No Bling for Microsoft Bing

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What a (financial) drag.

A CNNMoney report this week estimates that Microsoft's (Nasdaq: MSFT  ) Bing "decision engine" is hemorrhaging $1 billion per quarter, and has lost a cumulative total of $5.5 billion since its launch in 2009. Bing is part of Microsoft's Online Services Division, or OSD, whose segment results started being disclosed in 2007.

The division, which also includes MSN and adCenter, has lost roughly $8.4 billion since then, with the losses accelerating. Over the past three years, OSD has generated operating losses of $1.6 billion, $2.3 billion, and $2.5 billion in 2009, 2010, and 2011, respectively. It didn't help that Bing used to give away free money.

Is Mr. Softy at least gaining market share? That depends on what you consider Bing's true market share. comScore (Nasdaq: SCOR  ) recently released its search engine rankings for August 2011, comparing Google (Nasdaq: GOOG  ) , Yahoo! (Nasdaq: YHOO  ) , Microsoft, AOL (NYSE: AOL  ) , and IAC (Nasdaq: IACI  ) –owned Ask. Let's see how the market has changed over the past year.

Search Entity

August 2010

August 2011

Google sites 65.4% 64.8%
Yahoo! sites 17.4% 16.3%
Microsoft sites 11.1% 14.7%
Ask network 3.8% 3.0%
AOL 2.3% 1.3%

Source: comScore press releases.

A couple of things stand out to me. First, people still actually use AOL to search. Second, Google's dominant position is largely unchanged year over year, hovering right around 65%. Another worthwhile fact is that since July 2010, Microsoft's algorithm and search platform has been driving Yahoo!'s sites, pursuant to a December 2009 agreement. So although Microsoft has grown its share partially at the expense of Yahoo!, those gains only cannibalize its partner.

For even more detail, I went ahead and broke it down by month and added a line for Microsoft and Yahoo! combined.

Source: comScore press releases.

When including Yahoo!, Microsoft has grown its overall share, but not nearly as much as you would think judging by the company's figures alone. Meanwhile, top dog Google has barely flinched while the others fight for table scraps.

Qi Lu, Microsoft president of online service, detailed the company's plans to "change the game fundamentally" with Bing in order to capture market share. The goal is to get a deeper grasp of what a user is looking for when he or she hits the search button, whether it's game tickets, flight information, shopping deals, or local businesses.

Bing has a long, grueling battle ahead of it if it hopes to ever make a dent in Google's supremacy in the minds of netizens and wallets of advertisers. With $52.8 billion in cash and investments on the balance sheet, the software giant can afford to keep plunging money into its OSD and dream of sweet black ink. The question isn't whether Microsoft can continue, but whether it should.

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Fool contributor Evan Niu holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Microsoft, Google, and Yahoo!. Motley Fool newsletter services have recommended buying shares of Google, Yahoo!, and Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (10) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 23, 2011, at 1:11 PM, JTFOster1 wrote:

    Did you notice Microsoft was the only one growing market share? If nothing else, they are keeping Google honest and forcing them to create value.

    Microsoft did not take over the gaming console overnight, but slowly chipped away until it took over. I do not think they will over take Google, but they can certainly make them concerned.

    If somehow MS can get Win 8 right and it runs on phones and tablets nicely, then they will be a huge force again. Can you imagine having the ability to use phone, tablet, laptop and desktop all with the same apps? As well as syncing photos, documents, etc between all platforms... That would be a game changer.

  • Report this Comment On September 23, 2011, at 1:11 PM, BMFPitt wrote:

    "It didn't help that Bing used to give away free money."

    More specifically, it didn't help Microsoft. It helped me quite a bit.

  • Report this Comment On September 23, 2011, at 1:14 PM, jmy663 wrote:

    I think it would be more useful to show YouTub added to the mix, as it is considered the #2 search engine out there.

  • Report this Comment On September 23, 2011, at 1:24 PM, TMFNewCow wrote:

    @BMFPitt, I miss it too. The only time when I used Bing regularly was because of Bing Cashback. When they killed it I promptly switched back to Google.

    @jmy663, comScore labels it as Google "sites" which implies the figure goes beyond just, I would venture that YouTube is already included but I can't say for sure.

    - Evan

  • Report this Comment On September 23, 2011, at 2:47 PM, ByrneShill wrote:

    I don't understand why people still use google over bing. Using google search feels like using a car from the early 90's.

  • Report this Comment On September 23, 2011, at 3:09 PM, ishfive wrote:

    It's misleading to say that Microsoft gaining search users from Yahoo is "cannabalizing" its partner.

    MS gives 88 cents of every Yahoo search dollar to Yahoo -- they're perfectly pleased to remove the middle man and keep that money for themselves. It may not be enough to make them profitable, but if they take another half of Y!'s market they'll be looking at a respectable 25%-ish of Search where revenues stay in-house.

    Not to mention the possibility they're part of a Y! buyout.

  • Report this Comment On September 23, 2011, at 3:35 PM, TheDumbMoney wrote:

    What's up with the Buzz Box the last week or so?

  • Report this Comment On September 23, 2011, at 3:51 PM, Eerkes wrote:

    i like the cool pictures, bing it is for me

  • Report this Comment On September 23, 2011, at 4:13 PM, sheldonross wrote:

    "I don't understand why people still use google over bing. Using google search feels like using a car from the early 90's."

    "i like the cool pictures, bing it is for me"

    Your comments are why people still use Google. Bing reeks of Myspace type "bling" and shiny baubles. I (and a great many others) use google because it does search well without all the kruft.

  • Report this Comment On September 23, 2011, at 9:12 PM, hiddenflem wrote:

    Bring back Bing bucks! I loved making money for buying stuff online through bing!

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