What exactly is Microsoft's search strategy?

It continues to dance around Yahoo without proposing anything that would satisfy Yahoo shareholders. It also plans to announce today, according to several reports, a service that pays customers who buy products they find through Microsoft's search—a direct challenge to Google.

So does it need Yahoo in any way or not?

Microsoft's chief executive, Steve Ballmer, has been criticized for being seemingly wishy-washy about his pursuit of Yahoo. Shares of Microsoft have slipped, and advertisers have been lukewarm about the company's internet strategy.

Nearly adding injury to insults, Ballmer was the target of a young man throwing eggs at him. Speaking before a class at Corvinus University in Budapest, a young man stood up, yelled some incoherent rant about Microsoft stealing from the Hungarian people, and threw eggs at Ballmer. Unlike Bill Gates, who got pied several times, Ballmer took no hits, successfully ducking behind the podium. (See a video here.)

An acquisition for Yahoo is off the table. Ballmer underscored today that the company was not interested in making another acquisition push for Yahoo, despite the wishes of Carl Icahn and several prominent hedge fund followers.

"We are not bidding to buy Yahoo," Ballmer said at the opening of a new research and development center in Israel, Reuters reported.

"Yet, we are trying to have discussions about deals with Yahoo that might create value, but not a whole acquisition of the company," he said.

Microsoft has reportedly offered to buy the search business of Yahoo, but what Icahn and John Paulson and Dan Loeb and other investors are looking for is a return of the $31-per-share offer for the entire company.

And perhaps Microsoft will decide that it does not need any part of Yahoo or an alliance with it.

The cash-back service plan is a way to reclaim some of the most profitable searches from Google.

Michael Arrington on TechCrunch says, "Microsoft's hope is to lure advertisers with a promise to pay only if a purchase is made, unlike Google's pay-per-click model that carries more risk because a searcher may not complete a transaction. And by offering a percentage of the fee collected from advertisers, Microsoft hopes to convince searchers to take the last mile to a transaction through the Live.com search engine, generating more advertising revenue for Microsoft and simultaneously hurting archrival Google."

Henry Blodget on Silicon Alley Insider offers three reasons why the plan won't hurt Google.

First, he says, Microsoft will probably not offer enough cash to draw users.

"One million $1 clicks generate $1 million of revenue for Google, but even if Microsoft gives 50 percent cash back on each click, that's only 50 cents per user per transaction," Blodget notes. If you're buying a $5 item, 50 cents is a nice refund, but if you're buying, say, a $25 item, it's chump change."

Blodget also questions whether there will be enough retailers with enough breadth to make the program appealing. And if all else fails, Google can come back with its own cash-back plan "and its economics will always be far better than Microsoft."