Ronnie05's Blog

Is it there yet?(Afraid not)-Bing continues to be drain money for Microsoft even while results are not as desired

Posted in Internet and Search by Manas Ganguly on August 4, 2011

2 yrs back, Microsoft launched an aggressive attack on Google’s search with its Bing search engine. It also put in place, an agreement with Yahoo powering the Yahoo search at the backend. 2yrs on, Microsoft is still at it, loosing loads of monies to the tune of $700 million a quarter. The costs for Microsoft, meanwhile, keep mounting. In the latest fiscal year, ended in June, the online services division — mainly the search business — lost $2.56 billion. The unit’s revenue rose 15 percent, to $2.53 billion, but the losses still exceeded the revenue.

While there are some results in terms of 14% of search market share in US, it isn’t as encouraging as Microsoft would have wanted it to be. Add the searches that Microsoft handles for Yahoo, and Microsoft’s search technology fields 30 percent of the total. It was always going to be difficult- Google was more than a search, it was a generic- a search behavior! (Read Launch notes of Bing, Part I, Part II, Part III, Part IV)

Microsoft’s assault on Google in Internet search and search advertising may be the steepest competitive challenge in business today. It is certainly among the most costly. Trying to go head-to-head with Google costs Microsoft upward of $5 billion a year, industry executives and analysts estimate.

As the overwhelming search leader, Google has advantages that tend to reinforce one another. It has the most people typing in searches — billions a day — and that generates more data for Google’s algorithms to mine to improve its search results. All those users attract advertisers. And there is the huge behavioral advantage: “Google” is synonymous with search, the habitual choice. Once it starts, this cycle of prosperity snowballs — more users, more data, and more ad dollars. Economists call the phenomenon “network effects”; business executives just call it momentum.

Bing’s gains have not come at the expense of Google. Its two-thirds share of the market in the United States — Google claims an even higher share in many foreign markets — has remained unchanged in the last two years. The share losers have been Yahoo and smaller search players.

Even while Microsoft is a big, rich company, investors are growing restless at the cost of its search campaign. The inability to make effective inroads into Google’s Search stronghold is seen to be a failure in Ballmer’s strategy. While the gas tank of investments at Microsoft is an seemingly an endless pit, the lack of results (as desired) on the Bing search engine and the drain on investments is beginning to show up in terms of Investors, Analysts questioning the path, intent and approach. Challenging Google in real terms on search is a long drawn battle and it all depends on how long is Bing ready to bleed as against how quickly does Bing get measurable real results for investors to approve the spends.

Revisiting the Bing Strategy (Contd)

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