UPDATE 1-Microsoft to offer money for search engine use

(Adds Gates quote, more details on service, byline)

By Bruce Rutledge

REDMOND, Wash., May 21 (Reuters) - Microsoft Corp (MSFT.O: Quote, Profile, Research) said on Wednesday it launched a new "cashback" search service that pays users a rebate for buying products they found through the company's Windows Live search engine.

Live Search cashback is the latest attempt by the world's largest software maker to draw users to its online search engine, which is a distant third behind market leader Google Inc (GOOG.O: Quote, Profile, Research) and Yahoo Inc (YHOO.O: Quote, Profile, Research).

"This is giving you a reason why you should use a particular search engine," Microsoft Chairman Bill Gates said at the company's Advance 08 advertising conference.

Microsoft sees online search as a critical component to establishing an online advertising powerhouse. By placing text-based ads next to results from its ubiquitous search engine, Google has become the leader in Web advertising.

A product search on Windows Live will call up links to online retailers offering that item. The user who buys that item from the retailer's site will get 2 percent to 30 percent of the purchase price back as a rebate.

Consumers would have to sign up for a free Windows Live cashback account to participate in the program. Rebates would be issued after a 60-day waiting period to make sure there are no returned products.