On Sunday the New York Times ran a lengthy article about Microsoft, the search underdog. Directed at a very mainstream audience there was nothing new in the piece for readers of Search Engine Land. However it did raise some interesting questions, directly and by implication. For example:
- How many years does Bing (and Online Services) have to break even?
- What defines or will define success for Bing?
- Will investors eventually oust Microsoft CEO Steve Ballmer because of money losing Online Services (and mobile), and what then?
- What Bing features, tools or capabilities might break through and erode Google usage?
- What if Bing peaks at 25 percent?
How Long Is “Long Term”?
Microsoft’s Qi Lu, the former head of search at Yahoo, is quoted in the piece: “To break through, we have to change the game. But this is a long-term journey.” Indeed, but how long is “long term”? Is it 10 years, 15, 20?
We can probably say with some certainty that Bing must break even or otherwise demonstrate “success” before it reaches its tenth birthday. But if it doesn’t, what then: shut it down? That doesn’t seem smart — or even likely.
Bing launched two years ago and has made respectable gains since that time. The search engine now commands 14.4 percent of search query volume in the US (per comScore). It has also made Google blink and adapt in several ways, especially to the integration of social signals in search results. But it has not eroded Google’s market share, which now stands at 65.5 percent. Its progress has come largely at the expense of others: AOL, Ask and even partner Yahoo.
Bing Doesn’t Match Google’s Early Growth
Depending on how you date Google, the search engine is either 12 or 13 years old. By 2002, three or four years in, Google was already the leading search engine among a field of maybe 10. And by the following year, 2003, Google had more than 50 percent of search queries in the US according to multiple data providers.
The search market is very different today than it was nearly a decade ago. But Bing’s growth and trajectory does not match Google’s early growth.
It’s widely anticipated that Bing will pass partner Yahoo’s search share at some point this year or early next year. Because Bing powers both organic and paid search for Yahoo that event, when it happens, will be mostly symbolic or ironic. Indeed, Bing’s “real” share of the search market is 31 percent (combined Bing, Yahoo). And if Bing’s growth comes at the expense of Yahoo it’s a mixed blessing because “Bing powered” search then remains flat or declines.
Would Breaking Even Equal “Success”?
Business Insider published a chart that shows Microsoft’s Online Services’ steady, historical losses. This past fiscal year Online Services, which houses Bing, lost roughly $2.5 billion. While other divisions of the company are doing well, Bing and Online Services are a sore spot for some investors (so is mobile).
Recently Microsoft shareholder and hedge fund manager David Einhorn called for the removal of Steve Ballmer, citing a variety of perceived missteps. Ballmer has been Microsoft CEO since 2000. It’s very likely that Ballmer will retire or resign within the next five years, especially if Microsoft’s stock price remains flat and his deal with Nokia fails to generate mobile gains for Windows Phones.
Yet search is a strategic asset that extends beyond the confines of the search box. So any CEO successor will probably continue to support Bing — but at what level of investment and enthusiasm? One might argue without an intense commitment of energy and resources Bing can’t hope to compete with Google.
Fast forward to 2013, one could imagine Bing’s individual share reaching 20 percent or even 25 percent — and stalling. That might mean a combined 35 percent or so of the US market, with a diminished Yahoo in tow. In that event Bing and Online Services would likely break even or see net gains through ad revenue.
Those would be important milestones but would they equal “success”?
Seeking the Wedge
At this point it’s very challenging to imagine what features or specific capabilities Bing might introduce that would dramatically improve its position. At the end of the NY Times piece Bing Travel is mentioned as a differentiator. However Google is just beginning to build its own travel services following the ITA acquisition. And Bing’s “strategic verticals” beyond travel (local, health, shopping, entertainment) have not yielded the benefits and usage growth that Microsoft was hoping for.
That said, Bing keeps doing a range interesting and innovative things (e.g., iPad app, Facebook Like integration) but none of them have been sufficient to stop or even slow Google. And Google+ could ultimately minimize or erase the “social search” advantage that Bing currently enjoys through its relationship with Facebook.
The Antitrust Angle & the Android Tax
Microsoft has been exhorting the US and EU to impose restrictions on Google because of alleged anti-competitive practices. However some of the anti-competitive practices alleged by third parties — such as Google sending traffic to its own properties — are equally used by Bing and Yahoo, thus making any potential restrictions around that practice equally problematic for Bing.
The outcome of now active antitrust investigations in Europe and this country are uncertain but unlikely to result in any upheaval of the current balance of power in the market. By the same token I don’t believe that Google will emerge totally unscathed from these investigations.
At the same time Microsoft has been trying, with some success, to get mobile hardware OEMs (HTC, Samsung) to pay licensing fees on Android handsets in deference to Microsoft patents. This is both an effort to generate revenue, which could reach into the billions over time, and eliminate the perceived gap between Android’s free software and the cost of Windows Phone’s license.
Android’s success and the iPhone are driving mobile search dominance for Google far beyond its share on the PC. And though not an apparent part of either the European or American antitrust investigations I see Google’s control over Android being potentially vulnerable in the long term.
Upping the Intensity
The current intensity of Bing’s effort in search is paying dividends but not at the level Microsoft needs if it is truly going to challenge Google over the “long term.” The company will need to continue to develop novel tools and features and to build usage in verticals “around” search. Why isn’t Bing News much better than Google News, for example?
Microsoft also needs to continue to make acquisitions, but more frequently at and lower cost than it has been (i.e., Skype at $8.5 billion). Another example: Microsoft should have bought deals aggregator The Dealmap but Google did instead.
Finally Bing also needs to work both “ends” of the user spectrum: early adopters and grandma. It must appeal to both if it is to win meaningful share over time. And appealing simultaneously to both audiences is quite difficult.
From my desk chair, I realize all this is much easier to say than do. It’s much easier to be a movie critic than make a movie. But if Bing doesn’t execute effectively across multiple fronts it will find itself, five years hence, owning perhaps 20 percent (or so) of the search market. That would be an accomplishment to be sure, but probably not fully qualify as “success.”
- Bing Users Are From Internet Explorer; Google Users From Firefox, Chrome & Safari
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- MSFT Earnings: $17B In Quarter, $70 Billion For Year
- The Google Decade: Search In Review, 2000 To 2009Googleopoly: The Definitive Guide To Antitrust Investigations Against Google
- 2001 In Review: Search Engine Marketing Gets Respect, As Does Search Generally
- Microsoft’s Bing Vs Google: Head To Head Search Results