Where is Bing trying to be in the future

What's next for Bing?

Summary: And while many of us expected hardware/devices to be first to bear the brunt, Bing was where the leadership team tightened the screws. Not Bing the search engine, but the broader, extended Bing and advertising platforms.

In the wake of some belt-tightening, what's next for Microsoft's search and advertising platforms? Last week, we learned of some of the "tough choices" that Microsoft CEO Satya Nadella had warned would be coming as Microsoft began its fiscal 2016.

Microsoft handed off its display advertising business (and possibly 1,000-plus of its employees working in that business) to AOL. The company also opted to get out of the map-data-collection business and sold off those assets and about 100 employees to Uber; its new strategy is to license/display other companies' mapping data.

These moves are part of Microsoft's attempt to streamline and focus Bing -- a core part of Microsoft's Applications and Services Group that Ad Services Vice President Rik van der Kooi claimed last week was a "multibillion business that pays for itself."
Actually, unless Bing has hit the break-even point in the past several weeks, Bing hasn't yet achieved profitability. Microsoft officials have said repeatedly that they didn't expect this to happen until sometime at the start of fiscal 2016, which kicked off July 1. (I wouldn't be surprised to see Microsoft announce officially on its July 21 earnings call that Bing is now profitable.)

Starting around 2007, Microsoft began making substantial investments in building out its datacenters, infrastructure and search algorithm to try to give Google a run for its search and advertising money. The result: A constant string of operating losses from Microsoft's Online Services division for close to a decade.

Microsoft's search deal with Yahoo has helped Microsoft grow its search share. Microsoft officials had said that the Bing business would break even when it reached 20 to 25 percent share -- a mark it finally hit in the U.S. in April 2015, according to comScore.

However, it's worth noting that Microsoft's gains in search share largely have come at Yahoo's expense. Microsoft and Yahoo signed a search deal 10 years ago via which Microsoft was exclusively powering Yahoo search on the desktop and Yahoo became the ad sales force for Microsoft's premium properties.
       
            Under terms of the just-renegotiated search deal, Yahoo still will serve up Bing search results and Bing ads for a "majority" of its desktop search traffic. But now Yahoo can "enhance the search experience on any platform," which means Yahoo can use other back-end search providers on the desktop, and to continue to do so in mobile.

Like clockwork, Yahoo confirmed last week that it has begun testing results using other back-end search providers, including Google. As of October 1 this year, Yahoo (or Microsoft) has the right to terminate their updated search arrangement, effective almost immediately.

Microsoft officials are adamant that the company isn't getting out of the Web search or search-ad businesses. At this point, Microsoft has built Bing/Cortana deeply into many of its products, from Windows and Office 365, to Skype and Outlook that it can't and won't sell off or drop Bing.
So how does Microsoft make money with Bing, moving forward, beyond search advertising? The company has managed to forge a few third-party licensing arrangements for Bing with Apple, Amazon and now also AOL. (I'm not sure whether there's still much of a partnership left with Facebook.)

Subscription software/services that integrate Bing and Cortana is another somewhat indirect channel. If and when Microsoft ever starts charging for Bing Apps (now known as MSN apps)àits first-party consumer-focused news, weather, sports, travel, food, etc. apps -- there might be monetization opportunities there.

But a good chunk of Bing's value to Microsoft is on the back-end integration side. There are a lot of shared cloud, analytics, indexing, relevance and user understanding capabilities that Microsoft has developed through its web-search work with Bing that have enabled other new Microsoft products and technologies.

Microsoft may have finally stopped trying to be Google, but that doesn't mean the company is getting out of the search business...

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