Can Bing Grab More Market Share?
Robert is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Bing has emerged as Microsoft's (NASDAQ: MSFT) quiet success story. Over the past three years, the search engine has steadily acquired market share from its rivals and profitability is within sight. Can these gains continue and does Bing represent a credible threat to Google (NASDAQ: GOOG)?
Bing is taking market share
Over the past three years Bing has emerged as the strongest search engine. According to data collected from Comscore, Bing's market share hit a record high 17.9% of desktop search queries coming mostly at the expense of Yahoo! and other third-tier players. Much of this growth can be attributed to the dominance of Internet Explorer on PC desktop as the industry consolidates into a two-player duopoly.
Notably, Bing is making significant gains in the mobile space. Three years ago, Google accounted for 95% of all mobile queries. Today, Yahoo! and Bing now account for 11% and 5% of mobile searches respectively.
So can those gains continue?
Investors should expect Bing to take more market share for three reasons.
First, Microsoft is improving its position in mobile. According to Kantar Worldpanel, Windows accounted for 4.6% of U.S. smartphone sales during the month of June - up from 3.8% the previous year - cementing the company's position as a third place mobile player.
Much of this is being driven by the success of Nokia's Lumia. Last week the company reported that it shipped a record 7.2 million handsets during the second quarter. Lumia is rapidly ascending through the hanks up from 8th to 5th place in the global smartphone market. This is all driving increased use of Bing search.
But another unexpected development could boost's Bing's mobile presence. In June, Apple announced that it would start using Bing as the default search engine for Siri Voice Assistant on iOS7. The move is designed to wean Apple off Google so the company stops funding its main competitor in the mobile space.
This is a great deal for Microsoft as the company has little to lose from the partnership with Apple. I'd expect Bing to gain lots of mobile market share and search revenue, but this time at Google's expense rather than Yahoo!'s.
Second is Bing's improving search functionally. Microsoft is rapidly catching up to Google in terms of the performance of its search results.
Right now, Google is far and away the best. The company's Google Now feature comps through your email, calendar, and location, among other things, to remind you when your flight leaves or how long it will take to arrive at your destination. It's one of those 'gee wizz' features that adds to the value of using an Android device, and Google is trying to add it to other parts of its product ecosystem. Microsoft offers little in this respect, but the company intends to change that.
In a strategy memo CEO Steve Ballmer describe Bing as an 'intelligence engine,' where Microsoft could collect data from the Internet, Outlook, calendar apps, and your location to anticipate peoples' needs, improve search results and improve their interaction with their devices. Bing Now will be better at anticipating people's needs through data collected from users and the web. Better results will encourage more users to give Bing a try.
Third, Microsoft is expanding where you use search. It should already be clear Microsoft’s Xbox One isn’t just for gaming. The company's next generation console is set to take over your living room, capable of detecting your voice and movements. Bing is what makes all of this innovation possible.
Thanks to Bing’s ability to voice-query commands and body language, the device is able to react as if it was human. To prepare for Bing functionality, Microsoft worked with Xbox partners like Netflix and HBO to create index catalog for a seamless experience. Tell your Xbox to search for Mad Men, and it will find information related to your search and display it through the Xbox. Bing will be the search engine driving your living room experience.
Is Bing a threat to Google?
Let's be clear - Bing will not overtake Google. But the Microsoft search engine does represent a big enough threat that Google is willing to pay Mozilla $1 billion per year to remain the default search engine on its Firefox browser. Google will be forced to pay higher traffic acquisition costs - money paid to third parties to direct traffic to its search engine - to put a lid on Bing's growth.
Foolish bottom line
Investors shouldn't dismiss Bing. These catalysts suggest Microsoft will continue to gain market share over the next few quarters. And while this will only slightly boost Microsoft’s top-line, it could help it significantly advance the company's product ecosystem and represent a major threat to its competitors.
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Robert Baillieul has no position in any stocks mentioned. The Motley Fool recommends Google. The Motley Fool owns shares of Google 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!