According to the internal memo obtained by Geekwire, Mehdi and his tenure are described as follows:

Yusuf has been involved with leading Microsoft Online Services businesses longer than anyone else on the OSD LT, and has been a pivotal leader at critical milestones of our division’s journey from the early days of MSN, to the original MSN and Live Search products, to the launch of Bing and the consummation of key strategic deals for OSD and MS, including Yahoo!, Facebook, Twitter and Nokia.  Most importantly, he has built a world class marketing, business development, strategy, and product management organization that has made incredible contributions to the success of OSD and Microsoft.  

Mehdi’s direct reports will now report directly to Qi Lu, (the former Yahoo executive) who is president of the Online Services Division. While Bing has continued to gain market share, OSD has continued to loose money and faces increasing pressure to “stop the bleeding.” The following chart shows the quarter over quarter loses since 2007.

Source: Microsoft/CNN Money

Microsoft said, the “European roll out is scheduled to begin with the UK, Ireland and France in the second quarter of 2012.”

Yahoo and Microsoft have already transitioned the search ad technology in the U.S. and Canada, as well as some other regions. But the transition scheduled slowed as revenue figures did not meet estimates and advertiser expectations were poor.

Yahoo and Microsoft has completed the organic transition less than a month ago. The only migration left is the organic Korea region and much of the paid search and publisher transition.

To stay up to date on the UK transition, watch searchalliance.com/uk for updates.

Related Stories:

• Yahoo Completes Global Organic Transition To Bing (Except Korea)
• Yahoo Asia & More European Properties Transitioned To Bing Powered Results
• Yahoo UK & Others Switching To Bing Organic Results August 3rd
• Yahoo Begins Testing Bing Powered Results This Month
• Yahoo Search Advertisers Can Now Begin To Migrate Accounts To Microsoft adCenter
• Yahoo-Microsoft Organic Transition Happening, Site Explorer, Search Monkey Holding For Now
• What’s New With Bing & Yahoo Search Alliance
• Official: Yahoo’s Results Now Come From Bing

The Ballmer 70/15/15 Challenge

“I would issue you all a kind of challenge to try any search you want on Bing and Google,” Ballmer said, explaining that 70% of the time, there won’t be any difference in the results, that 15% of the time, Bing will be better and 15% of the time, Google will be better.

Now, if Ballmer had said that maybe 20% of the time Bing would be better, that would have given it perhaps some advantage over Google. But saying your product is exactly the same as someone else’s isn’t a real incentive, much less a ringing endorsement.

Ballmer did allude to there being things beyond the search results, such user interface differences. But he didn’t stress these as huge, major reasons to change.

Bing: “Getting Stronger”

Asked how Bing is doing versus three years ago, when Battelle last spoke with Ballmer at Web 2.0 about the service, Ballmer said “it’s getting stronger every day” and noted that Bing’s share had risen from 7% to 15%, which was “a nice rise.”

“We went from the number three player to the number two player,” Ballmer continued, explaining that when Bing’s share is combined with that of Yahoo, which Bing provides with results, the two have a 25% to 30% share of the search market in the US.

Ballmer added that beyond market share, the Microsoft-Yahoo alliance is important for “providing enough data to improve the product.”

Ballmer On Yahoo

Was Ballmer happy the plans for Microsoft to buy Yahoo in 2008 for $44-45 billion didn’t go through? “Times change, times change,” he laughed, adding later, “You get lucky sometimes.”

Ballmer went on to say that Yahoo was a great partner, with a huge audience and lots of good things about it, which is why the alliance with Yahoo is important.

Indeed, so important that Microsoft is providing revenue guarantees for an additional year than was originally agreed, to make up for poor monetization that’s plagued the partnership, news that came out during Yahoo’s earning call a few hours before Ballmer’s talk.

No Microsoft+ Coming

In other questions, Ballmer declined to say if Microsoft would launch a social network to rival the likes of Facebook, instead pointing to things like Xbox Live and Windows Live as examples of how Microsoft has “picked its play” in the social space.

Siri Nice; Android Phones Are For Computer Scientists

As for mobile, Ballmer said “there’s certainly some nice things Apple has done with Siri” in terms of its voice recognition and lookup but suggested that Windows Phone and Bing would build on Microsoft’s long-standing previous work in the space and be better.

On Google and mobile, Ballmer got perhaps his biggest laugh of the interview:

“You don’t need to be a computer scientist to use a Windows Phone, but I think you do to use an Android phone.”

“Did we just bump something,” yells Capt. Larry Page to his Googler crew. “No, full steam ahead!” yells back first mate Eric Schmidt. “There were some senators in the water, but I think I’ve handled them.” As for the wreckage of the SS Bing and SS Yahoo that Google also plowed through , that’s hardly troubling him. Google’s watertight.

The Depressing World Of DC

OK, enough with the ship metaphors. Later, fairly soon, I’ll do my own recap of how Google’s big day in Washington DC went, in terms of anti-trust challenges. Google does face some challenges there, primarily because the complexities of search engines are being lost on lawmakers who seem more interested in political talking points and asking for handouts than actually dealing with serious industry-wide issues that should be addressed.

Suffice to say, after witnessing the circus this week in Washington DC, seeing first hand how lawmakers have no idea what they’re supposed to be potentially regulating in an area I know extremely well, I’ve come to realize how deeply they probably screw up all those other areas that I don’t know well but still had some faith that they would have researched carefully. Sigh.

But what about Bing? What about Yahoo? What’s all this about deck chairs?

Bing’s Lost Billions

Earlier this week, CNN Money had an article about how Bing has lost over $5 billion since it was launched in 2009. Our write-up of that piece is here: Bing Still Seeking Magic Formula To Challenge Google & Turn A Profit.

That story follows off an earlier New York Times article about Bing still trying to win from the end of July, as we also covered and analyzed back then: Bing’s Battle With Google: How Long Is “Long Term”?.

CNN Money covers what I’ve kept saying and saying over the past years. Bing is growing, slightly, at the expense of its FTC-approved-so-that-we-have-a-competitive-search-marketplace partner Yahoo. But Bing hasn’t really touched Google’s marketshare. The growth it has had against Yahoo it’s been very expensive. Sponsoring all those shows on Being the “TV To Bing About” sponsor of CW doesn’t come cheap.

That’s OK. Bing’s got a plan. From the CNN Money article, we learn that unlike Google, it can experiment more easily, Bing says. It’ll get away from just showing blue links. It’ll help people do “more” than just search. It’ll apparently become an even better decision engine than it already is.

Are you friggin’ kidding me? Seriously. This is the game plan? That you’re going to keep saying all the same things that you said back when Bing launched? Which, by the way, isn’t even that different than what you were saying when you were Live Search? Or when you were MSN Search?

What’s The Plan, Bing?

All I kept thinking when I read this was Phil from Modern Family trying to figure out how to keep that car rolling away:

Click here to view the embedded video.

What’s the plan, Bing? Because “at least I’m going to do something” isn’t enough.

In reality, the plan seems to be hang in there long enough until Yahoo slips away. It’s probably not a bad plan. Another plan might be to stop spending all that money on advertising. That never worked long term in the past. Marketshare might not drop, but the red ink might.

And, reading from Ad Age today, it sounds like the whole Decision Engine idea might be going away period. Sounds good. How about something fun, play off that old joke everyone thought Bing stood for, “Because it’s not Google.” Give us some ads like “Bing: We’re Not Google.”

Yahoo: Just Sad

If Bing sounds incredibly lame, Yahoo just sounds pathetic. Last week, it rolled out yet another change to its search interface. We even wrote it up: Yahoo Rolls Out New SERP, Will People Notice?

No, no one really seemed to notice. So today, Yahoo’s back at it. It really, really is ready to fight in search. Why, it’s even got a whole fresh new post out saying this:

As the lead of a skunkworks-esque group that focuses on radical new experiences beyond traditional search, I can tell you that Yahoo! is in the most exciting phase of its entire 16-year history. My view is that it’s fight, not flight, for the company and there has never been a time where so many people have wanted to fight like today. Yahoo! Search has some product experiences that are so radically different, you’ll sit back in your seat thinking, “what the &$%# just happened?”

OK, as someone who has covered you for most of your 16 year history, no you’re not. No you’re not! This isn’t the most exciting phase in search for you. This is you being 95 years old and not sure where your glasses are, walking around thinking you’re a spry 21 year old headed out for a night on the town.

For one thing, you’re brain dead. Perhaps you haven’t noticed that you fired your CEO, who put you on this path that you can give up your search technology and still win by having any “search chip” inside a pretty case.

How’s that been working out. Yeah. So while your company is in disarray, and while we’re waiting to see who’s going to run it next, if your board is going to survive, if Microsoft is just going to get to do what we all think might happen and buy you , or whether you’ll merge with AOL so we only have one single depressing story to follow, you want us to believe there’s some search revolution that’s going to appear from your decimated search team that’s going to save Yahoo’s ass?

Hey, if you really do grow your search share steadily over the next 18 months as you seem to think will happen, thanks to yet another batch of buzzword-ridden user interface enhancements, I’ll come yodel down at the Yahooplex for everyone there personally.

Enough Talk

I like Bing. I like Yahoo. It pains me to write this stuff. But it’s true.

I want to see Bing succeed, because they’ve got good technology and good people there who can give us a nice counterbalance to Google. I’d like to see Yahoo succeed, but if you don’t have the search tech, that’s not going to happen.

Please, spare us any more pie-in-the-sky predictions of how you’ll out-innovate, out-experiment, out-user interface your way past Google. There is literally nothing new that you’re saying. Now, it’s just time to start doing and showing.

That phrase — “secret sauce” — is how a CNN Money article explains what Microsoft thinks will ultimately set it apart from Google. The article describes a recent meeting in which Bing discussed its (latest) plan for growing its market share:

At the company’s financial analyst meeting in Anaheim, Calif., last week, Microsoft President of Online Services Qi Lu gave an impassioned speech about how Bing would improve search by “reorganizing the Web.” To do that, Microsoft plans to leverage its network of products and partnerships to gain a better understanding of what the user is after when they enter a query into a Bing search box. Ultimately, Microsoft believes its technical secret sauce will let Bing both expand what is “searchable” and deliver more robust search results than any of its competitors.

Lu said Microsoft could not and would not try to “out-Google” Google. Instead, it must “change the game fundamentally.”

The article points out that Bing has increased its market share since its launch more than two years ago, but says Bing’s gains are not coming at Google’s expense. CNN uses comScore’s data to make the point that, while Bing has gained about six percentage points since its launch, Google has only dropped two-tenths of a percent. (CNN doesn’t mention the recent Hitwise market share statistics that show Bing gaining four percentage points at Google’s expense.)

Meanwhile, there’s an enormous financial backdrop to all this talk of tenths of percentage points. As CNN points out, Microsoft has lost $5.5 billion on Bing since its launch in June 2009. Here’s the striking image from their article:

Will Bing’s plan to “reorganize the web” put a dent in Google’s market share, or stem the tide of red bars on the balance sheet?

CNN says that “several analysts” think Bing will continue to gain market share and eventually make a profit in three to four years.

Bing Director Stefan Weitz explains the challenge best when he says, “Our challenge is that no one wakes up in the morning and says, ‘I really wish there was a better search engine.’”

Xbox did very well. However consumer PC demand was lukewarm and Windows revenue decreased by 2 percent for the year ended June 30. Overall, the company reported gross revenues of $69.94 billion for the full fiscal year, a 12 percent increase from a year ago.

Online services revenues grew to $662 million but the division posted a $728 million loss for the quarter. Microsoft said the following in its release about search and online advertising:

Search revenue grew due to increased volumes reflecting general market growth, relative share gains in the U.S, and our Yahoo! alliance, offset in part by decreased revenue per search primarily related to challenges associated with optimizing the adCenter platform for the new mix and volume of traffic from the combined Yahoo! and Bing properties. As of June 30, 2011, according to third-party sources, Bing organic U.S. market share grew over 31% to approximately 14%, while Bing-powered U.S. market share, including Yahoo! properties, was approximately 27%.

The company attributed its operating loss to “higher cost of revenue  . . .  driven by costs associated with the Yahoo! search agreement and increased traffic acquisition costs.” Thus Microsoft points the finger back at Yahoo, just as Yahoo pointed the finger in its release at Microsoft.

At a value close to $8 billion, the Skype deal would rank as the biggest acquisition in the 36-year history of Microsoft, a company that traditionally has shied away from large deals. In 2007, Microsoft paid approximately $6 billion to acquire online advertising firm aQuantive Inc. Many current and former Microsoft executives believe Microsoft significantly overpaid for that deal. But they are also relieved that Microsoft gave up on an unsolicited $48 billion offer for Yahoo Inc. nearly three years ago. Yahoo is valued at half that sum today.

eBay Double Dips

In 2005 eBay initially bought Skype for $2.6 billion in cash and stock but was never able to fully exploit or leverage Skype across its marketplaces. In 2009 eBay sold most of Skype to investors, while retaining a substantial minority stake that winds up making eBay as much in cash (roughly $2.5 billion) as what it originally paid for Skype.

Amazingly, as the WSJ points out, the transaction would make Redmond Skype’s fourth owner in eight years. Apparently, according to Malik, Skype’s investors and owners were pushing for a sale after the company’s widely anticipated IPO was delayed.

Last night the snark was out for the deal with many people dismissing Microsoft as overpaying and expressing skepticism that the company would be able to leverage Skype in any meaningful way.

Some Skype Numbers

Before a discussion of what Microsoft might be expected to do with Skype, a quick look at some numbers and financial data. The company had well over 600 million registered users in 2010 but “only” 145 milllion active monthly users and 8.8 paying users (mostly SkypeOut), on a global basis. Skype made roughly $900 million in revenue in 2010.

Google is one of the primary competitors identified in Skype’s IPO filing. And, as others have pointed out, the new “face” of IP Telephony is Apple (FaceTime), Google (Voice) and now Microsoft-Skype.

How Microsoft Could Deploy Skype

How might Microsoft try and use Skype to its competitive advantage?

• Microsoft will integrate Skype’s capabilities into its enterprise products: voice, video, etc.
• Microsoft will bundle Skype into Xbox/Kinect for video calling
• Microsoft will integrate Skype into Windows Phones for video chat and alternative voice calling over high-speed networks
• There’s also speculation that Facebook will get privileged access to Skype courtesy of Microsoft
• There will probably be some interesting integrations with Bing, especially in mobile — and perhaps IE as well

Given the above it’s not irrational for Microsoft to make this acquisition. The price may be inflated but there are solid consumer and enterprise use cases that come immediately to mind. However whether Skype can boost Windows Phones’ popularity and help make Windows Phones more competitive with the iPhone and Android is another question.

It’s also quite possible that Skype revenue growth could entirely offset the losses that Microsoft continues to rack up in online services — to the tune of nearly $2 billion annually now.

Like any major acquisition there will be organizational and execution challenges ahead but there is some very interesting potential across several of Microsoft’s product lines. The opportunity just comes at a very high cost.

Postscript: Microsoft has now officially confirmed the acquisition and the $8.5 billion price tag:

Microsoft Corp. and Skype Global S.à r.l today announced that they have entered into a definitive agreement under which Microsoft will acquire Skype, the leading Internet communications company, for $8.5 billion in cash from the investor group led by Silver Lake. The agreement has been approved by the boards of directors of both Microsoft and Skype.

The acquisition will increase the accessibility of real-time video and voice communications, bringing benefits to both consumers and enterprise users and generating significant new business and revenue opportunities. The combination will extend Skype’s world-class brand and the reach of its networked platform, while enhancing Microsoft’s existing portfolio of real-time communications products and services . . .

Skype will support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices, and Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities. Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms . . .

Skype will become a new business division within Microsoft, and Skype CEO Tony Bates will assume the title of president of the Microsoft Skype Division, reporting directly to Ballmer.

The research company found Google’s brand value to have slipped just 2% in 2011, to $112 billion. Meanwhile, Apple’s value rose 84% to $153 billion, boosted by the latest version of the iPhone, the creation of the tablet category with the iPad, and expectations of a broadened strategy.

Microsoft, steward of the Bing brand, came in at number five in the rankings, with an brand value pegged at $78 billion. The company’s brand value rose 2% as compared to last year, according to the BrandZ researchers. Facebook entered the BrandZ top 100 for the first time, coming in at number 35 with a 246% increase in brand value to $19.1 billion. Chinese search engine Baidu also showed a dramatic surge, growing its brand value by 141% and ranking as number 29 with its $22.6 billion valuation.

The Online Services Division, which is made up of Bing and MSN, had a 14% revenue growth year over year. Microsoft said the 14% growth was “primarily driven by increases in search revenue.” They also said Bing’s US search share increased to 13.9% this quarter. Although profits for that division shrunk even more, with a net loss of $726 million compared to $709 million the previous year. Revenues for that division were $648 million, up from $566 million the previous year.

Online ad revenue grew by 17% year over year, however the revenue per search of the combined Yahoo and Microsoft Bing marketplace was below expectations. Here is a chart showing the revenue by this division:

The largest growth for Microsoft was in the Entertainment & Devices Division which grew 60% year-over-year. The Kinect for Xbox 360 was the primary driver of that growth.

Microsoft’s partner, Yahoo reported earnings last week, they turned out to be a search disaster.

You can read the full release over here:

Related Stories:

• Microsoft Q2 Revs Almost $20 Billion, “Bing Division” Still Losing Money Despite Search Revenue Increase
• Yahoo Announces Q1 2010 Earnings: Income Up 87%
• The Yahoo Search Revenue Disaster

The BBP allows local business owners or their agents or designated representatives to claim and enhance listings with additional content including deals. Business owners can also add links to Facebook and Twitter.

Here’s what you can do in the Bing Business Portal:

• Claim, create, verify, and manage local business listings
• Identify key search categories where you want your listing to appear
• Customize listings with enhanced details such as logos, photos, and more
• Create a mobile Web site (and free QR Code) so customers can learn about your business on their mobile devices
• Create a custom menu (restaurants and bars) for inclusion on a mobile menu
• Create Deals (coupons) and promote them for free on Bing (both PC and Mobile) and Facebook
• Authorize other users to manage your listings

Business owners claim listings by phone or using a PIN that’s sent through conventional mail. The content should then go live in 48 to 72 hours. Microsoft is working on speeding up that process however.

Mobile website creation and the ability to generate deals and offers are standout features of the new BBP. Bing offers a deal editor that guides business owners through the deal-creation process but gives them control over terms.

Deals then receive PC and mobile distribution. As you recall Bing just added deals to its HTML mobile website (m.bing.com) and soon will to its various mobile apps. Deals can also be automatically published to Facebook.

Microsoft is considering a range of additional features and enhancements that would roll out over the next several months. One question is: how much human support will Microsoft provide to local business owners and their agencies? Many local marketers have been frustrated by Google’s very mixed track record on Google Places support and customer service.

Here are more BBP FAQs.