Bing bleeds billions: when will it end?

Bing bleeds billions: when will it end?

Analyst weighs in on the $US1 billion being haemorrhaged every quarter by Microsoft’s search wunderkind

Despite setting lofty promises and high business expectations, Microsoft’s search engine, Bing, has been costing the company nearly a $US1 billion a quarter since it launched in June 2009.

In the subsequent two years, the Redmond giant has lost $5.5 billion on Bing and there are no signs of this letting up in forthcoming quarters.

To explain why Bing is continually losing about $1 billion a quarter, U.K.-based Ovum senior analyst, Mike Davis, sees it coming down to the search engine not getting the advertising it needs to make it work.

“Microsoft is in a war with Google to win back the Internet advertising business, a war that Google is currently winning,” he said.

Davis emphasises that Microsoft is really committed to defeating Google, and that’s a big problem for them, as “when someone has 60 to 70 per cent market share or more, to try and topple that is really difficult".

When looking at whether the $US5.5 billion investment by Microsoft into Bing has paid off, Davis admits that the search engine’s market share has gone up a few percentage points, and may be even higher than reported considering Bing is the search engine behind Yahoo.

“However, in terms of direct revenue, it has definitely not paid off if you are losing a billion dollars a quarter,” Davis said.

Davis feels that Microsoft has not done enough with Bing despite the heavy investment, because they’re “not the next big thing".

“It’s nice to have trees and flowers behind your search screen rather than just a white page, but there’s nothing to differentiate it from Google and convince people to choose it over the other,” he said.

While in the past sites such as Yahoo were slow to load because they tried to be a portal as much as a search engine, Google came along and simplified it down to a white screen and loaded up the results faster than anyone else, which was what people wanted and made the search engine popular.

“Microsoft has not managed to make that leap and find itself the differentiator that makes it the next big thing, and Google is not going to go away either,” David said.

“Google is constantly investing and reinvesting, as well as diversifying into other areas such as the Android platform, which itself is about putting Google on as many mobile phones around the world as possible.”

When looking towards the future of Bing, Davis expects current Microsoft executives such as Steve Ballmer to be in it for the long haul.

“However, if I were a shareholder, I would be saying unless they can’t do anything dramatically different within a fairly short period, I would stop investing in it and let it go,” he said.

“Personally, if Microsoft can’t get Bing up another 10 per cent in market share in the next year, why bother?”

His suggestion is to invest that money into Microsoft’s own research labs and come up with something spectacular that everyone must have.

“Why bother competing if you can’t do it? Unless, of course, the goal is to defeat Google, which itself is a war on multiple fronts.”

Bing is already running on good technology, so if Microsoft wants to get Bing out of the red and into profitability, one of the things Davis recommends it do is just let it run as it is.

“They should stop investing in new developments for it and stop cross-subsidising, and maybe get some solid advertising for it,” he said.

However, while there are some great technologies within Bing and it is a solid search engine, David admits that Google is a verb and it has the mind share, which is something Bing does not.

“Like a lot of good technologies, Bing gets lost because they are out competed,” he said.

“Bing is a good search engine and I use it on a daily basis, but I also use Google as well.”

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