“Microsoft’s Bing search engine is indeed gaining some share of search queries in the US market (globally, Bing is nowhere),” Blodget reports. “But it is gaining this share at an absolutely mind-boggling cost. Specifically, Microsoft is gaining share for Bing by doing spectacularly expensive distribution deals, deals that don’t even come close to paying for themselves in additional revenue… For every $1 Microsoft generates from each new search query it buys, it spends $3 to get it. (And that’s just direct costs–the costs of obtaining and processing the query. It doesn’t include sales and marketing, research and development, and general and administrative costs–all of which are subtracted from the -$2 Microsoft has already lost on every new query.)”
MacDailyNews Take: Microsoft’s BoD should give Ballmer a raise and direct him to build more Apple Retail, er… Microsoft Retail Stores. That’ll save the company. No, really, it will.
May Steve Ballmer remain Microsoft CEO for as long as it takes!
Blodget reports, “In the past year, Microsoft’s online revenue grew $84 million. And its cost to generate that revenue grew $292 million… At the loss rate in the past quarter, in fact, Bing is now losing a spectacular $3 billion a year. $3 billion! This loss is ~$500 million more than Bing’s run-rate revenue, which is about $2.5 billion. Put differently, Bing is spending $5.5 billion a year to generate $3 billion of revenue.”
“Now it’s clear that Steve [Ballmer] focused his obsession on the wrong market. And the wrong competitor. While Steve has thrown chairs in rage and burned billions obsessing about killing Google in search, he has been utterly ambushed by a former zombie competitor known as Apple,” Blodget reports. “Apple invented the products that are now destroying Microsoft–the iPhone and the iPad–in the past 5 years. Microsoft, meanwhile, missed these markets completely… If Microsoft loses the Bing war, Microsoft will just lose a boatload of money. If Microsoft loses the Apple-Android-Mac-Chrome war, meanwhile, Microsoft’s core business will be destroyed.”
Much, much more in the full article, with a chart of Microsoft’s online income that’s soaked in red ink, here.
MacDailyNews Take: Steve Ballmer vs. Steve Jobs is not a fair fight, but it sure is fun to watch!
Excerpts from a BusinessWeek interview with Steve Jobs, October 12, 2004:
Steve Jobs: Apple had a monopoly on the graphical user interface for almost 10 years. That’s a long time. And how are monopolies lost? Think about it. Some very good product people invent some very good products, and the company achieves a monopoly. But after that, the product people aren’t the ones that drive the company forward anymore. It’s the marketing guys or the ones who expand the business into Latin America or whatever. Because what’s the point of focusing on making the product even better when the only company you can take business from is yourself? So a different group of people start to move up. And who usually ends up running the show? The sales guy… Then one day, the monopoly expires for whatever reason. But by then the best product people have left, or they’re no longer listened to. And so the company goes through this tumultuous time, and it either survives or it doesn’t.
BusinessWeek: Is this common in the industry?
Steve Jobs: Look at Microsoft — who’s running Microsoft?BusinessWeek: Steve Ballmer.
Steve Jobs: Right, the sales guy. Case closed.
Related articles:
Deer in the headlights: Microsoft completely unable to deal with market shift toward smartphones and tablets – May 4, 2011
Microsoft reports lower quarterly profit than Apple for first time since 1990 as consumers shift to iPad – April 28, 2011
Steve Ballmer wants Microsoft’s retail store count to surpass Apple’s – April 6, 2011
Microsoft’s Steve Ballmer, tech’s worst CEO; how long can he last? – April 4, 2011
Microsoft’s answer to iPad: Clueless PowerPoint slides – January 27, 2011
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