of your piggy bank with a disproportionately low level of associated costs to refund the bank. You might find yourself quickly in the red -- something that Bing told us has happened to other retailers.
Whether or not Cashback is Bing's ticket to challenging Google in the world of search is debatable. We've written previously that with clever marketing, Bing could overtake Google in the world of shopping-related search. The issues we've outlined here aren't crippling to Cashback, and they can all be successfully managed. It's just important that advertisers do so.