

Microsoft pays, literally, for Bing's bigger market share - cwan
http://www.techflash.com/seattle/2010/02/microsoft_pays_the_price_literally_for_bings_bigger_share.html

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pg
"If we grow share, we will grow our way into profitability"

We lose money on each unit, but make it up through volume.

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loganfrederick
As much as I agree with these obvious concepts, and I don't think any such
model on its own is sustainable, there is a caveat. The model of potential
financial success on the project _could_ be more complex than simply price
times units.

Using the Microsoft example, their traditional business lines are clearly not
as easily profitable as they used to be. Their options are basically: Hunker
down on their main products and innovate or diversify into new revenue
streams.

They've generally gone with the latter. Success has been limited (this thread
has inspired me to blog about the importance of the Xbox success on Microsoft
as a whole). Yet it is still the direction they've chosen.

That brings the discussion to the war with Google over search. They see huge
potential profits and markets in the internet, with search and its related
advertising revenues being the biggest. It's also a market with a clear market
leader, but one who doesn't necessarily have a complete monopoly and can lose
customers in a click (aside from custom deals such as search on mobile
devices, etc.)

Microsoft probably sees economic value that helps make up for some of the
immediate financial loss: Not allowing one company to monopolize any tech-
related industry or at least establish a brand and product in a growing market
space.

None of these directly compensate for the cash spent, but they do have value.
Microsoft _has_ the cash to make long-term investments, and that's how they
view search, as a long-term investment.

I feel compelled to be thankful that Microsoft is even bothering. I'd hate to
see Google be the only serious competitor in the search space. As nice a
company as they may seem, anyone given an absolute monopoly would inevitably
cave to some form of laziness or corruption.

