THE SENTIMENT AROUND BING: What’s the first words that come
to mind when you think of Bing? For most of you, it’s probably: slow, old, crappy, buggy, inferior,
and unappealing. I don’t blame you as Bing is associated with Microsoft which is associated
with Internet Explorer, and we all know how bad Internet Explorer was. In terms of market share,
it seems like the whole world agrees. While Bing’s marketshare has been rising within
the desktop market, it’s still struggling to crack even 3% while Google stands at a towering 93%. So,
this seems like an open and shut case. Google dominates and Bing sucks right? Well, in terms
of popularity that’s true, but the same cannot be said about profitability. Bing is actually
substantially more lucrative than Google in terms of per user revenue. In 2022, for example,
Bing pulled in a total of $11.59 billion worth of revenue. This means that for every percentage
of marketshare, they pull in $3.83 billion. Conversely, in 2022, Google’s search business
pulled in a total of $162.5 billion. While their overall revenue blows Bing out of the water,
their revenue per percentage of marketshare comes in at less than half of Bing at $1.75
billion. In other words, Bing is over twice as lucrative as Google from a per user standpoint.
If Google was as lucrative as Bing, their search revenue itself would jump to $355 billion. So,
while Bing isn’t nearly as large as Google, it does seem like they’ve been able to carve out an
extremely lucrative portion of the market. But, this wasn’t always the case. In fact,
about ten years ago, Bing was losing money hand over fist. During the worst of it,
Microsoft was losing over $1 billion every single quarter with Bing, and they were down a total of
$5.5 billion within just the first two years. But, after Satya Nadella took over, Bing would
finally become profitable in late 2015. And since then, it’s only gotten more and more lucrative. We
should also mention that Bing’s new ChatGPT powered search feature has had a far better
launch to Google’s. So, here’s how Bing went from abject failure to holding it’s own against Google.
ATTRACTING USERS: Before Bing could worry
about profitability, they first had to build a user base. You would think that the popularity of
Microsoft and Windows would make this easy, but this wasn’t exactly the case because Microsoft
was always fighting an uphill battle with Bing. Here’s the thing, Bing came out in mid 2009 which
was during the peak of the ditch internet explorer movement. In 2008, IE had nearly 70% market share,
but this would plummet to less than 30% by the end of 2013. This meant that Microsoft not only had to
convince people to stay on IE, but to also ditch Google and start using Bing. As you would guess,
this didn’t really play out all that well leading to the massive losses in Bing’s
early history. But, Microsoft wasn’t willing to just give in to Google. So, they started looking
for ways to grow their user base which leads us to their two key strategies starting with
incentives. Microsoft basically decided to pay users to use Bing with their rewards program.
If you’re not familiar with Bing Rewards, it’s actually quite appealing. As a new Bing user,
you’ll be paid 5 points per search for your first 10 searches everyday. Once you start using Bing
regularly and Microsoft can verify that you’re not just spamming searches to earn more points,
you’ll be upgraded to level 2 which is a lot more lucrative. At level 2, you can earn up to 250
points per day which translates to 50 incentivized searches. Each point is roughly worth a tenth of
a cent, so 50 searches is worth about 25 cents. Clearly, switching to Bing isn’t gonna make you
millionaire, but it can get you a free Chipotle every month which is a pretty good deal for just
going about your daily business with Bing. It appears that a lot of people feel this way
given that there’s a massive reddit community with over a 100,000 users who focus on just maximizing
the value of rewards points. I mean, these people have it down to a science. This user for example
broke down every rewards point avenue and calculated that you can earn up to $22.50
every month using Microsoft’s various offerings. Clearly, Microsoft’s been able to create a pretty
dedicated community, but bribing isn’t their only avenue of growth. Much of Bing’s search
volume comes from their dozens of partnerships and deals. Microsoft has basically partnered
with everyone that’s not Google. The most notable of these include Yahoo, AOL, DuckDuckGo, Lycos,
and Ecosia. It’s not just search providers that Microsoft has partnered with either.
Several years ago, they partnered with Amazon and entered the ecommerce space. And more recently,
they partnered with Shopify to bring merchant listings to Bing. On top of all this, Microsoft
has also integrated Bing into all of their product offerings. For example, if you’re searching on
Cortana, the Xbox, Microsoft Edge, or the Windows Search Bar, you’re gonna be directed to Bing
unless you manually change your default search engine. And when you put all of this together,
you get a userbase that can only be beaten out by Google, and now it was time to monetize.
SUPERIOR DEMOGRAPHICS:
While Bing was able to grow a pretty sizeable user base, one of it’s biggest shortfalls is that none
of it’s users are exactly choosing Bing due to its search merits. As we discussed, much of Bing’s
user base comes from Microsoft’s existing products and partnerships or bribery. So, how could such a
platform become more lucrative than Google? Well, the answer is superior demographics. I mean,
just think about it, what type of person would switch to Bing just to earn a couple of dollars
every month? Well, it’s not the average person because the average person is be too concerned
with staying socially acceptable. The type of person who switches to Bing is the type
of person who’s obsessed with credit card points, airline points, and hotel points. They probably
keep around their broken phone for 8 months just so they can save $100 bucks on black friday. And
they’re the ones that scam car salesmen. But, just because they’re so conscious of their
spending doesn’t mean they’re broke. In fact, they’re usually the most well off which means
that they’re extremely valuable ad targets. Now, let’s be clear here, you’re not gonna sell these
guys on the new iPhone or HBO Max. But, an AmEx platinum with a 200,000 point sign up bonus? Now,
we’re talking. These people are also the most likely to entertain insurance ads, mortgage ads,
and fintech product ads. In fact, 30 to 40% of all searches on Bing are related to travel,
cars, health, and finances. Meanwhile, these are the top searches on Google. It’s basically just
social media platforms, retailers, and food. While Google’s searches may be more relatable,
Bing’s searches are far more lucrative when it comes to adsense because the long term value of
these products are sky high. With mortgages, for example, banks can make hundreds of thousands of
dollars with each sale, so naturally, they pay a lot more to advertise their products than Walmart
or Starbucks. We should also note that Bing’s user base tends to be older with a median age of 45.
And given that people tend to get wealthier with age, this is once again a win for Bing.
It’s not just the financial demographics that are working in Bing’s favor either. Bing also tends to
benefit from having more desktop users. As we previously touched on, much of Bing’s success
is attributable to the desktop space where they almost have 10% market share. They’re virtually
non existent within the mobile space, but this isn’t exactly a bad thing because desktop users
tend to be far more valuable. Desktop users tend to visit far more sites and they spend
far more time on each site as well. In 2020, for example, the average mobile user visited
2.67 sites while the average desktop user visited 3.95 sites. Similarly the average mobile user only
spent 160 seconds on each site while the average desktop user spent 351 seconds on each site. So,
naturally, Bing is going to benefit from having a more lucrative demographic than Google.
THE NEW MICROSOFT:
We’ve primarily been discussing quantitative points as to how Bing is progressing,
but the reality is that much of Bing’s success actually has to do with qualitative points,
and especially the new Microsoft philosophy. Before Satya Nadella, the Microsoft philosophy was
that Microsoft is the absolute best company and that everyone should use everything from Microsoft
whether that’s the Windows Phone or MSN Messenger. But, Satya brought a much softer perspective to
Microsoft. Since 2015, Microsoft’s approach has been more of: how do we combine our hits with our
competitors’ hits to create the absolute best product as opposed to how do we replicate our
competitors’ success by ourselves. In other words, Microsoft has shed much of their ego and they’re
much more open to collaboration. For example, they launched Office on iOS. But, by far their
most humble move of all time was their decision to ditch their in house browser engine and switch
to Google’s Chromium which has done wonders for Edge. It appears that Microsoft is bringing the
same approach to Bing as well. The old Microsoft would’ve probably just pushed out updated version
of Cortana and that would’ve been their AI offering. But, the new Microsoft is embracing
ChatGPT all the way. Meanwhile, it appears that Google still has Microsoft’s old mindset. They’re
want everyone to use Google everything. They want you to have a google phone, a google os, a google
search engine, a google ai, a google security system, and even a google based smart home. While
this approach has worked for them so well, it’s only a matter of time until someone does something
better than Google. This already happened in the social media, video conferencing space, and
self driving space. I mean, Facebook destroyed Google+, Zoom and Teams are destroying Hangouts,
and Tesla is destroying Waymo. None of this has really hurt Google though because these industries
didn’t affect their main business. However, the same cannot be said about ChatGPT. ChatGPT is a
direct replacement to traditional search engines and it’s already doing extraordinarily well. Now,
Google does have their own version of ChatGPT called Google Bard which is supposed to come
out soon. And who knows, it could be way better than ChatGPT, but we should note that initial
impressions aren’t giving it much credit. I mean just take a look at this. Microsoft was able
to get 1 million people on a waitlist within 48 hours for the new ChatGPT powered Bing. Meanwhile,
Google ended up losing $100 billion worth of marketcap after their Bard announcement. Now, for
all we know, Bard could be a massive success, but this is just the latest example of Google being
stuck in their ways just like most companies. Microsoft, however, has become surprisingly
flexible, and I’d bet that this will turn out to be far more sustainable over the long term.
THE FUTURE OF BING: In the end, Bing
came out during a time when Microsoft hate was at an absolute peak. People hated IE and people hated
Windows 8, so naturally, they didn’t want to try anything that came out of Microsoft. Consequently,
Microsoft ended up losing billions with Bing within the first few years. They were able to
turn this around by offering appealing incentives and making key partnerships
which attracted quite a lucrative user base. But, the real turnaround for Bing didn’t come
until Microsoft stopped forcing their products to an intolerable level. For the first time, people
actually started to use Edge and Bing out of free will. And now, 1 million people are excited
for a ChatGPT powered Bing. I mean, just think about that: they’re excited for Bing. Clearly,
Microsoft is turning things around in a ginormous way. And who knows, in a decade, Bing may not only
be the more lucrative search engine but also the larger search engine. Are you guys excited
for the new Bing? Comment that down below. Also, drop a like if you like to see actual competition
in the search space. And of course, consider checking out our discord community to suggest
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