Bing: Microsoft's 11 Billion Dollar Gamble

Posted: Jun 19 2009, 2:10pm CDT | by , Updated: Aug 11 2010, 2:59pm CDT, in News | Technology News

 
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For a three-week-old search engine, Bing is doing pretty well. They've managed to capture a substantial portion of the U.S. Search engine market. Enough that Google has been forced to sit up and take notice. Yet, despite all that, Bing is not yet a close to profitable venture for Microsoft.

The computing giant has poured between 80 and 100 million dollars into advertising for Bing. If you've spent any time on the Internet at all lately, you've noticed banner ads and Hulu commercials and all manner of promotion for the new search engine. And what we've seen so far is only the beginning. Microsoft's ad campaign has managed to work in the short term. When you bombard people with enough advertisements they are going to take notice. It doesn't necessarily work to keep them coming back in the long term, but it will get you a lot of curious short-term users.

Apparently Microsoft thinks that, by throwing even more money at Bing advertisements, they can convert those curious short-timers and sight-seers into life-long Bing loyalists. Steve Ballmer, CEO of Microsoft, recently announced that he is more than willing to spend 5-10% of Microsoft's operating budget over the next 5 years on Bing. That means that Microsoft could end up spending anywhere from 5.5-11 billion dollars on keeping their search engine afloat.

As this excellent analysis points out, Google only makes about 8 billion in profit per annum. Bing would, at best, be splitting that profit with Google. On the outside, if they're extremely successful, they're looking at making maybe 3-4 billion a year. And that's ONLY if they manage to drag half of the market away from Google. Frankly, I don't see that happening.

I'm worried that this Bing V. Google rivalry could end up making Steve Ballmer reenact Moby Dick, with Google as the White Whale and Bing as the Pequot. If he throws eleven billion dollars away on a mad gambit to somehow dethrone Google his shareholders are not going to be happy with him.

Personally, I'm hoping Steve goes into full-on crazy attack mode and tries to obliterate Google. It won't work, but it will be so very entertaining to watch.

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The Author

<a href="/latest_stories/all/all/5" rel="author">Robert Evans</a>
The excitement about new smartphones, tablets and anything mobile drive Robert to unearth the latest rumors and developments in this fast moving space. He adopted 4G as soon as it become available and knows where the mobile market is going.
Robert can be contacted directly at robert@i4u.com.

 

 

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