Of course, it hasn’t worked out quite like that. When Microsoft launched its answer to Google’s search dominance in 2009, MSFT hit $24, its highest point so far that year. Google was trading at $425, while Yahoo (NASDAQ:YHOO) was at $16.40. Facebook had 220 million users or so.
Notably, Yahoo gave up its own search engine technology (too expensive to run) in an agreement with Microsoft as part of Bing. Yahoo still has search capability, but as of June 2009, it’s been running a rebranded version of Bing.
How has Microsoft’s search assault scored so far?
According to stats compiled by comScore just prior to Bing’s launch, U.S. market share for the primary search engines looked like this (counting all searches initiated from each company’s Web properties):
- Google: 65%
- Yahoo: 20.1%
- Microsoft: 8%
By 2011, Google was sitting at higher market share than it had enjoyed prior to Bing. Microsoft seemed to have plateaued, while Yahoo continued to slip. Meanwhile, Facebook had grown over the two years to 800 million users:
- Google: 66.6%
- Yahoo: 16%
- Microsoft: 12%
Since its launch, Bing has been bleeding money. According to CNN Money, in the first two years of operation, Bing loses amounted to $5.5 billion. Business Insider wrote in 2011 that for every $1 in search engine revenue Bing earns, Microsoft spends $3 to get it. Those are not good numbers.
Two years after introducing Bing, Microsoft was trading at $24, Yahoo at $15 and Google at $517. Google investors clearly weren’t worried about the threat posed by Microsoft’s search efforts, while Bing’s biggest effect was seemingly to be a drag on Microsoft’s bottom line and share price.
Hope at Last?
But Bing now might have some promise, particularly when you consider that Microsoft’s search technology is powering both Bing and Yahoo. In that case, you get more impressive numbers, including the stats from April of this year showing that Bing-powered U.S. searches hit 30% (up 11% year over year), while Google’s 64.4% was down 5%. Bing itself was at 14.3%, an impressive 16% year-over-year gain.
Which brings us to Microsoft’s May 15 rollout of its social search functionality. Remember, Google tried this a few months ago when it integrated search engine functionality with its Google+ social networking service, but was largely panned. To many Google users, the effort seemed aggressively aimed at trying to drive Google+ adoption, and if they didn’t like it, they had to opt out.
Bing seems to have learned from Google’s missteps. The social element is opt-in, so while it’s easy enough to access, it isn’t in everyone’s face. Social results are pulled out in a sidebar that doesn’t interfere with standard search results, and the user interface has been cleaned up to reduce clutter. Perhaps most important, Bing includes Facebook and Twitter and other social feeds — including Google+ — on its social media sidebar, offering much more depth than Google’s Google+ only approach.
The importance of Bing’s social media search element comes into play for mobile and searching for trending news. Google may still have the superior search engine, but Bing lets users ask questions of their friends and even suggests experts or friends active on social media who are known to have an interest in the subject.
This is ideal for mobile because someone using Bing to search for a good restaurant from their smartphone sees not only the usual professional reviews and corporate websites, but has access to opinions from others who have tried local restaurants.
Trending news also has an advantage. Where it may take a news flash hours to show up on Google, searching on Bing will quickly display all the Tweets and posts that have gone out about it.
According to an eMarketer study, U.S. mobile ad spending is set to increase 80% this year, to $2.61 billion. By 2016, that amount is forecast to top $10 billion. In 2011, Google took the lion’s share of mobile search advertising revenue, while Bing was a blip at best. Mobithinking analyzed IDC numbers for the year and came up with 70% of mobile ad spending going to Google, with both Microsoft and Yahoo having under 5% each.
Bing is costing Microsoft several billion dollars a year, but if it can leverage Bing’s social search implementation to grab a bigger share of mobile ad revenue, the money is ample enough to make a bottom-line difference.
Hardly in the Clear
Of course, other players will be angling for their cut. Apple (NASDAQ:AAPLE) is still trying to leverage its strength as a leading mobile device maker through iAd, and Facebook will be looking for revenue to justify its monster IPO.
Will social search be enough to turn Bing from a money loser to break-even, let alone profitable? An analyst with McAdams Wright Ragen was quoted as saying Bing would need to hit at least 25% market share to be profitable. That’s 25% of all search traffic, not just mobile, and 25% through Bing itself — not combined with Yahoo.
To hit those kind of numbers, Microsoft needs to wrestle a big chunk from Google or Yahoo (the few other search sites hanging on like Ask.com account for only a few percentage points of market share). With its social search strategy, it appears Microsoft has decided to target Google while stealing a social page from Facebook. And with Yahoo continuing to flail, Microsoft may eventually win its battle for profitability through attrition.
As of this writing, Brad Moon doesn’t hold a position in any securities mentioned here.