Microsoft products tend to be widely used and rarely praised. Messaging platform Teams lacks the rave reviews of rival Slack, for example. Unlike Google, search engine Bing has not become shorthand for online queries.
Launched in 2009, Bing’s name is supposed to emulate the feeling of getting an answer right. This feeling is not reflected in the service’s own market share. Google is estimated to have more than four-fifths of the search engine market. In second place, Bing has less than a tenth.
Yet a small slice of the search advertising market is still a sizeable business. In the three months to September 30, Microsoft reported $2.9bn in revenue for search and news advertising, up 10 per cent on the previous year.
This is admittedly small compared to Google’s business. In the last quarter, the company’s “Search and other” segment reported revenues of $39.5bn — though its pace of growth is slower. The difference is that digital advertising is Google’s main business. Microsoft’s dominant business is software and cloud. Advertising is an impressive additional revenue stream — the sixth-largest business broken out.
Costs are rising — up 16 per cent in the last quarter. Last year, Microsoft secured the right to manage Netflix’s new advertising business. This will require investment in developing video ads. But the investment is helpful if search ad revenue grows. Other areas of business face a tough year. Sales of PCs are slowing and businesses are trimming IT spending.
There is also the chance that Microsoft’s investment in artificial intelligence could transform Bing along with the rest of the company. A forecast investment of $10bn into OpenAI would account for less than one-sixth of Microsoft’s free cash flow last year — a small price to pay.
Of course, OpenAI’s products are not perfect. Founder Sam Altman has warned that the company’s chatbot service is “incredibly limited”. For Bing, as with the rest of Microsoft, change will not be instantaneous. Google’s position as a brand synonymous with search remains unchallenged.
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