Late on July 2, Microsoft disclosed that it will write down $6.2 billion from its Online Services Division, conceding that the unit will perform much worse than the company had predicted. Forecasts for this division were pretty rosy five years ago, when Microsoft bought digital advertising company aQuantive for $6.3 billion and, in 2009, when it launched Bing, a big public rebranding of its search portal. It was all part of a larger push to eat into rival Google's online dominance. But now, the write-down at the internet division, which also includes MSN, will wipe out all of Microsoft's profit for the quarter. Is this a good time to formally declare Microsoft's expensive, perpetually money-losing foray into internet search a dismal failure?
Yes. Bing has failed: Clearly, the aQuantive deal really didn't work out for Microsoft, says David Goldman at CNNMoney. But the real reason the online unit hasn't turned a profit in at least five years is "Microsoft's inability to catch up with Google in the online search race." Bing has seen some growth in search — much of it from "cannibalizing its search partner," Yahoo — but Google has grown far more. And Bing's 15 percent market share is only about half what it needs "to capture the attention of a critical mass of advertisers — enough to turn a profit."
"Microsoft's $6 billion whoopsie"
No. Things are looking up at Bing: Yes, "Bing is still a distant No. 2" in search, but "Microsoft touted some recent improvements," says Robert J. Mullins at eWeek. Globally, Bing is expanding its geographic and market reach — it's up to 28 percent, according to Experian Hitwise — its revenue per search is growing, and it just announced plans to include Yelp reviews in its web search results, which should make Bing more attractive for searchers. Don't write Microsoft's search portal off yet.
"Microsoft takes $6.2 billion write-down for aQuantive acquisition"
This write-down tells us nothing new: Microsoft's adventures in online advertising have clearly never come close to fulfilling the company's expectations, says Staci D. Kramer at TIME. But as huge as $6.2 billion sounds, it's "barely a blip for Microsoft." And as for what this write-down "says about Microsoft, there's not much new other than, possibly, the admission that... Microsoft hasn't been able to crack the nut on interactive advertising." That's nothing we didn't already know, which is why investors greeted the news with a shrug.
"Microsoft writes off most of its 2007 $6.3B ad business bet"
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- Why the West should let Russia have eastern Ukraine
- What would a U.S.-Russia war look like?
- 9 Harvard dropouts who became fabulously successful
- 7 grammar rules you really should pay attention to
- Why you should stop believing in evolution
- The dangers of our passionless American life
- The real reason conservatives should be outraged that police killed a white youth
- How China sparked an Asian frenzy for killer submarines
- 10 things you need to know today: August 30, 2014
- Girls on Film: Belle is one of the most groundbreaking, joyous movies of the summer
Subscribe to the Week