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
7/5/2012 9:42:42 AM
You're so gross the way you approach everything. Reading your stuff just gives you that icky feeling.
"I mean, if you wanna break down someone's door, why don't you start with AT&T, for God sakes? They make your amazing phone unusable as a phone!" -- Jon Stewart on Apple and the iPhone
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
Newegg Legal Chief: "We don't Feed the Trolls"; Defeats Bell Lab Shell Comp.
May 17, 2013, 10:11 AM
Quick Note: EA Axing Online Pass
May 16, 2013, 10:59 AM
Google's Eric Schmidt: "Don't Be Evil" was Stupid
May 14, 2013, 11:00 AM
RIAA Acknowledges Digital Streams for Artist Awards
May 13, 2013, 7:17 AM
ESPN Looking to Pay Wireless Carriers for Customer Data Overages
May 10, 2013, 11:21 AM
YouTube Offering Paid Subscriptions for Individual Channels
May 10, 2013, 10:50 AM
Most Popular Articles
Report: Microsoft Eyes Return to "Dying" Windows 7 Path After Windows 8 Flop
May 13, 2013, 9:50 AM
Bill Gates Gets Teary-Eyed While Discussing Steve Jobs, Shows Off Life-Saving Tech on 60 Minutes
May 13, 2013, 12:30 PM
Windows 8.1 Will Be Free; Microsoft Holds Onto Struggling ARM Variant
May 14, 2013, 2:57 PM
Google Announces "Pure" Galaxy Nexus S4 for $649, Android Updates
May 15, 2013, 1:42 PM
U.S. Federal Traffic Board Wants to Make Drunk Driving Threshold Far Harsher
May 15, 2013, 11:32 AM
Latest Blog Posts
Parents of Pre-Teen Drivers Commonly Practice Distracted Driving Says Study
May 9, 2013, 7:16 AM
Apple's iOS 7 Running Into Internal Delays Due to Massive Overhaul
May 1, 2013, 4:26 PM
Elon Musk Willing to Spend More Money on Widening of 405 Freeway
Apr 26, 2013, 7:28 PM
New $100 Bill Due in October
Apr 24, 2013, 11:52 PM
Volkswagen Shows off iBeetle in Shanghai
Apr 22, 2013, 9:29 PM
More Blog Posts
Copyright 2013 DailyTech LLC. -
Terms, Conditions & Privacy Information