As I was perusing the Supersite for Windows that Paul Thurrot hosts, I came upon a piece that gives an insight to the way that Microsoft is almost rabid about making Bing show a profit, and also the way the company truly feels about Yahoo.
The piece was first reported by Thurott in Windows IT Pro and is not eye opening, but simply amazing because it confirms the commonly held ideas that Microsoft is willing to throw good money after bad to pursue and overtake Google, and that it simply considers Yahoo a throwaway in the battle.
Echoing an economic reality that also hampers its Xbox video gaming business, Microsoft‘s Bing search engine has cost the company over $5 billion over the past several years. And although many people feel that the software giant can never recover that expense, Microsoft this week said it’s “confident” that Bing will be not only successful but profitable.
To echo an old refrain, a billion here, a billion there, pretty soon, you’re talking about some real money. What is wrong with these people? Is this some sort of honor thing, that will end up destroying the company because of a schoolboy’s dare?
“As soon as we close and implement the Yahoo! deal, we have achieved a milestone, [and] for advertisers, we are a credible number two [in the marketplace],” said Microsoft Senior Vice President Yusuf Mehdi. “The goal is about share gain. If we grow share, we will grow our way into profitability, and we have confidence we can do that.
“There’s no question we intend to make a profit,” he added. “There’s a huge return in the search marketplace that can more than make up the investments we’ve put in to this point.”
But how long will the trip be to reach the break even point? This is much like the guy at the horse track that bets on the 40-1 horse, not because of a tip that the horse is great, but because the odds are such that a win could put him on easy street. Of course there is money in it, otherwise Google would not be there, but how much loss does it take to make Microsoft see that for them, it’s a day late and a few hundred million dollars short?
(Mehdi currently runs Microsoft’s online audience business and is directly responsible for Bing and the MSN web portal. His comments came during an interview with Reuters this week.)
Although Bing has made modest but steady gains this year—it now controls 10.7 percent of the United States search market, up from 8 percent when it was called Live Search through mid-2009—it also trails market leader Google (with 66 percent share) and number-two Yahoo! (with 17.3 percent) by a wide margin.
Mehdi says that simply combining Bing and Yahoo! will yield a more competitive marketplace and achieve what Microsoft’s standalone search service can’t: 30 percent share. (OK, it’s closer to 29, but whatever.) “At 30 points we are now a credible option, so that number matters,” Mehdi told Reuters. “The nice thing is we can say [to advertisers] you can be close to 30 percent share in one easy buy. That 30 percent carries a lot of weight in the marketplace.”
A combination of Bing and Yahoo! would indeed improve Microsoft’s ability to compete in this market, but it’s unclear whether it would do much to blunt the market leader. Google has actually improved its share of the search market over the past seven months, by 0.7 percent. That’s tiny even by Bing standards, but it’s still a gain. Assuming the Microsoft/Yahoo! deal goes through, the software giant will need to address that trend next.
They are already looking ahead, pushing toward the days that Microsoft kicks the Yahoo carcass to the side of the road and keeps on the chase after Google. Does Bill Gates still have any cares about Microsoft, or are those days behind? It would seem that he might have the good sense to stop the madness. If I were a Microsoft shareholder, I would want to know why the company was wasting my dollars on things that are not anywhere near their core competencies. For those that wonder about Steve Ballmer, any of the moments caught for YouTube of the “monkeyboy dance” should make them think twice about investing in Microsoft.
I have no way to prove this, but during the time when Carl Icahn was on the board of Yahoo, and many were wondering why the communications between Microsoft and Yahoo broke down, I stated that I believed Ballmer, not a complete idiot, did not want any part of Carl Icahn being involved with Microsoft. This because he would start doing what he does best once ensconced within the stock holders there - all because the stock is underperforming, and many think they know why.
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