Getting a jump-start on the usual year-end hoopla, Microsoft (NASDAQ:MSFT) recently released its list of top Bing searches of 2014. Once we get past the embarrassing notion that Kim Kardashian was the No. 1 person searched this year, Bing's top searches proved to be an interesting recap of 2014, led by World Cup and Winter Olympics searches, along with devices like the iPhone 6 and Microsoft's own Surface Pro 3.
Of course, when most people think of online search, Bing isn't the first engine that comes to mind. Google (NASDAQ:GOOG) (NASDAQ:GOOGL) has earned that distinction, and rightfully so, by dominating the market for years. But before Google fans start celebrating the end of the search war, Microsoft has a few cards up its sleeve that could give Bing the push it needs to close the gap. In fact, it may come as a surprise to some, but Bing is already showing signs of life.
The search of today
As of August of this year, according to data from comScore, Google owned a commanding 67.3% of the U.S. market, compared to 19.4% for Microsoft. That's an awfully big difference, to be sure, but perhaps not as large as some may have thought. And it so happens, with each successive month, Bing is making slow but steady progress.
Though minor, in each of the last three months Bing has taken incremental pieces of Google's search market share. Obviously, with about two-thirds of the lucrative search market -- search ads were responsible for $18.4 billion in revenues last year -- overtaking Google, or even playing in the same ballpark, is an ongoing challenge. But Microsoft CEO Satya Nadella, former head of the Bing unit, has pledged to bring the money-losing Bing division back to at least break-even in the next two years. Unfortunately, Microsoft doesn't break out Bing-specific revenues, but most pundits agree it's gaining traction.
Microsoft's toughest task will be to overcome the notion that Google is the default search engine of choice for users. To "Google" something has become a part of our lexicon, which will be a tough nut to crack for Microsoft. Even as it makes slow, but steady, progress in chipping away at search market share, perhaps Microsoft's best chance to really make an impact is take a page from Google's own book, which is exactly what Nadella has planned.
The search of tomorrow
Google gets a big boost from the Android OS,which runs over 84% of the world's smartphones. What Google figured out a long time ago is that by controlling the operating system of the world's mobile devices, it can drive traffic to its search engine and associated websites. That, in turn, is part of the reason Google is able generate a 20% jump in revenue as it did last quarter.
Android may not directly contribute to Google's impressive bottom line, but make no mistake, it's akin to a money-making machine. Which brings us to Microsoft and its "mobile-first, cloud-first" strategic direction. Nadella's mobile-first ambitions reach far beyond selling devices, including the successful launch of its Surface Pro 3 pseudo-tablet. For Microsoft, mobile-first means getting its OS, and by extension software and services like Bing, into as many mobile devices as possible, regardless of the manufacturer.
Recent partnership agreements with industry leaders like Salesforce.com and the soon-to-be-completed $200 million deal to acquire email app Accompli are recent examples of Microsoft spreading its mobile wings. Getting its operating system onto iOS devices, and now Android-run units, in addition to the aforementioned partnerships and acquisitions will continue to feed the Bing fire.
Even with Nadella's push to get all things Microsoft into every mobile device possible, don't discount its own hardware efforts. It's no secret that smartphone growth is expected to come primarily from emerging markets around the world, something Google and its Android OS have taken full advantage of. But Microsoft's lineup of entry-level smartphones, with Bing preloaded as the default search engine, are ideally positioned to gain market share in the world's up-and-coming markets.
Knocking a long-established leader like Google from its perch, as Microsoft is trying to do with Bing, is a long-term proposition. But Microsoft's incremental search wins these past several months are certainly steps in the right direction, and combined with Nadella's mobile-first plans, it's safe to say Bing is doing just fine, thank you.
Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Google (A shares), Google (C shares), and Salesforce.com. The Motley Fool owns shares of Google (A shares), Google (C shares), and 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.
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