Bing's Slow Climb
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
MSN Search, Live Search and Windows Live Search are all former search engine attempts and brands of Microsoft (NASDAQ: MSFT). From 1998 to 2009 Microsoft slowly built up the services offered through their search engine with numerous feature rollouts, but under every name Microsoft was never very successful in taking market share away from Google (NASDAQ: GOOG). However this is slowly changing as Microsoft's Bing branded search engine (or decision engine as they like to call it) has been slowly picking up market share at the expense of Google and Yahoo!. Microsoft has an extremely reliable business with its Windows and Office products combined with its enterprise offerings; however going forward, Bing will play an increasing role in Microsoft's offerings.
Search is more than just a website where we go and type in a query. Now search is mobile, it is social and it is integrated with other services. Bing has its own local services, shopping services, maps service, image & video searches as well as an instant answers feature that shows things like sports scores and weather directly on the search results page. This transformation of search will help those companies that not only run search engines but also offer other online services, such as Microsoft. Microsoft has taken advantage of their other products by integrating Bing with Hotmail, Xbox, Windows Phone as well as Internet Explorer, but Microsoft has gone well beyond this limited integration. Microsoft has not only integrated Bing into its Windows Phone operating system but in 2011 they announced a partnership with BlackBerry that will make Bing the default search engine and maps provider and integrate these changes on an OS level on new BlackBerry's not through an app that needs to be downloaded after purchase.
Bing has also struck a deal with Facebook which will allow Facebook friends to be displayed in Bing search results along with recommendations by Facebook friends. Direct interaction between friends will be possible on the Bing site, if a Facebook account is logged in. This integration also allows Bing search results to be more personalized with Facebook’s vast knowledge about its users. Bing is also going to display relevant twitter posts in its search results that will help its live search results. Most of this integration is unavailable to Google because Facebook and Twitter both have deep integration deals with Bing not Google. With Bing's coming three columns re-design of the search results page, these non-traditional forms of search results like social, local or maps will be more prominently displayed in search results.
Yahoo! and Bing struck a ten year search deal in 2009 that will have all Yahoo! searches powered by Bing. At least for the first five years of this deal, Yahoo! will still keep the vast majority of all revenue received from ads on Yahoo! search and they will be able to put some ads on certain Microsoft sites. While this is a good deal for Bing in the short term to get more search traffic, Bing does not make very much profit from this deal and the Yahoo! search page will still be called Yahoo! Search, so in the long run this deal is more about eliminating a competitor while increasing search traffic for Bing.
Bing has also had an easier time operating in China than Google has; most recently they struck a deal with the Chinese search giant Baidu. The deal will direct English language Baidu searches to Bing, this gives Bing a foothold in a market that has over five hundred million users and is growing rapidly. Currently Bing has less than 5% of the Chinese search engine market share while Baidu is the undisputed search leader in China. Hitching Bing to Baidu will greatly increase the Chinese traffic that Bing gets and could catapult Bing to a major player in the Asian search world in the coming years. Google is a somewhat tenuous player in the Chinese search market after having several issues with censorship in the past few years, though Google has a larger percent of Chinese searches than Bing at the moment and is boosting their chinese services. In general Microsoft has been much more accepting of the Chinese censorship measures than Google has which allows Bing to have better relations with local authorities.
All of these deals, features and integration have allowed Bing to compete with Google on a level playing field in most areas for the first time. To be sure, the online division at Microsoft that Bing is a part of is still losing hundreds of millions every quarter, but that amount has been dropping. The loss dropped from 776 million dollars in quarter one 2011 to 479 million dollars in quarter one 2012; a 39% decrease. Slowly but surely this is paying off for Bing in terms of market share as the latest numbers indicate that Bing now captures 15.3% of searches. For Microsoft it may not be about making billions from Bing but rather having an integrated competitive online suite of products that is not losing money. Bing is in the process of re-designing the Bing site in a completely novel approach to displaying search results that will display social, local, and multi-media results on the same page as the traditional search results in three columns. Though Bing is clearly the underdog to Goggles 66% market share, they are becoming a credible competitor and will over the next year move solidly into second place, break even and add greatly to the online services platform Microsoft should have to complement their bread and butter businesses.
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