

Microsoft has lost $9 billion on Bing - bufo
http://money.cnn.com/2011/09/20/technology/microsoft_bing/index.htm?source=cnn_bin

======
0x12
> Stefan Weitz, Microsoft's director of Bing, believes that if Bing can change
> the way people think about search, sooner or later users will switch over
> from Google.

For that to work people would have to change the way they think about
microsoft as well, not how they think about search.

Right now there are several ecosystems on the web that you can be part of.
There is the 'social' ecosystem which governs you interactions with other
people rather than with other services. Facebook, twitter, google+ etc. Then
there is 'mobile', which is a gateway to a bunch of data and to information.
Then there is your work and the applications you use to do that work. Finally
there is search.

Search is different from all the others in that you _could_ switch overnight
to a new provider, but just like any other good infrastructure component, you
probably will not do that if you are satisfied with your current provider.
Search is not visible enough to warrant a conscious decision until you are
dissatisfied.

Changing your thinking on search is one hurdle that is going to be hard to
cross without say google going down for a couple of weeks or some major mishap
that would make their search results unusable for any period of time. That
would give an upstart a better chance at a first shot at retaining the users.

Changing the way you think about microsoft is going to be a very hard obstacle
to clear as well. Microsoft is synonymous with software that you use on your
desktop and with several botched attempts at doing search. Before you try them
again you'd have to see google performing worse than the _best_ that microsoft
has ever presented in this field.

Frankly I'm surprised that they keep sinking money into this, they've clearly
failed to establish a profitable beach head, meanwhile google is making money
hand over fist in the exact same domain. I'm happy they do, more competition
is better but for now google seems to be acing them. Microsoft will have to be
very careful that 'search' does not turn in to their Afghanistan.

~~~
pessimizer
>Frankly I'm surprised that they keep sinking money into this, they've clearly
failed to establish a profitable beach head, meanwhile google is making money
hand over fist in the exact same domain.

This seems to be Microsoft's MO, and it seems to have worked with the XBox.
Push hard, buy a second place position with massive marketing, investment, and
underpricing, and continue to maintain it while losing billions and billions.
Then the first place company inevitably, eventually makes a series of
horrible, very public missteps, and Microsoft is positioned as "The
Alternative."

On one hand, I think it's a pretty sleazy tactic, but on the other hand I
rarely ever see any corporation thinking in the long term, especially to this
absurd degree. I'm not exactly sure what the strategy is to defend against
this, either.

~~~
Arjuna
Microsoft deserves some credit for the XBOX.

They had the foresight to include a NIC (Network Interface Card) in the XBOX,
right out of the gate. It was also the first game console to include a hard
disk.

The PS2 did not initially include a NIC, and Sony offered the add-on
PlayStation Network Adapter in order to compete with Microsoft. In addition,
Microsoft launched XBOX Live _approximately four years_ ahead of Playstation
Network.

Regarding missteps, Microsoft has experienced their share of technical hurdles
[1].

Regarding financial losses, Sony has experienced the same [2].

[1] <http://en.wikipedia.org/wiki/Xbox_360_technical_problems>

[2] [http://www.engadget.com/2009/08/25/sony-still-losing-
money-o...](http://www.engadget.com/2009/08/25/sony-still-losing-money-of-
ps3-slim-hardware)

~~~
runjake
Didn't Microsoft shun any mention of the word "Microsoft" in XBOX marketing,
at least initially? That might've played a big part in it's success. Or at
least a big part in giving it a fair shot.

~~~
Arjuna
_Didn't Microsoft shun any mention of the word "Microsoft" in XBOX marketing,
at least initially?_

I do not know the answer to your question, but I would venture to say that the
target audience would have known either way. The adult game cognoscenti are
obviously dialed into magazines, blogs, etc. Kids are of course in the know as
well, and in cases where they do not have purchasing power, they will
undoubtedly provide the necessary counsel to those above them that do :)

 _That might've played a big part in it's success. Or at least a big part in
giving it a fair shot._

My opinion is that the XBOX's success was largely due to the quintessential
launch title, _Halo: Combat Evolved._ This is one of the driving factors
behind the XBOX's sell-out launch in North America.

~~~
chc
Bungie was always Microsoft's ace in the hole. Online gaming helped, but it
was more incremental and more easily copied. Now that Bungie's out of
Microsoft's grasp, I'm betting Sony takes back the lead (though in a much
closer race) for the next generation of consoles.

~~~
Arjuna
Yes, it will be interesting to see how the Bungie-Activision relationship
unfolds. I am sure that Bungie is happy to have moved on from the Halo
franchise in order to work on new projects, but perhaps in a mixed-emotions
sort of way that we all feel when we want to move on, but at the same time let
go.

Meanwhile, the Halo torch has been passed to Microsoft's 343 Industries, with
their sights set on developing Halo 4.

------
ramchip
_"Bing will likely be better than Google over time, but even if it is, users
and advertisers still need to go to them," said Sid Parakh, analyst at McAdams
Wright Ragen. "To be clear, this will take a long, long time to play out. This
is something Microsoft will continue to lose money on."_

That's an example of an annoying tendency that I see in many news sources. Why
is a vague quote from an investment advisor relevant here? Who is Sid Parakh
and what justifies his opinion? I see nothing related to search on his
linkedin profile, at least.

~~~
brown9-2
Even more, why does Sid Parakh believe that Bing will "likely" be better over
time? He doesn't even qualify his own statements.

~~~
jaredmck
It seems unlikely that bing will be better over time, since google has more
data and will continue amassing more click-through data with which to improve
the results.

------
makecheck
Please retain original article titles as per the guidelines [1]. In this case,
the new title is also inaccurate.

This article is actually called "Microsoft's plan to stop Bing's $1 billion
bleeding", and the loss on Bing alone is $5.5 billion _since mid-2009_. It was
only Microsoft's _total online services division losses_ that reached $9
billion, and that was _since 2007_.

[1] <http://ycombinator.com/newsguidelines.html>

~~~
puredemo
I wonder what else is in the online services division?

~~~
0x12
MSN, messenger.

~~~
stumm
I think messenger is part of windows live, which I've been told falls under
the windows umbrella.

------
iamelgringo
In certain verticals, Bing really outshines Google like travel search, video
search, and image search. Bing maps is really quite good.

Microsoft is a cash cow, and has multiple sources of strong revenue. Google
has one: advertising. Microsoft can afford to bleed cash for years, just to
give Google a black eye.

Microsoft only this past year got out from under government oversight for
antitrust violations. I've spent quite a bit of time talking to people at
Microsoft the past 2 years. A lot of the BizSpark team are ex-Sun people. And
a number of them have mentioned to me how shocked they were at how profoundly
the anti trust litigation still affected employees within the company 10 years
later.

Windows 8 is the first OS since ME that comes out without government anti
trust oversight, and it looks like Microsoft has come out swinging, both at
Apple and Google. <http://channel9.msdn.com/Events/BUILD/BUILD2011/KEY-0001>

Google is just now starting to get into anti trust how water, and I have no
idea how they are going to get out of it. I think Yelp in particular has a
really strong case:
[http://www.pcworld.com/article/240330/google_faces_antitrust...](http://www.pcworld.com/article/240330/google_faces_antitrust_accusers_expedia_nextag_and_yelp_wednesday.html)

~~~
wavephorm

      Microsoft can afford to bleed cash for years
    

Except that's exactly what they've been doing for a long time now. Microsoft
reminds me of a cliche fat cat executive who's always red in the face, yells
and bosses everyone around, and acts like he's invincible... until he keels
over from a heart attack.

~~~
barista
Except that for pretty much every year it has been in business the revenue and
the profits have been growing.

~~~
wavephorm
Sure the company as a whole is profitable. But if their internet businesses
were it's own company, and run in this manner, they wouldn't survive. They're
sure good at keeping up an appearance of extreme arrogance.

------
brudgers
Another half assed analysis of Microsoft's Online Services Division.

OSD includes Bing, MSN, Live Mail and Messenger...aka support services they
provide to their internal and external customers (e.g. Windows Phone 7 uses
Live Mail). It doesn't include profit centers like Xbox Live or their various
enterprise level cloud services.

OSD is primarily a cost center for marketing. Microsoft attributes half the
value of its goodwill to OSD (US $6B).

[[http://www.microsoft.com/investor/EarningsAndFinancials/Earn...](http://www.microsoft.com/investor/EarningsAndFinancials/Earnings/FinancialStatements/FY11/Q1/IRFinancialStatementsPopups.aspx?tag=msft:GoodwillDisclosureTextBlock&title=Goodwill)]

In addition, it's revenues don't reflect any savings Microsoft realizes by
advertising it's own products on it's own ad network or by promoting its own
brands on MSN (e.g. stories from MSNBC).

Finally, the value of the data collected by the OSD is not directly reflected
as revenue. That data provides Microsoft with insight regarding search,
shopping, social networks, news interests, etc.

~~~
kooshball
All Windows Live properties are in the "Windows and Windows Live" division
under Sinofsky. Not in OSD.

[http://en.wikipedia.org/wiki/Microsoft#Windows_.26_Windows_L...](http://en.wikipedia.org/wiki/Microsoft#Windows_.26_Windows_Live_Division.2C_Server_and_Tools.2C_Online_Services_Division)

------
Aloisius
The one thing you can say for Microsoft is that they stick to their guns and
keep trying.

With Google, you never know if a product has a team behind it or it was
someone's side project that got out of hand and received too much press that
they'll kill a couple in a couple months because it didn't get enough
traction.

Now sure, in the startup world the idea of sticking with an idea and plotting
along losing money is a terrible sign, but on a personal level I can't help
admiring Microsoft's fierce tenacity.

------
danmaz74
The examples of "semantic search" reported in the article don't look
innovative at all to me. Giving you specialized results (eg maps) based on the
search query has been done for ages, and expanding on that can be useful but
it will hardly be revolutionary.

Moreover, trying to guess the semantics of user's queries can be very annoying
to some users, especially the geekier ones which are often also the trend
setters in this area - there are lots of people already being pissed off by
google when they search for synonyms of what you type, and not exactly what
you type.

Competition is always good and I hope that Bing and Google will make search
always better, but I'm not so sure how useful will be what was reported in
this article.

~~~
mturmon
The article _is_ thin on the use cases of semantic search, which is the market
Bing says it's trying to serve ("a decision support tool").

The article raises the question of "how will Bing make money" and then drops
the question, and goes on to talk about competing with Google. Lazy thinking
by the writer.

------
dave_sullivan
Sounds like bing probably represents better bang for your advertising buck
than google at this point. Could be good deals there for marketers.

For microsoft's part, it just seems like they're always one step behind
google, which is one step behind Facebook, which sooner or later will be one
step behind someone else when they've maxed their revenue from their current
business and feel compelled to stray from their core competencies. History
repeats itself and the young grow old.

Also, thought it was an interesting bit about bing gaining marketshare from
yahoo (their partner) and not google. Ouch.

~~~
brown9-2
Can you explain why you think Bing would be a better bang for your advertising
dollars? Because less users would mean lower ad rates?

~~~
dave_sullivan
Sure, fewer advertisers = lower demand & lower prices, less users OTOH = less
supply & higher prices... not sure which side of the equation is having more
effect (I suspect it varies) but I'm thinking there's some value there over
adwords.

------
bergie
From last year:

 _When you hear the word “startup”, you most likely think of an Internet
startup. Maybe it’s funded, maybe not, but its burn rate almost for sure puts
it in the red each quarter. Obviously, Microsoft is not a startup. Nor have
they been a startup for a long time. But what if you thought of their Online
Division as an Internet startup? One funded by Microsoft. The thought it
terrifying. Or it should be. To Microsoft._

 _Microsoft released their Q1 2011 earnings today. The results were very good
except for one very big blemish: the Online Division. Last quarter, the
division lost $560 million for Microsoft. That’s better than the previous
quarter when it lost a staggering $696 million, but it’s much worse than a
year ago, when it lost $477 million. In the past year, Microsoft has lost well
over $2 billion from the division._

<http://techcrunch.com/2010/10/28/microsoft-online-business/>

------
bstar77
I think that I have a similar problem to many other users... It's not that
Bing is a bad product, it may be the best thing out there. The problem is that
I've lost confidence in Microsoft as a company to objectively serve me
information. It's a trust issues that I don't have with Google or Apple...
yet. Those companies have their warts too, but nothing like I experienced in
the 20+ years I was locked into the MS ecosystem.

As long as a guy like Steve Ballmer is running the company, I will stay far
away. Perhaps when management changes down the road result in MS better
demonstrating that they are more interested in producing great products rather
than gaining market share at any cost, I'll take them seriously again. We're
starting to see some of that with windows mobile and win8.

------
bane
The sad thing is that they are spending this on a fight that's largely been
over for a few years. Hell, the social fight is nearing a conclusion were it
not for g+, MS is not just trailing in the Internet space, they are in a time
machine.

------
joelthelion
As much as I'm happy to see Microsoft losing money, this is actually very bad
news. Any competition for Google is a good thing, and at this rate it won't be
long before Microsoft cuts expenses on Bing...

------
olliesaunders
I get that Bing is no success, but how is it losing so much money? That can’t
just be developer salaries can it?

~~~
dillona
Advertising I'd imagine

------
forkandwait
Why I don't use Bing:

1\. I hate the stupid pictures and the other stupid fluff.

2\. It is called "Bing" (the only worse brand name is "Yaris"... what are they
thinking?)

3\. Microsoft doesn't help fund and staff a LOT of the Free software
infrastructue I depend on.

~~~
IanDrake
>It is called "Bing"

I've always wondered about names...is Bing only a bad name because they
haven't been successful? Is Google only a good name because they've been
incredibly successful? I wonder how many people said the same thing about
Google 12 years ago?

~~~
gamble
I still see Google as a silly name, but at least it has some rationale in the
corporate philosophy and a hint of geek cred. "Bing" just smacks of a
committee of corporate drones trying to look hip with an unintentional parody
of younger, cooler Web 2.0 company names.

------
JoshTriplett
Providing the same services as Google will not get people to switch from
Google, even if Bing provided somewhat better results. Google got people to
switch because they didn't just provide astonishingly better results, they did
things quite differently than others. If Bing wanted people to switch, they
have to do something different, not just do the same things "better".

Bing can't win by offering "a better way to Google":
<http://www.youtube.com/watch?v=tYVCk10AzS0>

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alttag
I suspect part of Google's success is not just front-page search but also
site-specific searches (how some sites use Google as a a back-end search).

Perhaps more significant is their number of AdSense affiliates. (After all,
search doesn't make money, advertising does.) Blog after blog and developer
and developer continue to embed Google ads, and are thus themselves bound to
Google and encouraging others to do so.

------
chrismealy
A couple of years ago they'd lost something like $8 to $10 billion on xbox
too.

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pnathan
Well, Bing always feels slow and 'baroque' in visual looks. Google always is
fast and has a very clean visual look. Duckduckgo is slow and has a clean
visual look (and doesn't track me).

I use DDG. :-)

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kablamo
Thats a lot of money. Is duckduckgo profitable yet? I bet its not losing $1
billion per quarter. But then again I suppose Bing has hugely more market
share than duckduckgo.

------
mattmanser
One wonders why with an apparent 15% share they're losing so much?

Also find it interesting that they're gaining share, while the article states
it's from other providers but Google, doesn't that still mean that these users
are actually choosing Bing over Google? That they're chosen it because it's
better?

~~~
brown9-2
They are losing money because they are pouring money into buying that 15% with
advertising, deals with mobile carriers, etc. The division also has thousands
of employees.

Bing is not like a small but scrappy startup who can make a profit off their
small market share because they are lean.

