FOLLOWING THE rejection of its $47.5 billion bid for internet rival Yahoo, Microsoft will attempt to beef up its own search business by giving cash back to people who shop online with its Live.com search engine.

Users who buy products such as Cuisinart coffee makers and Adidas shoes through Windows Live accounts will get rebates of 10 per cent or more. The move may attract more customers and online advertisers to Microsoft's sites, helping it compete with Google.

Microsoft, whose online business was its only unprofitable division last quarter, had sought to unite its third-ranked engine with No 2 Yahoo but walked away after it demanded a higher price.

"They've got to do something major, either through acquisitions or taking more significant steps, like the cashback offer, to keep things moving," said American Technology Research analyst Donovan Gow.

In a major change of internet business models, Microsoft will charge advertisers per purchase, rather than per click. This model may be cheaper for businesses and help it take advertising dollars from rivals Yahoo and Google.

"That could be a significant change and very compelling to advertisers," said Mr Gow.

Microsoft is working to consolidate brands, attract advertisers and expand partnerships, online business president Kevin Johnson told employees this week. The unit lost $228 million last quarter.

Microsoft said it was consolidating its products for advertisers, including AdCenter, Atlas and ScreenTonic, under a single brand, Microsoft Advertising.

Google handled about 61.6 per cent of US internet search queries last month, compared with 59.8 per cent in March, researcher ComScore said. Yahoo fielded 20.4 per cent of searches,while Microsoft's share slipped 0.3 per cent to 9.1 per cent. - ( Bloomberg)