Even Without aQuantive Charge, Microsoft’s Online Division Loses $1.92 B in Fiscal 2012
Is it time to cut bait with Bing?
Even though Bing itself only launched 3 years ago, Microsoft has been in search for a very, very long time:
Not only that, from Microsoft's own earnings report (http://www.microsoft.com/investor/EarningsAndFinancials/Earnings/PressReleaseAndWebcast/FY12/Q4/default.aspx):
Bing-powered U.S. search market share, including Yahoo! properties, was approximately 26% for the month of June 2012, down 30 basis points quarter over quarter and down 100 basis points year over year.
While Google's US search share is at a 5 year high. Let's not even talk get into Global search share where Bing is a small player and has struggled mightily to see any success outside of the US.
But marketshare isn't really the problem. The real problem is, even with 25% of the most lucrative market, Bing continues to lose $500 million dollars a quarter. How is this possible? Google, with 60% US market share, somehow is able to make $1-$2 billion per quarter from the US search market. Something doesn't add up, and I'll tell you what that is:
1. Microsoft doesn't have the same technical background as Google and has to live with much costlier datacenter and hardware. If you know anything about Google's infrastructure, you'll know that they save a ton of money because they build their own datacenters and their own datacenter infrastructure/hardware. Microsoft doesn't have that luxury so they end up paying way more than Google to serve a fraction of the traffic.
2. Microsoft hires too many people. If you've been to Bellevue/Redmond, WA you'll know that the Bing team takes up 3 of the newest constructed, and most expensive, skyscrapers in Bellevue. To top that off I wouldn't be surprised if the Bing engineering team is just as large if not larger than the Google Search engineering team. For a company that only serves a few % of the world's search, that is insane.
3. Advertisers don't spend money on Bing because Bing's ad serving platform sucks (compared to Google's). Advertisers are *always* eager to spend more money because *it works*. Yet somehow they don't want to maintain campaigns on Bing. Why is that? Even with lower CPCs, It's much more complicated, less flexibility, and worse conversion rates. All of this adds up to bad news for Bing on the revenue front.
Bottom line, maybe Microsoft can afford to waste $2 billion a year, and the time of thousands of employees, but that money and time could easily be spent elsewhere. It's time Microsoft dumps Bing and just admits that they aren't the company that is going to dethrone Google from search.