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Microsoft Executive Says Bing Will Eventually Make Money

February 3, 2010

A top Microsoft executive said the company’s 10-month-old search engine Bing, which has struggled to gain ground on Google, can still be a viable runner-up and make money online eventually, Reuters reported.

Microsoft has lost more than $5 billion over the past four years trying to build an online business and hopes to turn that around after a search advertising partnership with Yahoo becomes fully operational.

Yusuf Mehdi, senior vice president of Microsoft’s online audience business, said in an interview on Tuesday that as soon as they close and implement the Yahoo deal then they would have achieved a milestone.

“For advertisers, we are a credible No. 2,” he said.

Mehdi, who is charged with making Bing and the MSN portal a financial success, said the goal is about share gain.

“If we grow share, we will grow our way into profitability, and we have confidence we can do that,” he said.

ComScore shows that Microsoft now has 10.7 percent of the U.S. search marketplace, up from 8 percent before Bing’s launch in June, yet it still lags behind Google’s 65.7 percent and Yahoo’s 17.3 percent.

However, Microsoft will effectively control almost 30 percent of the search market — a key number for advertisers — once U.S. regulators approve a deal that makes Bing the underlying search engine for Yahoo.

Mehdi said that at 30 points they are now a credible option. “The nice thing is we can say (to advertisers) you can be close to 30 percent share in one easy buy. That 30 percent carries a lot of weight in the marketplace.”

He believes that once advertisers start to catch on, Microsoft will be on its way to making money online — a goal that has eluded the company for many years.

“Clearly there’s a huge return in the search marketplace that can more than make up the investments we’ve put in to this point,” he said.

Experts say it is difficult to gauge the global search ad marketplace, but Google’s annual revenue of more than $23 billion indicates that it is large and growing.

Mehdi said the biggest part of moving into profit is just getting the scale.

“We’re built out to be a much larger player. We’ve spent the money and built out in such a way that we can be a player at scale. Every day that we grow a tenth of point of share, that moves us further up the curve.”

Mehdi said the Bing application was a hit on Apple Inc’s mobile devices, but he refused to comment on recent reports that Apple is considering making it the default search application on its iPhone.

He also said Microsoft has no plans to spin off or sell MSN, saying there was a “great synergy” between Bing and MSN for advertisers.

The company has planned a full-scale relaunch of MSN in which they would clean up the look of the portal and offer the choice of custom home pages focusing on entertainment, news, sports, money or lifestyle.

“To get that right, it takes some time, so we’ve delayed it a little bit to make sure we get the features right,” said Mehdi.

Mehdi said Bing’s gains have not so far reduced Google’s hold on the market, which has actually increased 0.7 percentage points since Bing’s launch.

He said Bing ultimately wants to be a major player at scale, so they’re going to have to grow against Google at some point.

“But we’re still outmanned and outgunned by Google, they still have way more engineers than we do.”

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