Bing, Microsoft’s answer to the Google information empire, has done a decent job of working its way into the public mind. The suite of services is embedded in the modest number of WP7 devices sold so far, and the name isn’t unfamiliar to non-nerds. However, as of a recent Microsoft earnings call, it doesn’t look like the service is ready to stand on its own financially.
The earnings report for Q4 of the fiscal year 2011 reveals that Microsoft sunk $1.4 billion into their Online Services Division, yet only returned $662 million in cash, for a net loss $728 million, meaning not only did Microsoft lose three-quarters of a billion dollars, but returned less than half of what they invested on a two-year-old product (as well as all their other online services), in just three months.
If you’re thinking that it’s money well spent, though, comScore might like to have a word with you. In the U.S. market, Microsoft’s marketshare for total core search in the U.S. increased a mere 0.5%, from 13.6% at the end of March, to 14.1% at the end of June. Worldwide, the situation looks even bleaker for Bing, where the service is actually losing marketshare. Even if you combine the searches on Yahoo! that are powered by Bing, Microsoft still only has about 30% of the U.S. market, sitting next to Google’s 64.5% share.
Of course, Microsoft isn’t in the search market for money made on searches. As part of their larger strategy, the investment could make some more sense. The future of the tech world isn’t in products, but in ecosystems. And where Google, Apple, and Microsoft are all positioning themselves to be their own one-stop shops, having online services makes sense. In truth, Google sinks a lot of money into their online services as well that don’t directly make money, but rather serve to push a unified brand.
Still, it’s a noteworthy step for a company that historically has been all about the software-for-profit. The same earnings report indicates that Microsoft made $8.3b between their Windows, Office, and Server and Tools divisions. The money train still makes plenty of stops at Redmond, however if Microsoft’s online services division is going to be of value to Microsoft, it looks like it will be in brand power instead of cash for a while now.
Microsoft Investor Relations: http://www.microsoft.com/investor/EarningsAndFinancials/Earnings/PressReleaseAndWebcast/FY11/Q4/default.aspx