Black Friday's Biggest Loser

Tim Beyers reviewed Black Friday's biggest winners yesterday, but there are two sides to every story.

As holiday shoppers surfed the Web for monster deals, not every company ended up sitting pretty in cyberspace. Sears Holdings' (Nasdaq: SHLD) Sears.com suffered a two-hour outage. Amazon.com (Nasdaq: AMZN) was as dependable as always, but you certainly have to knock off some style points since its signature Kindle e-book reader is out of stock until early next year.

However, if you're looking for one company that truly dropped the ball at the official start of the telltale holiday shopping season, it's hard to top Microsoft (Nasdaq: MSFT).

You won't hear it from Microsoft, though. In fact, Microsoft managed to throw its own hat into the winner's circle. The company issued a press release to sing the praises of its Xbox 360. According to Mr. Softy, its Xbox outsold high-end rival Sony's (NYSE: SNE) PS3 by a 3-to-1 margin over the weekend. Yes, Microsoft's pace is running 25% ahead of last year in units, though it's only fair to point out that the consoles are substantially cheaper today than they were a year ago.

So where did Microsoft play the Grinch card? Cashback, baby.

The irony of Live.com
Microsoft's Live.com search engine launched Live Search Cashback in May, a spunky move to gain market share in a niche where Microsoft is a distant bronze medalist. However, offering registered online shoppers the ability to score cash rebates for looking for deals through Live.com didn't exactly wow the critics. CNET dismissed it as "bribery." Blogging Stocks called it "a desperate last move."

"I think many of the cynics will come to eat their words," I wrote at the time the move was announced. I thought the plan was brilliant. By scoring price breaks for serial online shoppers, Microsoft was attracting the juiciest target audience for Internet advertisers.

Of course, even the best plans can falter with poor execution, and that is exactly what happened to Microsoft on Friday.

Online buzz was building for the mother of all Cashback deals. Microsoft would offer whopping 40% rebates on direct online purchases through Hewlett-Packard (NYSE: HPQ). It typically offers just a 5% rebate to HP.com shoppers through Live.com.

The promotion was a disaster. Most computer shoppers couldn't get to the HP site through Live.com. The few who did trickle in were then shocked to see just a 3% rebate balance applied, instead of the promised 40% payout.

Whether the blame should go to Microsoft or HP is immaterial. Both companies are tech juggernauts. They know better. Unfortunately for Microsoft, this is the kind of episode that could sink Cashback before its first birthday.

Live.com and let die
The Live Search blog announced an instant Cashback rebate program through eBay (Nasdaq: EBAY) last night. Instead of waiting 60 days for Microsoft to "Cashback" the promised rebate, it was announced that "some" Cashback users will have the money deposited directly into their PayPal accounts.

Some?

"Instant cashback will be eligible for some, but not all users," the blog explains. "Eligible shoppers will be notified online after completing a purchase on eBay."

Am I reading that right? Microsoft wants marketplace shoppers to budget for a generous 30% rebate on "Buy It Now" orders bankrolled through PayPal, but it tells them that they'll have to make the purchase before finding out whether they get the rebate now or in two months?   

Can I just start smothering my springtime words of encouragement now?

So the Cashback program followed an operational blunder with a non-egalitarian one. And scorched Friday shoppers are still steaming over Microsoft's first mistake -- they're filling up the Live Search blog comments on the eBay move with venom over the HP snafu.

"Your complete and utter failure in Black Friday was rediculous [sic]," writes one disappointed shopper. "I cannot believe it was allowed to continue all day. You guys couldn't figure out what was wrong? You looked like a mechanic who couldn't get his own car started."

"I wasted one full day in my life because of this offer," wrote another. "Finally I was able to go through the site after NINE hours of refreshing and made the purchase. I have not received the cashback confirmation email till now."

Way to blow the holidays, Microsoft. If you don't act quickly, Cashback is going to become the Toysrus.com fiasco of 1999. Do you really think Cashback is going to get a second shot during the 2009 holiday shopping season if you don't make things right immediately? Oh, and not right for just "some" people. You have shoppers scratching their heads and countless more who were denied access to HP's Cashback sale in the first place.

In a nutshell, you'll never catch up to Google (Nasdaq: GOOG) in search if you trip over yourself running backwards.

The world according to Microsoft:

• Tim looked at Black Friday's biggest winners earlier this week.
• The software giant has been cutting prices lately.
• The Best Company I've Ever Seen