Almost a year after launching Bing and revitalizing their Cashback program, Microsoft is bringing an end to their Bing Cashback Shopping and Bing Cashback Search rewards programs, effective July 30. Cited reasons include less than desired profitability and lack of adoption. Microsoft hoped the program would change user behavior of Bing usage by getting users to use Cashback habitually to incent purchases. The official announcement is available on Bing’s Search Blog.

This news is disappointing in terms of the opportunities Cashback presents for advertisers and the needed differentiation a program like Cashback brings for an engine to be competitive in the marketplace. On the heels of Yahoo’s end of the Paid Inclusion program at the start of 2010, this is now two key variants in the marketplace gone from challengers to Google.

Cashback was introduced as a differentiator for Bing when it launched and took significant work on the part of their advertisers and agency partners to implement. Advertisers who invested in IT developments to support site integration for Cashback’s premium program will surely feel a sense of wasted long-term opportunity. Ultimately, this program felt partial baked upon launch, and with significant changes to the Bing focus and leadership, it is safe to say it never released its full potential and thus went the way of many “differentiating” products brought to the search market.

Products of this nature seem caught in a fatal cycle – brought to market with great effort to get buy in and heralded as a staple in differentiating factors. They are then supported by significant investments in time and resources by advertisers and agency partners, only to be pulled from the marketplace. What’s most disappointing is when these decisions are made without conversations along the way with key parties – leading advertisers, agencies, partner sites, etc. – to discuss what is or isn’t happening with the program and address how to combat a challenge when a product, like Cashback, falls short of meeting objectives.

So what are the implications? This decision by Microsoft raises important questions:

What will happen to cost-per-click and click-through-rates?
Close attention will be paid to CPCs and CTRs when Cashback comes to an end. When the program was announced, paired also with the aggressive nature of the program for eBay, CPCs on Bing increased. The impact on CPCs and CTRs should be monitored and, after a year’s time, also assessed to determine if they will adjust or whether the impact of the Yahoo/Bing Search Alliance will show little or no savings.

Will audience size decrease?
Cashback was designed as a tool to get users interacting with the engine. What happens with those adopters will be critical for Bing and the marketplace. The removal of the program will reveal in the mid-term the true impact Bing has had on consumers at providing value in what they’ve deemed as core: decision making.

What is the impact on campaign stability?
One could argue the elimination of Cashback offers greater stability in managing a search program as we face the imminent Yahoo/Bing Search Alliance with two engines housing drastically diverse environments. Previously, we were informed Cashback would remain on Bing but would not be offered on Yahoo post-Alliance. While Microsoft contends that Yahoo is not applying pressure to end the Cashback program, they do note that it would be difficult from a technical perspective to maintain the program in a unified marketplace with a common technology structure. That said, Yahoo and Bing have an essential task ahead of them to develop reliable programs and tools that mutually benefit their growth in share and deliver value for their advertisers.

There is discussion around the development of a similar program to incent users after the Search Alliance is complete. This is a tough proposition. While Microsoft has significant depth of resources and the potential to be successful in this endeavor, many search players, such as iWon, have tried unsuccessfully to devise incentive-based programs and increase share. The challenge Microsoft now faces with Bing, however, is bigger than an incentive program to attract users and advertisers. It is creating differentiation and product advancement that is critical for the industry and necessary to continue increasing market share.  Our disappointment with the lack of ongoing communication around Cashback heightens our interest in greater scrutiny when evaluating future opportunities and creates an expectation for greater communication in regards to the overall health of a program.

While the decision to end the program may have come down to the financial support model created by Microsoft, one cannot help but wonder if the decision was made premature to trying to allow this program to stand on its own. When Microsoft began this program they were adamant this was a “rabbit hole” they didn’t feel Google could or would chase them down; yet, here we find ourselves with clear indication as to why that is. While Bing is showing nice gains (up 3.4% market share since launch), this move leaves their core product more and more Google like; and that lack of differentiation is not a positive for Bing or the marketplace at large.