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
7/10/2012 11:20:36 AM
You make some good points. I don't necessarily agree that Microsoft will kick the bucket without Bing. After all, most companies don't have a search engine and do just fine. However, I think we agree that killing off Bing, especially given its growth, would very negatively impact the company. Microsoft can't expect to maintain their current status going forward without delivering a compelling internet service platform. Bing provides a nice tie in to such services.
Unfortunately, your overzealous ripping on Mick (deserved or not) causes many to ignore these points, downrate your post to oblivion, and thereby prevent further reading by many visitors. I propose that you present the flaws in the article as you see them, back them up with facts and logical reasoning, and let others decide based on your arguments how many brain cells Mick (or anyone else) has.
"Nowadays you can buy a CPU cheaper than the CPU fan." -- Unnamed AMD executive
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
LinkedIn CEO Questions Need for Google+
July 19, 2011, 9:37 AM
Bing Kicks Yahoo Out of Second Place in Search Market
September 15, 2010, 9:31 AM
Tech's Biggest Loser on Tax Day: eBay Pays Nearly 99 Percent Tax Rate
April 15, 2015, 3:28 PM
Death and Dragons -- Report Claims Game of Thrones Hit by Piracy "Tidal Wave"
April 10, 2015, 8:37 AM
Court Blocks Twitter and YouTube in Turkey After Pro-Communist Attack in Istanbul
April 6, 2015, 10:53 AM
In Graphics and Quotes: $10.4 Billion Charter & Bright House Merger
April 2, 2015, 5:19 PM
WSJ Report Implies That Google Leveraged Lobbying to Kill Antitrust Abuse Probe
March 25, 2015, 5:37 PM
Nationalist Hackers From Turkey Cause Chaos, Deface Dozens of Sites
March 16, 2015, 12:29 PM
Most Popular Articles
Raytheon $1.9 Billion Purchase of Websense Raises Tough Questions
April 20, 2015, 1:57 PM
HBO to VPN HBO Now Users: Prove You Live in U.S. or We Will Terminate You
April 21, 2015, 12:17 PM
After Record-Setting Week, Samsung Predicts 70 Million GS6/GS6 Edge Sales
April 17, 2015, 8:39 PM
AMD CEO: Windows 10 Will Launch at "The End of July"
April 20, 2015, 7:24 PM
Quick Note: Lady Macbath -- One Japanese Woman's Apple Themed Revenge
April 23, 2015, 11:47 AM
Latest Blog Posts
Sceptre Airs 27", 120 Hz. 1080p Monitor/HDTV w/ 5 ms Response Time for $220
Dec 3, 2014, 10:32 PM
Costco Gives Employees Thanksgiving Off; Wal-Mart Leads "Black Thursday" Charge
Oct 29, 2014, 9:57 PM
"Bear Selfies" Fad Could Turn Deadly, Warn Nevada Wildlife Officials
Oct 28, 2014, 12:00 PM
The Surface Mini That Was Never Released Gets "Hands On" Treatment
Sep 26, 2014, 8:22 AM
ISIS Imposes Ban on Teaching Evolution in Iraq
Sep 17, 2014, 5:22 PM
More Blog Posts
Copyright 2015 DailyTech LLC. -
Terms, Conditions & Privacy Information