Should Microsoft Dump Bing?

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A pair of bloggers in the New York Times today recommend that Microsoft sell Bing as a way to pare the company's online losses and fatten the bottom line for investors. Selling Bing may save money in the short term, but in the long term it would ensure Microsoft's eventual irrelevency in the Internet and mobile future.

Robert Cyran and Martin Hutchinson, in their Reuters Breakingviews blog, have this to say about selling Bing:

Microsoft needs to concentrate on a different kind of search: finding a buyer for Bing, its online search business. Bing is the industry's distant No. 2 after Google. It has become a distraction for the software giant --- one that costs shareholders dearly. The division that houses Bing lost $2.6 billion in the latest fiscal year. Facebook, or even Apple, might make a better home for Bing. A sale would be a boon for Microsoft's investors.

They go on to claim that Microsoft could sell Bing for $11 billion, based on sales related to search, and that overall, it would result in a 10 percent increase in profit for the company by unloading the search engine.

There's so much wrong with the argument, it's hard to know where to begin. First is that the numbers are off-kilter; Bing didn't lose $2.6 billion for Microsoft in the past year; the entire online division did. There are plenty of other products and services in the division that bring in little or no revenue. As the bloggers themselves write, Bing brought in $2.5 billion in sales for the year that just ended on June 30. So it's hard to know the bottom line numbers for Bing by itself.

Beyond that, though, Bing is central to the future of Microsoft, especially in mobile, where the greatest growth it. Ultimately, a major reason Microsoft needs Windows Phone to succeed is because of ad revenue from online searching, which is a tremendous growth market. In addition, mobile search will become the glue that holds many other mobile services together, an area where Microsoft desperately needs to succeed.

Google, for example, doesn't get any money at all from licensing Android; its revenue comes from search, maps, Gmail, and other Google services. Microsoft will need the same business plan if it is to succeed in mobile. And for that it needs a search engine, and a very good one. And Bing is a very good one, and constantly getting better.

In addition, as the bloggers themselves note, Bing and sites it powers like Yahoo make up 27 percent of the U.S. market. They see this as a bad thing. But it's certainly not that --- 27 percent of the U.S. search market is a tremendous revenue opportunity. In addition, if Microsoft abandons Bing, it might as well just about abandon its entire online presence, because aside from Hotmail, Bing is its only substantial Internet service. But giving up oneline as well as mobile would ensure that Microsoft will never see high-growth days.

So yes, selling Bing would certainly be good in the very short term for Microsoft, because it would bring in substantial revenue from the sale and pare short-term losses. In the long run, though, it would be a disaster.

This story, "Should Microsoft Dump Bing?" was originally published by Computerworld.

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