Microsoft: Search advertising revenue grew slower than expected last quarter

Microsoft reported revenues of $36.9 billion for the second quarter of the 2020 fiscal year, which ended December 31, an increase of 14% over the prior year. Revenue from search advertising ticked up just 6% year-over-year in the quarter that encompassed the holiday shopping season.

Search advertising growth was lower than the company had expected, Microsoft CFO Amy Hood said on the earnings call Wednesday. The company had expected search advertising growth would be in line with the 11% seen in the previous quarter.

LinkedIn revenue growth has been decelerating. Revenue increased by 24% year-over-year last quarter, down from the 25% growth of the previous two quarters. The LinkedIn audience does continue to grow and the company touted another quarter of growing engagement. Sessions increased by 25% year over year.

“We saw record levels of member engagement again this quarter,” said Microsoft CEO Satya Nadella. “Marketing Solutions remains our fastest growing business as marketers leverage enhanced tools and LinkedIn Pages to connect with our nearly 675 million members.” That’s up from the 660 million the company announced last quarter.

Why we care. Search volume has long been a challenge for the search engine that sits squarely in Google’s shadow. Hood said the lower than expected search ad growth was “primarily driven by lower Bing volume.” The company expects to see similar growth next quarter.

Performance agency Merkle reported (registration required) client spend on Microsoft search ads grew 17% year over year last quarter, but that click volume fell 10%.

Microsoft Advertising launched several new updates last quarter to help advertisers run campaigns more easily. Microsoft Advertising showed off an updated web interface and rolled out a redesigned desktop Editor. Shopify users can run search campaigns through Microsoft Advertising directly from the Shopify Marketing platform thanks to an integration announced in October.