The Orange View (on hiatus) Because Apple is great but it isn't perfect

20Sep/11Off

One billion dollars

That's how much Microsoft is losing per quarter on its Bing search engine, as David Goldman tallies up the damages for CNNMoney. The total loss so far? $5.5 billion. And, over that time, Google's market share has declined from 65% to 64.8%. Yipes.

Then you get the automatic response from the Microsoft cheerleaders analysts:

"Bing will likely be better than Google over time, but even if it is, users and advertisers still need to go to them," said Sid Parakh, analyst at McAdams Wright Ragen. "To be clear, this will take a long, long time to play out. This is something Microsoft will continue to lose money on." Several analysts, including Parakh, predict that Bing will continue to incrementally improve and gain share, becoming profitable in another three to four years.

-CNNMoney, September 20, 2011

Pretty tepid. So what exactly is the evidence that Microsoft will ever make money on Bing? The CNN headline says "Microsoft's plan to stop Bing's $1 billion bleeding" but there's no real plan beyond just keep experimenting with new ways to show search results. How is that a plan? And if you look at the graph accompanying Goldman's story, the search effort's losses are increasing as Bing's market share rises. Buried in the story is the fact that Microsoft's entire online unit over the past five years has lost $9 billion!  I'm just not sure what the analysts think is going to happen here.

And it's another example of journalists and analysts under-appreciating what they don't understand in the realm of computers and mathematics. Google's success is not simply the result of showing 10 blue links on a search results page. It's the algorithms, the speed, the network, the data centers, the spiders that crawl the web and assemble the index, the ads displayed -- an entire vast and complex ecosystem.

Posted by Aaron Pressman

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