Microsoft Bing since its launch has been considered the primary competitor to the behemoth known as Google search. It is a valiant effort in a very lucrative market space. However despite the immense opportunity,the term success has so far eluded Microsoft Bing. When you look at Search Engine market share the numbers continue to improve for Bing as it hit over 17% in April, however the revenues have so far failed to materialize. In Q2 of Fy13 for Microsoft’s Online Services Division lost money, $283 million. In Q1 Google generated over $11 billion in revenue. Granted Microsoft’s OSD is not just Bing, but all the other online services such as MSN and Outlook Mail. The flip side of course is we really don’t know how Bing as a stand alone business is doing, despite the market share increases.
The history of Bing some may say is one of failed opportunity. I am not so sure it is so much that as it is understanding online reality. Bill Gates and Steve Ballmer often have said they blew it on search and I have often said they would never have figured it out. Even if they had I am not so sure they would have been willing to take the financial risk to challenge Google at the time (remember we are going back to the 2002/2003 time frame) . In his short stint at Microsoft Ray Ozzie provided the best analysis of Google. He stated that they were using their immense revenues to fund software development projects that would compete against Microsoft. It was an indirect model, where ad revenues funded software engineering. As has been shown Google has a lot of revenue to fund these projects. It was difficult for Microsoft to grasp as they for so long have lived off of volume license revenues.
In the past decade it took a long time for Bing to come to the forefront. First Microsoft toyed around with Live search. It was not a well named product. Certainly not as fun as saying, “Google”. But globally it did ok and when you looked at the top 100 websites, Live did appear in the top twenty. It just did not have an ad word business model set up that could compete with what Google was doing. Microsoft was slow in understanding the competitive threat that Google posed, if not holistically, at least opportunistically. My view is Microsoft viewed it as another software market to conquer rather than the threat it was to existing businesses, namely Microsoft Office and Microsoft Windows. This is just another market space in which we are entitled to own.
As things progressed so did Microsoft’s desperation ending in an audacious bid to acquire its competitor Yahoo. Luckily for Microsoft and many grad schools across America this would end in the ego of Yahoo founder Jerry Yang as he made every attempt to kill the deal. In the end this may have worked out for the benefit of Microsoft as they entered onto a partnership rather than spending $40 billion on an acquisition that may have been doomed to fail. While Jerry Yang seemingly failed business 101 which is to increase shareholder value, not decrease it. He is now a case study for business graduate school history.
What has happened as these events have unfolded is that Google has systematically found other business opportunities to augment and promote its search business and increase revenues. Namely using the mobile phenomena to launch Android. This has led to great headway in the mobile phone business and the tablet. In 2013 it is projected that there will be 800 million Android devices sold. None of these devices will have Bing as the default search engine. In addition there will be 300 million iOS devices sold in 2013, again none will have Bung as the default search engine. I only wrote this to share with Steve as he seems to be unaware of this fact, but hey, he is a numbers guy.
So what does Bing do? For starters that Apple iOS number is key. One of Steve Jobs last talks to the Apple faithful at their corporate headquarters was about the evils of its key competitor Google. There is no question that there is no love lost between the two. Apple has tried to compete with Google head to head. The failed Apple Maps comes to mind. In my opinion a rare case of me saying, “Whose stupid idea at Apple was this?” Google owns that space and barring some catastrophe, I do not see them losing in that space. So with all that hate and failure what if Bing was the default search engine for Apple iOS? Instantly Bing would have access to 300 million users. Granted this would be a bizarre twist of fate, but Microsoft is not in a position of power in this space and Apple would like nothing better than to hurt Google. If Bing can meet Apple’s high quality standards they could have a very compelling play in this space and be considered attractive to Apple.
There is also a bigger question of “if Not Microsoft than who?”. Competition that is not challenged is a threat to the greater benefit of society. They can dictate terms, which is never a good thing. When we look at companies that are able to challenge Google there are few with the cash reserves to do it. One of the few would be Microsoft. And frankly they owe it to us all. Fundamentally competition is a good thing and maybe Bing is competing, it’s just that Google is pushing their game to a higher place. If that is true than Bing needs to set a higher bar, not just compete at parity. Faster more accurate search is nice, but we are reaching a point where for the end-user it is becoming increasingly difficult. to distinguish in milliseconds.
Another factor is much of Bing’s success is tied to other products like Windows 8, Surface and Windows Phone. To successfully get people to switch alla Coke versus Pepsi, is not so easy as there is a lot more tied to it than just switching a can. The effort Microsoft must put in will take years, which in technology is worlds away. So far it has been slow in coming and market share has increased at a snail’s pace. This may drain Microsoft’s cash reserves but the reward is high Once yo have been great there is always a thirst to be great again and I think that more than anything drives Microsoft. To get there search will be a key cog in the engine. Information rules the world and if Bing is not successful Google very well could rule that world. Bing is in a tough place but it is a fight worth fighting.
Good Night and Good Luck
Hans Henrik Hoffmann July 10, 2013
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