Microsoft Earnings Beat Estimates Online Services Post Loss, More On Bing And The iPhone

Microsoft had a “blow out” quarter in which it saw $19.02 billion in revenue, a 14 percent increase from $16.63 billion in the same fiscal quarter a year ago. This was largely about the success of PC OS Windows 7. That’s the story: people like it and are buying PCs. Everything else is a bit more mixed.

Online Services, which houses online advertising and Bing, reported $581 million in revenue vs. $609 million a year ago. Lower revenues translated into higher losses for the division. There was a quarterly loss of $466 million compared with $320 million a year ago.

Bing is making steady incremental progress in its bid to gain search marketshare. But the going is slow. The company has inked big “default search” deals with HP, Dell and other PC makers, and with Verizon in mobile.

Yet so far Bing has not affected Google’s leadership position in PC search (or mobile search for that matter). There are widely reported rumors that Apple and Microsoft are discussing replacing Google as the default search engine on the iPhone with Bing. This would certainly be a “big deal” from a PR standpoint but its actual impact on search query volumes is more uncertain.

Apple CEO Eric Schmidt, asked about the Bing rumor on Google’s recent earnings call, said that Google’s relationship with Apple was “stable.” On Apple’s earnings call a few days later COO Tim Cook had something with a parallel tone to say about Google: the two companies are partners but also compete in certain areas.

There was really no hint of the purported Apple-Google animus driving the rumor articles about Bing replacing Google on the iPhone. In addition, during the iPad launch we saw Apple showcase Google Maps. This suggests an ongoing relationship; after all Bing Maps has very rich functionality and could equally make for a terrific experience on the iPad.

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Ad network Chitika put together some data on Google’s share of traffic from the iPhone to illustrate, by implication, how a new “default search” deal with Microsoft might adversely affect Google (and benefit Bing):

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The company, based on data from its ad network (which may not be entirely representative) says “according to our numbers as shown in the above graph, Google search accounts for just over half of all Internet traffic on the iPhone.  A stunning number, when you consider that it outnumbers the entire genre of non-search traffic – traffic from putting URLs directly into the browser, navigating to your bookmarks, clicking links from any non-search site.”

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In the relatively unlikely event that Google lost its default status on the iPhone and Bing took over, it’s very unlikely that Bing would see massive traffic gains. It would see gains but how much is uncertain.

Related Topics: Channel: Mobile | Google: Mobile | Microsoft: Bing | Microsoft: Bing Mobile | Microsoft: Business Issues

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About The Author: is a Contributing Editor at Search Engine Land. He writes a personal blog Screenwerk, about SoLoMo issues and connecting the dots between online and offline. He also posts at Internet2Go, which is focused on the mobile Internet. Follow him @gsterling.

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