Will Microsoft Save Christmas?

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Deals that look too good to be true usually are. But when I heard Microsoft (Nasdaq: MSFT  ) would pay me $200 just to buy something I was already going to buy -- well, that was just too much money for me not to give it a try.

For a while now, Microsoft's Live Search program has offered cashback deals on purchases from a variety of vendors, including Gap (NYSE: GPS  ) and Hewlett-Packard (NYSE: HPQ  ) . But since I don't usually shop those stores, I never bothered to sign up.

But when I heard the program was offering ridiculous amounts of cash back for purchases through eBay (Nasdaq: EBAY  ) , I decided to overcome my skepticism and take the plunge on Live Search. Now that I'm several hundred dollars richer, Microsoft can count me among the converted -- at least until the deal goes away.

In search of free money
When it comes to great deals, I'm an inveterate freebie-seeker. Ever since I found my first quarter in a pay-phone slot 30 years ago, I've looked for opportunities to score free cash.

When American Express (NYSE: AXP  ) offered me 50,000 points to sign up for a gold card earlier this year -- enough to buy two plane tickets, the invitation claimed -- I jumped at the chance. When JPMorgan Chase (NYSE: JPM  ) offered me a 0% balance transfer a few years ago, I borrowed as much as they'd let me -- and parked the money in a high-yield savings account, pocketing the interest for six months until I had to pay it back.

But Microsoft's deal through eBay is a lot better than finding loose change at the bottom of the swimming pool. We're talking about huge amounts of money.

Buying for a discount
If you're willing to jump through a few extra hoops, the Microsoft/eBay cashback deal can save you hundreds on purchases. Although there are some restrictions, you can get rebates of up to $200 on anything you buy on eBay. And you can do so up to 12 times, meaning you can save up to a cool $2,400.

What's more, the hoops aren't that difficult. Here are the steps:

  • Sign up for a Live Search cashback account.
  • Use the Live Search engine to find an eBay-sponsored link that promotes the cashback offer. This is the hard part, but you can use a common search term like "Wii" or "gold," even if you want to buy something else.
  • Click on that sponsored link, and then find the eBay item you want. Note: You have to use the "Buy It Now" option.
  • Pay with PayPal.

That's it. When I used it last week, I got 25% off up to $200 instantly deposited in my PayPal account. In other cases, you may have to wait a while before your rebate shows up in your Microsoft cashback account.

A boon for eBay
As I pondered this, I realized that as good a deal as this is for me, it's also really good for eBay. In order to get that $200 in cash back, I had to buy from an eBay seller who was willing to pay selling fees. Also, because I have to use PayPal, the seller has to pay fees there as well.

So on my $800 purchase, my seller would have to pay:

  • $0.35 to eBay to list the item.
  • $51 in final value seller fees to eBay.
  • $23.50 in PayPal fees.

So in the end, my seller would make $725 on the sale, I'd pay $600, and eBay would generate $75 in fees -- all thanks to Microsoft.

A viable business model?
I understand that Microsoft has to compete with Google (Nasdaq: GOOG  ) for search-engine traffic. But man, this seems like a huge price to pay for traffic -- traffic from many people who are probably just as fickle as I am.

Already on eBay, hundreds of sellers are using the Microsoft offer to justify paying premium prices for items. People are selling $500 gift cards for much more than $500, banking on the Live Search cashback to make up the difference. Gold bullion coins are selling at huge premiums to spot value. It has to be unsustainable -- even if it's good news for Christmas shoppers looking to save wherever they can.

While it lasts, though, I'll take advantage of the gold rush. It's not the first time a company spent more money than they should to earn my loyalty temporarily -- and I'm sure it won't be the last.

For more on what's going on in today's economy, read about:

JPMorgan Chase is a Motley Fool Income Investor recommendation. Microsoft, Gap, and American Express are Motley Fool Inside Value recommendations. Google is a Motley Fool Rule Breakers selection. Gap and eBay are Motley Fool Stock Advisor recommendations. The Fool owns shares of American Express. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Dan Caplinger found $6 on the side of a highway in L.A. a few years back -- he was certain he was being filmed. He doesn't own shares of the stocks mentioned in this article. The Fool's disclosure policy won't Grinch on you this holiday season.

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  • Report this Comment On November 30, 2008, at 6:42 PM, okkarma wrote:

    This IS incredible and it's also hilarious to see people online calling it a scam. I have already bought a new $627 camcorder for $439 (it sells at Best Buy for $899!) and a $179 camera for $123 today alone AND gotten an instant paypal rebate of $188 that I've already withdrawn and transferred into my bank account. eBay must be dancing in the street when other brick and mortar online merchants are offering two to five percent and you can get 30% off on eBay! Please Microsoft lift the $2500 limit (btw I never saw anything about a 12 transaction limit, it was just $2500 per year). MS, you rock, keep it up!

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