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Microsoft's Plan to Stop Losing Money on Bing

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At the Microsoft financial analyst meeting held earlier this month, Microsoft’s Qi Lu presented an argument for how Bing would become profitable – over the course of the next several years.

Bringing Bing to the Black

Microsoft’s President of Online Services Qi Lu told CNN Money and financial analysts that Bing will be able to gain the market share necessary to make Bing into a profitable service. The path to doing so relies, no on an attempt to “out-Google Google,” but in expanding how a search engine functions, allowing users to connect to the specific data they want right from the search page.

Bing is already starting on this path by giving product results, flight data, sports information, and more. However, Google is already doing all those things itself – so Bing hasn’t met their objective yet.

That objective, according to Lu, is to “fundamentally change” how users perceive search engines. Once Bing has done so, users will migrate away from search sites that fail to meet those standards (e.g., Google) and to search sites that pull the more advanced search features off (e.g., Bing).

Lu also emphasizes that Bing has more advantages that just its partnerships and product integrations: Bing can safely experiment and adapt in a way that Google simply can’t any longer.

Bing Bleeds as It Grows

microsoft-online-services-profit-loss

Since Bing’s launch, Microsoft has lost billions on the product. The exact loss figure is difficult to calculate, but the online services division has been a $9 billion drain on the company revenue since 2007.

In that time, Bing has been gaining insights into user searching habits through both its current 14.7 percent share of the market (up from 8.4 percent at launch) and their access to data from Yahoo searches (which are powered by Bing). The combination of Yahoo and Bing ads and the integration of the SERP results for both has also been a strong draw for advertisers. However, the online services division has yet to post a single profitable year, and in 2010 the division posted a $2.5 billion loss.

Still, there are plenty of reasons why Bing will stick around. That may not be great news for investors, though.

Even if Lu’s proposed process succeeds, it will take years – and during that time, Bing will be a multi-billion-dollar bleed. According to analysts at the conference, including Sid Parakh, an analyst at McAdams Wright Ragen, it’s likely to take three to four years for Bing to hit the 25 to 30 percent market share necessary to be a profitable service. Even then, many are skeptical that Bing can make the necessary market share advances.

While Bing has nearly doubled in size since its launch in 2009, the majority of its share increase has been taken from Yahoo, AOL, and Ask – not from Google.


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