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Yahoo rewarding users for Web searches

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Yahoo needs people to use its search engine so badly that it's willing to reward them for doing so.

The company is now running search for Swagbucks, a popular coupon and rewards service that gives people virtual currency for searching the Web, watching videos and playing games on its site. Prior to Monday, when the "powered by Yahoo" message began showing up on search results pages for Swagbucks, the company was using the white label service InfoSpace to manage search.

"Our new search engine will be powered by Yahoo! and will be available to all of our U.S. members beginning on Monday, August 11th," Swagbucks wrote Monday in a blog post. The company called it the "biggest change we've made to our search since its launch."

And in an email to members, Swagbucks presents the purple Yahoo logo and says "the journey toward free gift cards begins with performance of a single search."

As Yahoo Chief Executive Officer Marissa Mayer bulks up spending on acquisitions and pushes the Web portal deeper into areas like news, the company's already struggling search business continues losing market share. Yahoo's share of U.S. search fell to 10.1 percent in March from 11.8 percent a year earlier, while Google's increased to 67.5 percent from 67.1 percent and Microsoft's rose to 18.6 percent from 16.9 percent, according to comScore.

Partnering with Swagbucks is the latest sign that, despite its challenges, Yahoo has no intentions of abandoning search. It can't afford to. The business accounts for about 40 percent of Yahoo's revenue, and it's one of the four main products—along with communications, digital magazines and video—that comprise the company's current strategy. Any momentum Yahoo has built in search of late is on mobile, where sales more than doubled in the second quarter.

"There's a clear opportunity here, and we're continuing to look at ways to deliver more innovative, more intuitive search experiences on mobile phones," Mayer said on the company's earnings call in July.

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A call for comment to Yahoo's media relations team wasn't immediately returned. Mark Lindsey, a spokesman for Swagbucks in El Segundo, California, wouldn't comment beyond the blog post.

Powering search for Swagbucks gives Yahoo access to the start-up's 11 million members, who use the site's services for entertainment and to earn currency that can be redeemed for things like Amazon.com and Wal-Mart gift cards and Skype credits. Members have earned more than $69 million in rewards, according to the Swagbucks website.

Microsoft jumped into the rewards market back in 2010 with its Bing Rewards. Similar to Swagbucks, Bing lets users of the search engine rack up points that can be used for Amazon, Starbucks and Groupon cards, among other items.

Competing in the rewards business is just another way Yahoo and Microsoft have become frenemies. After Microsoft's failed bid to buy Yahoo, the two companies struck a search agreement in 2009, calling for Yahoo to use Microsoft's algorithmic technology for its search advertising. Revenue from that agreement accounts for more than one-third of Yahoo's overall sales.

By CNBC's Ari Levy