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Bing: Still Gaining Market Share

Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Microsoft (NASDAQ: MSFT) took aim at the search engine market back in 2009 with its introduction of Bing – a web search/decision engine that has recently overtaken Yahoo! (NASDAQ: YHOO) in market position. Since its inception, Bing has steadily built up to its current position of 15% of the market, and with a parent like Microsoft, it is unlikely to go anywhere but up. Investors should take note of the ‘change in tide’ and evaluate their position in favor of Microsoft, not only for Bing’s performance, but also because of the planned “phase out” of the Yahoo! search engine. 

What Has Happened

Bing began under the name MSN search and later Windows Live. Microsoft seemed, at least for a time, to be in a naming rut, in efforts to promote its other products in the ‘Live’ family. In March of 2007, Microsoft announced that it would separate its search product from the Windows Live services, but it wasn’t until the rebranding into “Bing” in 2009, that the company found its way.

Microsoft’s plan from the beginning was to be a leader in the search engine market. This is par for the course, as Microsoft has a history of introducing only products it knows will dominate. Continuing in that tradition, Microsoft knew its major competitors and sought an agreement prior to entry.

In July of 2009, Microsoft and Yahoo! announced a deal in which the Yahoo! search engine would be replaced by Bing. The phase out would be over a ten year period, in which time, Yahoo! would get to keep 88% of the revenue from all search ad sales on its site for the first five years, and have the right to sell advertising space on some Microsoft sites.

On its launch, Microsoft sunk a hefty $100 million in advertising behind Bing. A smart move, as in its first year, popularity grew to around 10% market share. The reaction, however, is that Yahoo! has steadily been losing market share over the past couple of years, finally relinquishing second place to Bing in December. Google still holds an incredible lead, capturing around 11.7 billion searches last month alone, compared to only 2.7 billion searches on Bing and 2.4 billion on Yahoo!.

What Is Happening

Before the launch of Bing, the market share of Microsoft web search page, both MSN and Live search, had been relatively small. However, the result of steady growth saw that by January 2011, Bing's market share had increased to 12.8%. But it wasn’t just people using Bing that assisted its growth. Bing powered searches continued to have a higher "success rate" compared to Google, with more users finding what they needed and clicking on the resulting displayed links. In comScore’s report “2010 U.S. DigitalYearinReview”, Bing received more praise, with the announcement that it was the biggest gainer in year-over-year search activity, picking up 29% more searches in 2010 than it did in 2009. It was December of 2011 when Bing officially overtook Yahoo with its share of searches at 15.1% compared to Yahoo's, which fell to 14.5%.

What Will Happen

There is a key element which must be discussed before predictions are made and that is the concept of ‘core searches’. Core searches are those where the user has an intent to interact with the search result, for example, links to business websites, information gathering, etc. This does not include a search for images or content for display only, such as maps or stock information. Holding this in mind, it is no wonder as to why Google still has a commanding lead, as readers are aware of phrases and slang terminology that has crept into everyday speech such as, “Google us”. Even the simple action of translating the name into a verb makes marketing and advertising easier. Microsoft capitalized on this when it launched its “Bing and decide” campaign. This is a definite factor in Bing’s achieving a market share of 14.54% last year.

Yahoo! Search has not increased visibility, and with Microsoft poised to take the helm, it is unlikely to. It will still maintain its own user interface, but will eventually feature "Powered by Bing" branding. Likewise, all Yahoo! Search partners are expected to be transitioned by later this year.

What impact will this have on Yahoo! and Microsoft? I predict that Yahoo will continue a downward trajectory. The company still has revenue generators such as its recent launch of Yahoo! Contributor Network. However, I see Microsoft continuing its drive upward based on the past performance of Bing as well as Microsoft’s superior strategy.

Why It Will Happen

Microsoft never does anything without plans for complete domination. Its entry strategy all but made certain Bing’s positive performance. While it still has far to go to reach Google’s stronghold of the market, I think that because of Microsoft’s influence and vast resources, Bing will continue to grow. As part of the Internet Explorer toolbar options, it is already positioned for increased use.

Not only that, but Microsoft has the vision to see where things are going and connect to them. It has formed strategic partnerships to ensure its products success. For example, Bing's search results can display one's Facebook friends when a Facebook account is linked with Bing via Facebook Connect. Users then have the option to send messages to their friends in the search results.

Capitalizing on the growth of social networks, Microsoft has increased its competitiveness.

Summary

Microsoft has been the example for a powerful, focused strategy accomplishing predetermined goals.  Its line of products continue to be competitive in all industries they enter because of the forethought and planning that goes into market entry. Microsoft currently sits at around $32 per share and I believe will continue to see steady growth.


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