"Facebook, or even Apple, might make a better home for Bing. "
At this point, the article stopped making sense. Yes, bing is draining money, but why on earth would Facebook want to buy something they already have a pretty good partnership with? There are other investments that make way more strategic sense for both Facebook and Apple.
" Apple might even be interested, given its growing online ambitions, evidenced by its consideration of a bid for Hulu. "
Apple wants to buy a company that streams TV (which ties in pretty well with their hardware strategy), therefore they want to get into everything web? Again, I don't see the logic here....
"But [Bing] has more value to a buyer that could bring it traffic."
If Microsoft can't bring it traffic... who can? Whatever other company you cite, can its putative advantage compete with owning the default browser? (Wikipedia still has IE in the lead [1], though an ever-thinner one.) Even mighty Facebook can't really compete with that sort of advantage.
Facebook. Even though IE is still in the lead (for now), everyone "googles" and "facebooks" their way through the internet. No one "microsofts" anything.
It would be additive -- I'm sure any sale would include a multiyear agreement for Microsoft to leave it as the default search engine in IE. Otherwise what value Bing has today would largely evaporate.
That isn't to say that the article isn't complete crap. Bing was developed as a strategic asset. MSFT certainly isn't hurting for cash flow. They have no compelling motivation to part with it any time soon.
I think Bing's problem from the start has been that it has been in a "Goliath versus Goliath" fight. No one is rooting for an old monopoly to beat a new, cooler monopoly. But an independent Bing, one which was agile enough to create its own fun, quirky and smart user experience, might get a lot interest.
As is typical, the article talks about Microsoft's online services division without any analysis of it's role in Microsoft's corporate strategy.
Considering that OSD does not include profit centers related to cloud computing such as sharepoint, and the substantial goodwill OSD provides Microsoft (over $6 billion in 2010), valuing OSD as if it were the whole of Google, is just poor journalism.
Comprised of both Bing and MSN along with an advertising platform, among the roles of the Online Services Division is to provide a channel by which Microsoft can promote it's products to consumers - e.g. Microsoft does not pay to advertise Windows 7 on MSN or to place advertising for SQL server alongside Bing search results. [I'll leave aside my hypotheses about the value of Bing as a research tool and as a strategic way of keeping Google from datamining queries from Redmond].
Exactly. Microsoft never expected Bing to make money, it's just a way to apply pressure on Google. Which helps Microsoft compete with Google elsewhere.
Of course there is a chance Google will mess up, in which case Bing might become profitable. But not likely.
In any case, the current situation is good for everyone but Google. Microsoft can afford to spend the money and it makes Google's life a little harder. Everyone else benefits since Google is not left unchallenged. We have seen what monopolies can do in computing.
Let's face it, if Microsoft doesn't burn money on this, there aren't many alternatives (the alternatives that do exist are either very limited or in fact dependent on Microsoft in some way).
(Pointing this out because I used to work for a newspaper, and it was always frustrating seeing people mistake opinion pieces for the official editorial line of the paper)
The big deal here is a lack of efficiency. Apparently revenue is $2.5 bln and losses are also $2.5 bln. That means with double the revenue (i.e. nearly Google's market share) they'd barely be in the black.
Maybe we're missing something. How much of these billions in losses are not Bing? I mean most of it is surely Bing but Azure and Win 365 are probably substantial investments.
> That means with double the revenue (i.e. nearly Google's market share)
You're assuming search revenue and market share are linearly related. The whole point of the Bing/Yahoo deal was that they are not - as market share increases, revenue increases superlinearly.
My understanding is that neither Azure nor Office 365 are in the online services division. Azure is part of Server & Tools and Office 365 is part of Office. btw, Hotmail (and the rest of Windows Live) isn't part of OSD either, it's counted as part of Windows. OSD is pretty much just Bing and MSN.
"A sale would be a boon for Microsoft’s investors. . . the unit would be worth about $11 billion."
So a boon to investors is a short-term sale that's the equivalent of 4.6% of MSFT's market cap (235b)?
And in exchange surrender an asset that's fundamental to their mobile strategy (with NOKIA blowing in the wind towards MSFT) and strategic in distracting Google from eating their primary lunch?
I am a proponent of FOCUS but this article seems shortsighted.
Oh well, why would you care about long-term strategy if your only intent is just to short sell those MSFT shares quickly.
It's a link-bait. If GOOG can give away almost everything for free to distract their competitors and protect their core revenue (search and ads), then why shouldn't MSFT lose some $$ to get some share of the $40 Billion industry with a projected growth rate of around 10-20%.
Bing isn't different enough to gain mindshare, and it's search results can't compete with Google (or even Blekko's IMO).
You know what would be disruptive? A search engine for physical spaces. When I'm scouring my apartment for a matching sock or my keys, I'd do a search and the missing item would be located.
A division that is bleeding cash doesn't mean that it should be sold off or closed down.
Sometimes, products that don't make money or even make losses are part of a bigger strategy.
Look at Google, no one knows if YouTube is still profitable but it has positioned Google as the leader in online video and will no doubt help their social efforts.
Innovative things have happened from online video - online lectures, talks, short films and creation of internet stars wouldn't have happened faster without the massive reach of YouTube.
Bing is positioning itself in a way that when Google does something stupid (looks highly improbable right now) then Microsoft can be at the right place at the right time.
One of the more important things is a user's trust. Yahoo! & Microsoft are very notorious at abruptly closing down their services and so it becomes difficult to trust their products even if they're a notch ahead in terms of features than their close competitors. Another sale would hurt that trust, no doubt.
This is clearly a controversial article. But I think it's fair to say Microsoft is not focused. Who can say what Microsoft's focus is these days? Without vision, the company and its followers will get lost. Microsoft may be able to stumble upon success by flailing about, but without vision Microsoft won't be able to tell the difference between success and distraction when it's staring them in the face.
To make an extreme example, is a great real estate deal a success to Microsoft? Microsoft might need to buy real estate from time to time and benefit from doing it well. And yes, some companies make lots of money in real estate. Should Microsoft be opening up a real estate investment arm? Probably not. But given Microsoft's focus these days, who knows.
The question isn't just what is a distraction to Microsoft, but what is Microsoft's focus? Samsung's focus is manufacturing. Apple's focus is product design. Google's focus is data. These are all big, successful companies with laser focus even if it appears from the outside they are working on the same things. Who are you Microsoft and where are you going?
The real value of buying a technology company is the talent that comes with it. Sure, the technology is good, but you will need to continue innovating or else the technology will become obsolete. For that you need the talent. In company acquisitions what many times happens is that the talent just runs away which sort of defeats the whole point of buying the company (unless you just care about patents). Because of the risk of loosing the talent I don't think buying Bing is such a good idea, especially since it will cost billions. I wonder if it would be better for companies like Apple/Facebook to just develop their own search engines themselves. In fact, I would be surprised if Apple doesn't have some people working on something like that, even if just for R&D and it never goes anywhere. I know I would have a couple of smart people working on it.
The biggest issue here would be they would then probably have to make google the default browser in ie and phones, making google more money. Also you would have to think there might be something in the yahoo deal to prevent a sale.
I think it would be fascinating to see Apple purchase Bing and rebrand it. With search built into the iPhone and the future value of mobile search in mind, I think it would be near foolish for Apple to miss this opportunity. Otherwise, no matter how well the iPhone does, Google will still always have its hand in mobile advertising money.
But what do I know?
I think it would place Apple and Google in a very interesting competitive position.
Apple is a very focused company. They build nice gadgets and sell them for nice profit margins. Everything they do is directed toward that goal.
Entering the search business means entering the online advertising business. They don't know anything about that business; just look at how iAds is working out.
Steve Jobs himself said directly at one of the All Things D conferences something like (paraphrase), "We don't want to do search. It's not a business we know anything about, other people do it well, there's no reason for us to get into it."
That's focus. It's something that's badly needed at Microsoft.
Isn't the exact same reasoning for Microsoft to operating Bing?
Bing is baked into WP7 pretty deep, and although sales of WP7 devices are off to a slow start, the marketplace is growing nicely, and the reviews are positive.
I think it's smart to take a short-term loss if they can grow their Windows Phone franchise. It is the default search engine on those phones and is tightly integrated into the OS. If the forecasts end up being correct (who knows?) then that will be quite a large part of the world searching through Bing and could drive long-term profitability.
But where does this $2.5bn get spent on ? Will data centers and employees cost this much.. Also since this is a loss, the actual costs must be much higher than this...
[+] [-] varunsrin|14 years ago|reply
At this point, the article stopped making sense. Yes, bing is draining money, but why on earth would Facebook want to buy something they already have a pretty good partnership with? There are other investments that make way more strategic sense for both Facebook and Apple.
" Apple might even be interested, given its growing online ambitions, evidenced by its consideration of a bid for Hulu. "
Apple wants to buy a company that streams TV (which ties in pretty well with their hardware strategy), therefore they want to get into everything web? Again, I don't see the logic here....
(Disclaimer: MSFT Employee)
[+] [-] jerf|14 years ago|reply
If Microsoft can't bring it traffic... who can? Whatever other company you cite, can its putative advantage compete with owning the default browser? (Wikipedia still has IE in the lead [1], though an ever-thinner one.) Even mighty Facebook can't really compete with that sort of advantage.
Honest question, interested in the answers.
[1]: http://en.wikipedia.org/wiki/Usage_share_of_web_browsers
[+] [-] jpeterson|14 years ago|reply
Facebook. Even though IE is still in the lead (for now), everyone "googles" and "facebooks" their way through the internet. No one "microsofts" anything.
[+] [-] angrycoder|14 years ago|reply
Google has search, gmail, google docs, you tube, etc etc.
Facebook has your friends.
Microsoft has a bunch of second place also rans like bing, hotmail, msn, etc.
[+] [-] bodyfour|14 years ago|reply
That isn't to say that the article isn't complete crap. Bing was developed as a strategic asset. MSFT certainly isn't hurting for cash flow. They have no compelling motivation to part with it any time soon.
[+] [-] joe_the_user|14 years ago|reply
I think Bing's problem from the start has been that it has been in a "Goliath versus Goliath" fight. No one is rooting for an old monopoly to beat a new, cooler monopoly. But an independent Bing, one which was agile enough to create its own fun, quirky and smart user experience, might get a lot interest.
[+] [-] brudgers|14 years ago|reply
Considering that OSD does not include profit centers related to cloud computing such as sharepoint, and the substantial goodwill OSD provides Microsoft (over $6 billion in 2010), valuing OSD as if it were the whole of Google, is just poor journalism.
Comprised of both Bing and MSN along with an advertising platform, among the roles of the Online Services Division is to provide a channel by which Microsoft can promote it's products to consumers - e.g. Microsoft does not pay to advertise Windows 7 on MSN or to place advertising for SQL server alongside Bing search results. [I'll leave aside my hypotheses about the value of Bing as a research tool and as a strategic way of keeping Google from datamining queries from Redmond].
[Link to 2010 Microsoft 10-k: see Part II Item 8 Note 10] http://apps.shareholder.com/sec/viewerContent.aspx?companyid...
[+] [-] Duff|14 years ago|reply
Microsoft losing $2.6B is like me dropping $5 on a crapy sandwich.
Microsoft has successfully executed this strategy several times.
[+] [-] azakai|14 years ago|reply
Of course there is a chance Google will mess up, in which case Bing might become profitable. But not likely.
In any case, the current situation is good for everyone but Google. Microsoft can afford to spend the money and it makes Google's life a little harder. Everyone else benefits since Google is not left unchallenged. We have seen what monopolies can do in computing.
Let's face it, if Microsoft doesn't burn money on this, there aren't many alternatives (the alternatives that do exist are either very limited or in fact dependent on Microsoft in some way).
[+] [-] simonw|14 years ago|reply
(Pointing this out because I used to work for a newspaper, and it was always frustrating seeing people mistake opinion pieces for the official editorial line of the paper)
[+] [-] kenjackson|14 years ago|reply
[+] [-] Steko|14 years ago|reply
Maybe we're missing something. How much of these billions in losses are not Bing? I mean most of it is surely Bing but Azure and Win 365 are probably substantial investments.
[+] [-] dmnd|14 years ago|reply
You're assuming search revenue and market share are linearly related. The whole point of the Bing/Yahoo deal was that they are not - as market share increases, revenue increases superlinearly.
[+] [-] contextfree|14 years ago|reply
[+] [-] aresant|14 years ago|reply
So a boon to investors is a short-term sale that's the equivalent of 4.6% of MSFT's market cap (235b)?
And in exchange surrender an asset that's fundamental to their mobile strategy (with NOKIA blowing in the wind towards MSFT) and strategic in distracting Google from eating their primary lunch?
I am a proponent of FOCUS but this article seems shortsighted.
[+] [-] imaverickk|14 years ago|reply
It's a link-bait. If GOOG can give away almost everything for free to distract their competitors and protect their core revenue (search and ads), then why shouldn't MSFT lose some $$ to get some share of the $40 Billion industry with a projected growth rate of around 10-20%.
[+] [-] brown9-2|14 years ago|reply
[+] [-] xiaoqmaiiuu|14 years ago|reply
[deleted]
[+] [-] blackboxxx|14 years ago|reply
You know what would be disruptive? A search engine for physical spaces. When I'm scouring my apartment for a matching sock or my keys, I'd do a search and the missing item would be located.
I don't know how, but someone should do this.
EDIT: No, I'm not high. Just weird.
[+] [-] icebraining|14 years ago|reply
[+] [-] amitagrawal|14 years ago|reply
Sometimes, products that don't make money or even make losses are part of a bigger strategy.
Look at Google, no one knows if YouTube is still profitable but it has positioned Google as the leader in online video and will no doubt help their social efforts.
Innovative things have happened from online video - online lectures, talks, short films and creation of internet stars wouldn't have happened faster without the massive reach of YouTube.
Bing is positioning itself in a way that when Google does something stupid (looks highly improbable right now) then Microsoft can be at the right place at the right time.
One of the more important things is a user's trust. Yahoo! & Microsoft are very notorious at abruptly closing down their services and so it becomes difficult to trust their products even if they're a notch ahead in terms of features than their close competitors. Another sale would hurt that trust, no doubt.
[+] [-] jonursenbach|14 years ago|reply
[+] [-] Pooter|14 years ago|reply
[deleted]
[+] [-] ansy|14 years ago|reply
To make an extreme example, is a great real estate deal a success to Microsoft? Microsoft might need to buy real estate from time to time and benefit from doing it well. And yes, some companies make lots of money in real estate. Should Microsoft be opening up a real estate investment arm? Probably not. But given Microsoft's focus these days, who knows.
The question isn't just what is a distraction to Microsoft, but what is Microsoft's focus? Samsung's focus is manufacturing. Apple's focus is product design. Google's focus is data. These are all big, successful companies with laser focus even if it appears from the outside they are working on the same things. Who are you Microsoft and where are you going?
[+] [-] felipemnoa|14 years ago|reply
[+] [-] robryan|14 years ago|reply
[+] [-] quizbiz|14 years ago|reply
I know Apple is sitting on a lot of cash. A lot.
I think it would be fascinating to see Apple purchase Bing and rebrand it. With search built into the iPhone and the future value of mobile search in mind, I think it would be near foolish for Apple to miss this opportunity. Otherwise, no matter how well the iPhone does, Google will still always have its hand in mobile advertising money.
But what do I know?
I think it would place Apple and Google in a very interesting competitive position.
[+] [-] jad|14 years ago|reply
Entering the search business means entering the online advertising business. They don't know anything about that business; just look at how iAds is working out.
Steve Jobs himself said directly at one of the All Things D conferences something like (paraphrase), "We don't want to do search. It's not a business we know anything about, other people do it well, there's no reason for us to get into it."
That's focus. It's something that's badly needed at Microsoft.
[+] [-] pedalpete|14 years ago|reply
[+] [-] Yhippa|14 years ago|reply
[+] [-] null_para|14 years ago|reply
[+] [-] meow|14 years ago|reply
[+] [-] badclient|14 years ago|reply
[+] [-] RexRollman|14 years ago|reply