Microsoft Loses $6.2B USD on Internet Advertising Bet
July 3, 2012 6:54 PM
comment(s) - last by
Bing has a sixth of the market, but is losing loads of cash
It started off simple -- "beat Google". We'll transform Microsoft into an "industry leading, Internet-wide advertising platform" pitched Kevin Johnson.
Today Mr. Johnson is no longer with Microsoft Corp. (
). He's CEO of Juniper Networks, Inc. (
). But his $6.2B USD gamble into display advertising firm aQuantive is back in the headlines after Microsoft took a
$6.2B USD writeoff
on the struggling pet project.
Microsoft spent the $6.2B USD to acquire aQuantive in 2007, a bold bid that greatly expanded its small stable of search-tied online ad-offerings. Since the acquisition, though, the road has been nothing but rocky.
To be fair, Microsoft has grown Bing from an 8.4 percent market share to a 15.4 percent share, according to ComScore. But the problem is that gain has been less of a grab and more of a resource transfer, as it
came at the expense of Yahoo!
), the floundering search veteran who Microsoft
paired with back in 2009
The problem is that Microsoft needs to reach a "tipping point" in order to lure large advertising clients to its service. Analysts have speculated that the magic number is around 25 to 30 percent of the market. But that would likely require Microsoft to scoop double digits of market share away from Google Inc. (
) which has hardly budged from its 60+ percent dominant position.
Bing is still struggling to reach its "tipping point" and achieve profitability.
Search in theory works something like a toll road. You pay a certain amount to route traffic to you -- expenses which range from the
cost of server farms
cost of advertising to build customer awareness
of your brand name. You're repaid when people visit your search homepage and click on ads -- text or graphics -- that are displayed amongst the search results. Those clicks are compensated on a unit basis by advertising clients either directly (as in Microsoft's case) or through third parties.
The idea is to make your advertising dollars outweigh your "traffic acquisition" and hosting costs, generating a net profit. Google is the master of that game. Microsoft, is unfortunately on the wrong end of the equation.
Search is hurting Microsoft financially, burning away the
of its operating system division. Losses
hit $1B USD
per quarter last year, but have slowed to a slower bleed of $2B USD in the last 12 months.
The company glumly surmises, "While the aQuantive acquisition continues to provide tools for Microsoft's online advertising efforts, the acquisition did not accelerate growth to the degree anticipated."
Search is an expensive hobby, but Microsoft plans to stick with it for now, in hopes of reaching that ever elusive profit cloud. But one has to wonder how profitable Microsoft might be, if it just swallowed its pride and dumped the search baggage.
This article is over a month old, voting and posting comments is disabled
RE: I'm afraid MS won't be in the game long if it were to dump Bing
7/4/2012 3:25:03 PM
You are correct which is why Pirks' statement isn't as bad as the negative votes it received.
Windows is not the future. It's the cloud and the internet. A lot stuff are already and will be replaced by the cloud. Most people just need a browser nowadays.
So if MS is failing on the internet and Google is succeeding, then MS will surely die of a slow death. If MS can't compete with Google and can't compete with Apple, then there is nothing for them.
"A politician stumbles over himself... Then they pick it out. They edit it. He runs the clip, and then he makes a funny face, and the whole audience has a Pavlovian response." -- Joe Scarborough on John Stewart over Jim Cramer
Quick Note: Bing Adds 165 TB of New Satellite Imagery to Bing Maps
June 26, 2012, 5:41 PM
Microsoft Fought to Place Bing Search Engine in AMC's Walking Dead
October 12, 2011, 4:49 AM
Bing Loses Nearly $1B per Quarter for Microsoft
September 22, 2011, 12:59 PM
Microsoft: a Year of Record Earnings And All it Gets is 6% Stock Bump
July 20, 2011, 5:36 PM
Bing Kicks Yahoo Out of Second Place in Search Market
September 15, 2010, 9:31 AM
Quick Note: Google Drive 100GB, 1TB Plans See Major Price Cuts
March 13, 2014, 2:45 PM
Target Missed Early Warning Signs of Holiday Data Breach
March 13, 2014, 1:45 PM
Amazon Increases Prime Subscription to $99/year Starting March 19
March 13, 2014, 8:23 AM
Bitcoin King's American Accounts Get Frozen
March 13, 2014, 3:00 AM
Time Warner Cable CEO Says Merger with Comcast is a "Dream Combination", Will Increase Innovation
March 12, 2014, 2:37 PM
North Carolina-based Company to Offer Gigabit Internet Before Google
March 12, 2014, 2:31 PM
Most Popular Articles
Bitcoin King Pt. II: Mt. Gox's Dictator Karpelès Proves Tragically Flawed
March 7, 2014, 1:12 PM
Windows 8.1 Update 1 Leaked Early
March 7, 2014, 9:30 AM
Hack Reveals Fallen Bitcoin CEO's Posh Tokyo Penthouse
March 10, 2014, 4:28 PM
Vine Users No Longer Allowed to Post Pornographic Videos
March 7, 2014, 1:47 PM
Staples Closing 225 Stores Across North America
March 7, 2014, 1:24 PM
Latest Blog Posts
Tesla vs. BMW: Who Has the Safer EV?
Feb 1, 2014, 2:56 PM
Justice Leaks Details of Next HTC One Two Flagship Phone
Dec 5, 2013, 4:04 PM
Global Cyber Espionage Concerns Reveal Growing Cyber Armies
Nov 29, 2013, 11:04 AM
Is The Period Becoming an Expression of Anger?
Nov 26, 2013, 2:02 PM
NSA and Congress -- You Will Never Kill the Constitution, It's an Idea
Nov 10, 2013, 2:00 PM
More Blog Posts
Copyright 2014 DailyTech LLC. -
Terms, Conditions & Privacy Information